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Summary:

Rarely does the tech world see companies who resemble Timex watches in their ability to take a patent lickin’ and keep on tickin’. But the U.S. headquarters of Buffalo Inc. is one such entity.

Patent lawsuits always seem to be one of two things: Little more than a slight annoyance, or a business-ending death blow. Rarely does the tech world see companies who resemble Timex watches in their ability to take a patent lickin’ and keep on tickin’. But the U.S. headquarters of Buffalo Inc. is one such entity.

In Japan, the company reports sales of about $1.3 billion a year. Yet it generates a mere $100 million of revenue out of the U.S., where it offers four types of products, two of which (Wi-Fi routers and flash memory devices) it currently can’t sell because of court injunctions. Another line — multimedia — is new, with the first product due to hit the shelves in June. Its best-performing line is storage, which is profitable despite the fact that the company buys the basic drives from its competitors. All in all, it reads like a prime candidate for business failure. But so far, Buffalo is making it work.

Let’s start with wireless, since the story there is pretty simple. Four years ago, Buffalo started selling 802.11n routers in the U.S., going up against Linksys, D-Link and Netgear. As the smallest player in the market it was first hit with a patent infringement lawsuit from Australia’s Commonwealth Scientific and Industrial Research Organisation. Last year, a court sided with the Australian firm and ordered an injunction against Buffalo’s routers, despite protest (and amicus briefs) from Netgear, 3Com, Atheros, Dell, Intel and others. The case is being appealed, but in the meantime Buffalo can’t sell Wi-Fi devices in the U.S. and the 802.11n IP is still up in the air.

Patent cases have stymied Buffalo in its flash memory business as well. Last month Buffalo stopped selling USB drives and memory cards (its first line of business in the U.S., which it acquired over a decade ago), due to a patent infringement lawsuit filed by SanDisk against it and several other industry players.

Legal fun aside, Buffalo has established itself as a well-regarded provider of storage for the small- to medium-sized business market and, to a lesser extent, consumers. Buffalo has a pretty loyal following for its network-attached storage products, but the company has to purchase the hard drives from rival firms Seagate and Western Digital since, like other smaller storage vendors, Buffalo doesn’t manufacture its own. Making hard drives is a competitive business where economies of scale are important.

Buffalo adds applications and other features to its storage products to make them more compelling at what is generally a higher price point than those offered by Seagate and Western Digital, but storage is a commodity product, one in which cost-per-gigabyte is a customer’s primary consideration. Regardless, Buffalo makes money on each of its storage devices, so while the fact that its success in storage puts money into the pockets of its competitors pocket is galling, it doesn’t signal the end of that business for the firm.

Storage and its single product for multimedia streaming (wired, because it can’t sell wireless in the U.S. right now) are the cards Buffalo currently has to play, and the Austin, Texas-based Buffalo USA intends to play them for all it’s worth. Patent fights or no.

  1. I cannot help but wonder if this fluff piece was commissioned by Buffalo. From my perspective it looks to me like this article passed through Buffalo’s digestive system and was dropped where someone who was not paying attention might step in it.

    In my opinion Buffalo is another patent pirate, a thief who steals from inventors. A parasite which sucks the life out of the people who produce inventions and create jobs and tax base.

    It is independent and academic inventors who produce important inventions, creating jobs anchored in their communities. It is long past time that inventive companies take Japanese patent pirates to task for their unauthorized use of other’s inventions.

    Ronald J. Riley,

    Speaking only on my own behalf.
    Affiliations:
    President – http://www.PIAUSA.org – RJR at PIAUSA.org
    Executive Director – http://www.InventorEd.org – RJR at InvEd.org
    Senior Fellow – http://www.patentPolicy.org
    President – Alliance for American Innovation
    Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
    Washington, DC
    Direct (202) 318-1595 – 9 am to 9 pm EST.

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  2. interesting – I have 2 Buffalo external USB HD drives at home and different models, both of them have Samsung drives inside ;)

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  3. Buffalo rocks here in Japan: Good and cheap.

    Buffalo’s telephone customer support is also great, and they replace their products promptly if there is any problem.

    IO Data is another great peripheral company here.

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  4. Guess some companies have the ability to grin and bear it, and keep on moving. In some ways, I’d reckon that companies such as Buffalo represent the tech companies of the future – operating with ideas that have legal issues around them (pray tell me tech companies which have absolutely none against them!) , as well as have the ability to work with competition to succeed in a co-operative way (coopetition).

    Well, some lawyers may not like Buffalo, but then that’s what they are paid for.

    Balu @ http://www.geexoo.com

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  5. You forgot to mention the Buffalo’s Link Theater line. After a trip to Tokyo and all the DVD players had USB ports, I started doing some research. What I came up with was this Link Theater.

    It’s amazing. It’s a DVD player, but it’s also a lot more. It hooks up to your TV, but it also connects (wirelessly via WiFi or wired with an ethernet cable to your router) to your PC (or PCs). All the software does is recognize which folders you store your media in, and the box does the rest. So I download content to my computer, then I turn on my TV, and BANG! there it is… in the other room… ready to be watched. I’m a believer. I really hope Buffalo keeps its head above water on this litigation deal.

    But I don’t get it… what did they do to infringe on patent rights?

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  6. Dissatisfied Customer Monday, April 28, 2008

    My boyfriend and I purchased a 4G Buffalo storage device because we were in desperate need of disk space. Our 2G with RAID 5 had maxed out, and so stumbling upon this product was a boon. Until it failed to reboot the first time we turned the machine off, a day after purchasing it. So we returned the drive and replaced it with a new one. No hard feelings, sometimes you get the bad egg now and then.

    The second drive wouldn’t even start up. Suspicious at this point, we went for three times a charm. The third unit performed just like the first one. Fine for a few hours, and it failed the reboot test. Needless to say, we took that POS back and vouched to never touch the Buffalo product line again.

    Let it also be said that the only thing worse than their products is their customer service.

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  7. [...] companies who resemble Timex watches in their ability to take a patent lickin?? and keep on tickin?http://gigaom.com/2008/04/27/buffalo-cant-roam-but-still-charges-ahead/Atheros Enhances GPS User Experience with Advanced Navigation and Low Power in Handsets, PNDs and [...]

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