High-Tech Firms Face Off In High-Stakes Battle Motorola Fights Tiny Interdigital Over Crucial Technology
While much of the country is tuned to the O.J. Simpson murder trial, another trial with a more significant global impact is proceeding in relative obscurity on the East Coast.
It may not have the day-to-day appeal of the West Coast trial but, for those in the high-tech world of wireless communications, the battle being waged between electronics giant Motorola Inc. and a small Pennsylvania company in a Delaware courtroom is just as compelling.
It is even filled with the same kind of caustic banter, judicial admonitions, sidebar sessions and closed-door hearings that have characterized the more visible Simpson case.
At stake is nothing less than the ownership of an emerging technology that is expected to propel satellite telephone-systems such as Motorola’s Iridium network and other wireless communications devices into the next century.
On one side of the courtroom is Motorola, the Schaumburg, Ill.-based giant which racked up some $22 billion in sales in 1994. On the other side is Interdigital Communications Corp., a struggling company based in King of Prussia, Pa., which lost $34 million on sales of just $11.7 million the same year.
Interdigital, which was founded 23 years ago and has yet to turn a profit, is convinced it has found a way out of its sea of red ink.
The company contends it has the right to collect what could amount to hundreds of millions of dollars in royalties from companies such as Motorola, AT&T Corp., Japan’s Matsushita Corp. and Germany’s Siemens Corp. because they and others used four of its patents to make digital telephones.
Patent disputes like this one are common as companies attempt to prove “ownership” of what is generally viewed as a generic technology and earn lucrative royalties from it. However, both the courts and the U.S. Patent Office generally have opted to rule against those who would attempt to claim ownership of a broad technology.
Despite the courts’ track record, AT&T, Matsushita and Siemens have agreed to pay some $50 million collectively to mollify Interdigital. The reason, confided a Matsushita executive, is that “a few well-placed pounds of flesh today will keep the tiger away from the door tomorrow.”
But Motorola decided it would rather fight than compensate and several months ago filed suit against Interdigital seeking to have its patents revoked.
In fiery opening statements two weeks ago, Motorola attorneys argued that Interdigital was trying to “shake down” cellular-telephone manufacturers and anybody else who used the digital technology it claims to control.
That technology, known as Time Division Multiple Access, or TDMA, will allow three to four calls to be sent over a single channel simultaneously, compared to one call per channel for traditional analog systems.
Work on TDMA began in the early 1980s, but Interdigital insists that it had patented a digital system for wireless telephones and radios that the TDMA standard was built on before an industry forum was created to perfect the technology.
“We aren’t saying we invented TDMA,” said an Interdigital executive.”But what we are saying is that we were the first ones to pull it all together into a practical earth-based system. We feel we deserve to be compensated for that.”