Comcast, Time Warner And Charter Sued Over Modems

Cable modem and iPhone

Most Americans have never heard of a company called WiLan, but that company is now claiming that it should get a cut of many of the cable modems sold in the U.S. The Canadian company, which used to make wireless products, now makes its living suing companies for patent infringement. This week, it sued Comcast (NSDQ: CMCSA), Charter (NSDQ: CHTR), and Time Warner Cable (NYSE: TWC), saying those companies use cable modems that infringe a patent it bought in 2007.

This is far from WiLan’s first time in court, but it does appear to be the first time the Ottawa-based company has gone after cable companies, and the first time it has sued over this patent, which it acquired from the two California inventors, Larry Wagner and Peter Moss.

WiLan was founded in 1992 as a wireless company, but didn’t make it in the marketplace. Since 2006, it’s focused on buying patents and licensing them, which has grown its revenue from a bit over $2 million in 2006 to $35.4 million in 2009. WiLan is one of a few public patent-enforcement companies, and its stock is traded on the Toronto Stock Exchange.

It’s an interesting choice by WiLan to go after the cable companies, which don’t manufacture their own cable modems or have much to do with their designs. But patent law allows a patent-holder to go after anyone who makes, uses, or sells a patented invention, which gives a company like WiLan a wide choice of targets.

Suing three giant cable companies allows WiLan to pursue damages on a large scale, and it might be easier than going after the numerous modem manufacturers. Those modem makers may yet be sued over this same patent, which claims to cover the DOCSIS standard, or the protocol that all cable modems use. By naming that standard in its complaint, WiLan is making clear that it believes that every cable modem in the U.S. is a violator of its patent, and thus a potential target. This is not to say that WiLan is at all likely to go after individual users, but it speaks to the scope of the complaint.

WiLan has filed more than 20 patent infringement lawsuits since 2007-but previously it has sued over wireless broadband standards like 802.11 and 3G. The cable companies, which are huge and important customers of companies like Arris that actually made these modems, will likely ask for the modem manufacturers to indemnify them in this suit. That could take the form of direct intervention in the lawsuit, or they might get asked to quietly foot the sizeable legal bills that will result from this suit.

WiLan’s latest lawsuit, like most of its other lawsuits, was filed in East Texas, a venue whose courts and juries are considered friendly to patent plaintiffs. The company has hired the McKool Smith law firm, which is responsible for more than its fair share of the big patent verdicts in the past few years, including two East Texas verdicts against Microsoft-on behalf of VirnetX Holdings and i4i-which totaled more than $400 million.

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