Apple, Dell, Intel Sued Over Encryption Patent

Mar 31, 2009 (11:03 AM EDT)

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The PACid Group, a Houston company formed by inventors Guy L. Fielder and Paul N. Alito, on Monday filed a patent-infringement lawsuit in the Eastern District of Texas against 19 computer and semiconductor companies and their subsidiaries.

The patent in question is U.S. patent No. 5,963,646, "Secure deterministic encryption key generator system and method," which describes an encryption key generator. The system allows for "the destruction of an encryption key after each use by providing for the re-creation of the key without need of key directories or other encryption key storage processes."

Companies named in the lawsuit include Apple, Atheros, Broadcom, Dell, Edimax, Gateway, Hewlett-Packard, Intel, Lenovo, Marvell, Realtek, and Toshiba. These defendants, PACid's complaint charges, include in their products the patented technique for generating pseudo-random, symmetric encryption keys.

PACid describes itself as "an encryption technology research firm, specializing in dynamic key management." It lists on its Web site four encryption patents, which it seeks to license to interested parties.

PACid did not immediately respond to a request for comment.

Several of the companies named in the lawsuit are members of the Coalition for Patent Fairness, including Apple, Dell, HP, and Intel. The group has been lobbying for patent reform as a way to reduce patent litigation costs.

In testimony before the Senate Judiciary Committee earlier this month, Steven Appleton, chairman and CEO of coalition member Micron Technology, explained the situation as the tech sector sees it: "Technology companies have been victimized by a growing wave of patent litigation and licensing fee requests that often precede the filing of a patent lawsuit," he said.

Appleton attributes the surge in patent litigation to the major source of patent claims today: companies that exist solely to license intellectual property, otherwise known as nonpracticing entities, or NPEs. These companies do not make or sell any product or service; they exist only to collect patent royalties.

According to PatentFreedom, a company that tracks NPEs as a service to companies involved, or likely to be involved, in patent litigation, the number of patent lawsuits filed by NPEs jumped from 2.7% in the period between Oct. 1, 1994, and Sept. 30, 2002, to more than 10% in 2006 and 2007.

The 10 tech companies sued the most for patent infringement between 2004 and 2008 are Samsung, Microsoft, Motorola, HP, AT&T, Sony, LG, Apple, Dell, and Nokia.

As an example, there were 34 patent-infringement lawsuits filed by NPEs against Microsoft between 2004 and 2008. In 2004, there were three such suits. In 2005, there were five. In 2006, there were six. In 2007, there were 11. And in 2008, there were nine.

NPEs filed 88% of patent suits against U.S. technology companies over the past five years, according to the Coalition on Patent Fairness, which also claims that licensing fee requests to U.S. technology companies have increased 650% since 2004.

In 2005, Nathan Myhrvold, CEO of Intellectual Ventures, a major patent holding company, defended NPEs in his testimony before the House Subcommittee on the Courts, the Internet, and Intellectual Property.

"Discriminating against patent holders on the basis of whether or not they produce a product disenfranchises some of America’s most creative and prolific inventors," he said. "This broad group includes: university professors and research scientists, who often make great breakthroughs without having the facilities or resources to manufacture the products commercially; individual inventors who are in the same situation; and, finally small businesses who may commercialize some of their inventions but frequently invent more than they are able to productize simultaneously."

Myhrvold said that there's nothing dishonorable about licensing patents, as Thomas Edison and Nicola Tesla did. He expressed some sympathy for Microsoft, where he used to work as chief technology officer, because it's a major target for patent lawsuits. But, he insisted, the "magnitude of the supposed problem is not borne out by the statistics."

Nonetheless, the lobbying clout of the tech industry appears to be moving the needle toward reform of some kind. In a blog post on Tuesday, the Coalition on Patent Fairness hailed a tentative deal among Senate lawmakers to advance legislation to update U.S. patent laws.

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