IP Strategies in Today s Wireless Technology Revolution. By Mark Punzalan and Dennis Fernandez
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1 1 IP Strategies in Today s Wireless Technology Revolution By Mark Punzalan and Dennis Fernandez I. Introduction Wireless technologies are all around us these days. Today, terms like hot spot and Wi-Fi have become common vernacular even outside of the tech industry. The number of mobile subscribers has brown more than a hundredfold in the last decade with over 1 million subscribers globally. 1 In many ways, the excitement surrounding wireless technologies resembles the dot-com frenzy of the late 1990 s. The wireless world has become even more exciting in light of the Federal Communications Commission s (FCC) stated commitment to the emergence of new wireless technologies. However, for the startup companies involved in this wireless revolution, this new exciting world is not without some serious potential pitfalls, and it is important for startups to employ sound intellectual property strategies within the context of these FCC regulations. This article will set forth these strategies while also addressing timing considerations in obtaining FCC approval. II. The Wireless Industry Model The model for emerging wireless technologies is not unlike the typical system within the telecommunications industry. In any telecommunications system, a base station (or server) employs the use of radio frequencies (or spectrum) to communicate with a user (or terminal). See Figure 1. For communication to occur, the base/server and user/terminal require distinct software and hardware applications (e.g., chips, 1 Yrjo Neuvo, Designing Radio Systems for the Future, Electronic Engineering Times, Feb. 16, 2004.
2 2 microprocessors, etc.) to allow the functionality of the system. Moreover, the wireless communication network requires the production of various components for its operation. Thus, in this wireless model, there exists a potential to create a wide variety of services, products (i.e., software), and components to provide the foundation for the operation of current and forthcoming wireless technologies, and the companies at the center of these creations will be the ones driving the wireless revolution. See Figure 2. To make matters both more complex and exciting, the FCC in recent years has embarked on a mission to allow wireless technologies to flourish by freeing up large amounts of spectrum necessary for communication between the user/terminal and base/server. Within this context, it becomes as important as ever for startup companies in the business of constructing wireless applications to use sound intellectual property strategies to protect their products. III. Filings with the USPTO and FCC 3.1 Patents Any company involved in creating services, products, or components in this wireless revolution should craft a sound patent strategy for any of its innovations especially since such a strategy provides added value to the company. If the United States Patent Office (USPTO) grants a patent, the owner of that patent has a virtual monopoly on the invention for twenty years, and the owner has the right to exclude others for making, using, or selling the invention during that time. A patent offers protection for
3 3 any functional concept, method, apparatus or process that is novel, useful and nonobvious FCC approval for hardware or components For a company that designs wireless hardware or components, the company must ensure that the FCC approves the device. In general, the FCC will approve such a device provided that it does not substantially interfere with radio communications. The FCC s Office of Engineering and Technology (OET) ensures that the devices do not pose such interference, and the OET sets forth a number of different authorization procedures depending on the type of device: 1. Verification For verification, a company performs its own tests to measure the radio frequency energy radiated by the device and reports this information to the OET. Once this report is completed, the company must keep this file as evidence should the FCC ever request it. Verification does not require that any document be filed with the FCC. 2. Certification Certification requires similar tests as verification. However, a certification must be filed to the OET, and the product cannot be marketed until the FCC grants certification for the device. Typically, 90% of the applications for certification that the FCC receives are processed within thirty-five calendar days. 3 However, a length of time of sixty to one hundred days for product certification is not uncommon. 2 United States Code, Title 35, Sections 101, 102, Understanding the FCC Regulations for Computers and Other Digital Devices, Office of Engineering and Technology, Federal Communications Commission, OET Bulletin No. 62, December 1993.
4 4 3. Declaration of Conformity (DoC) No filing is required under DoC, however, the testing must be completed by an OET-approved test lab before DoC is granted. 4. Telecommunications Certifications Body (TCB) The FCC may designate a group of members called a TCB to determine whether a product meets the Commission s requirements, and the TCB then decides whether to issue a written grant of equipment authorization. TCB is a fairly new program that may be more attractive than typical Certification because the approval process is generally faster. Generally, the self-approval process of Verification is sufficient for devices marketed exclusively for use in business, industrial and commercial environments (designated by the FCC as Class A devices). On the other hand, Class B devices, i.e., those that are marketed for use anywhere including residential environments, must go through either Certification, DoC, or TCB and must be inspected by the OET before they are approved. Because the FCC has intricate technical requirements depending on the type of device, a company seeking FCC approval for its innovation should closely examine FCC rules to determine the appropriate approval process FCC Approval for Software It is important to note that wireless software applications, in and of themselves, do not require approval by the FCC. The exception to this rule is if the innovation is a software-defined radio. Such a device must be approved through the FCC approval procedures outlined above.
5 5 IV. Timing of USPTO and FCC Filings While FCC approval for a product generally takes from a month to a year, the average time for patent approval by the USPTO is generally three years. Moreover, obtaining patents will prove to be more profitable when accomplished early on in the game. Thus, before any efforts are made toward obtaining FCC approval, a company that seeks to market any wireless technology should seek to patent the technology as soon as possible. Filing patents and receiving approved patents will generally lead to more investors and capital in the long run. For a startup company, this capital could be invaluable for costs associated with marketing the wireless application after it obtains FCC approval. See Figure Filing with the USPTO Once a company has a conceptualized the wireless application, the company should file a patent application. The company may consider filing a provisional patent application which, unlike a regular utility patent application, acts as a placeholder to file a regular utility patent application within a year and does not need to contain actual claims. The later-filed patent application can then claim priority back to the filing date of the provision application as long as the invention is supported by the details in the provisional. However, a provisional application may hurt rather than help especially if the provisional is rushed. Instead, it is generally in the best interest of a company to spend all efforts on completing the regular utility patent application rather than risk having to clean up problems from a rushed provisional application.
6 6 It is extremely important for companies not to disclose ideas about the invention or offer it for sale before a patent application is filed. The USPTO currently has a oneyear grace period to file a patent once it is disclosed, and if an application is not filed within this time, the invention becomes part of the public domain. This is yet another reason why the patent approval process should be undertaken before any efforts are made to obtain FCC approval since conducting the tests required by the FCC could inadvertently result in disclosure of the invention. When crafting patents, startup companies must work with an experienced patent prosecution team to ensure that the submitted claims are not too narrow in scope. Patent claim language should be constructed to broadly define novel concepts so as to create a legal blocking strategy from other competitors. 4.2 Filing with the FCC As stated earlier, companies creating software for wireless technologies need not concern themselves with obtaining FCC approval. Instead, software manufacturers can focus the brunt of their efforts toward the patent approval process. On the other hand, manufacturers of hardware, components, or other devices necessary for wireless communication should concentrate on obtaining FCC approval (via one of the above-outlined methods) only after they have filed the regular patent application. In an ideal situation, filing a patent (or more than one patent) will have attracted investors and capital to the company. This capital may be critical to finance the costs stemming from obtaining FCC approval (e.g., lab tests), an approval period which could last anywhere from a month to a year. Once the FCC has approved the device, the
7 7 company is then allowed to market the product. However, it may be a good idea to hold off on marketing until a patent is obtained from the USPTO. This protects the company against potential infringement claims from makers of other devices. 4.3 Obtaining Spectrum Licenses If a company s burgeoning technology requires the use of radio spectrum (e.g., WiMax or 3G), a company should apply for a license with the FCC to purchase radio spectrum. Ideally, this should be done fairly early in the game, perhaps even before the patent application is filed. This guarantees the company a designated amount of spectrum for a company to employ its new technology for ten years and renewable thereafter. Applications for licenses can be made online, and the elapsed time between application and approval is typically less than fifteen days. Moreover, the application is fairly inexpensive. A company should also take note of when the FCC offers sales of spectrum. Spectrum may be freed up when the prior owners of the spectrum become bankrupt, and FCC will often hold auctions for this spectrum. In June of 2004, the FCC added an additional five megahertz of additional spectrum from below 2500 MHz, increasing the total size of the band to 194 MHz. Further, the FCC also established simpler and more flexible rules for licensees, including geographic area licensing and the ability to employ the technology of their choice. In early 2005, the FCC expects to auction large amounts of spectrum. While larger telecommunications companies will swallow a large amount of this freed spectrum,
8 8 the FCC has reserved a significant amount of spectrum specifically for small businesses, and startup companies should fully exploit the availability of this spectrum. V. Other IP Strategies Aside from patents, startup companies should consider other IP strategies to help protect their wireless innovations. 5.1 Copyrights Copyrights protect the original expression of an idea. Because legal protection is effected instantly when the original copyrightable subject matter is fixed in a tangible medium (e.g., digital storage form), copyrights may provide valuable protection for a company s innovations. Furthermore, obtaining copyrights can be accomplished much more quickly and inexpensively than patents and are valid for the author s lifetime plus fifty years. 5.2 Trade Secrets Trade secrets protect any technical or business information that may give a business a competitive advantage. While novelty or exclusiveness is not required, the trade secret must have some economic value. Moreover, a company must make reasonable efforts to keep the information secret, e.g., Non-Disclosure Agreement (NDA). Once the information is disseminated publicly, legal protection no longer applies.
9 9 5.3 Maskworks For chip manufacturers providing applications in wireless technology, maskworks may provide valuable IP protection. When a chip layout includes an original circuit design, maskworks can protect against the unauthorized copying of the chip layout information. Although this form of IP is generally quick and inexpensive to obtain, a company must file within two years of commercialization of the chip product. VI. The FCC s Activism in the Wireless Industry The FCC has played what some would call an activist role in helping the wireless industry to move forward. Indeed, the agency has come a long way since its inception in 1934 when its role was focused mainly on the regulation of radio communication. 4 Today, the FCC has stated a number of goals and policies to foster the growth of the wireless industry. 6.1 Goals of the FCC Amazingly, the emergence of wireless technologies has entered the realm of presidential politics. In a speech given on April 2004, President George W. Bush stated his goal to bring high-speed Internet access to every corner of the United States. 5 Similarly, in its Strategic Plan for FY 2003 FY 2008, the FCC set forth its own goals of promoting the availability of broadband to all Americans as well as encouraging an environment that stimulates investment and innovation in broadband technology and 4 47 U.S.C. 303(g) (1996). 5 Declan McCullagh, Bush: Broadband for the People by 2007, CNET News.com (April 26, 2004), at
10 10 services. In several speeches, FCC Chairman Michael Powell has stated his belief in broadband technologies as the key to the expansions of the U.S. economy. More importantly, Powell has stated that he believes this economic expansion would result by a light touch of regulation in the wireless industry. 6 Some industry analysts have speculated that the FCC s proactive stance in stimulating the wireless industry is a direct byproduct of the American wireless industry lagging behind its foreign competitors. Indeed, Asian companies have been at the forefront of many of the new innovations in wireless technology with American companies playing catch-up. VII. Case Studies of Wireless Technologies A startup company seeking to maximize the value of its company should view the FCC s pro-competition policies in the wireless industry not as a hindrance but as an important opportunity to create new applications for current and forthcoming wireless technologies. The following are examples for possible innovations for startups in the wireless industry. 7.1 Bluetooth and Multi-User Gaming Bluetooth is a wireless protocol that allows communication from one device to another within a small area usually less than thirty feet. It uses the 2.4 GHz spectrum to communicate a one megabit connection between two devices for both a voice channel and a 786k data channel. In other words, the chip technology for Bluetooth enables 6 Remarks of Michael K. Powell, Chairman, Federal Communications Commission, at the Wireless Communications Association International (June 3, 2004).
11 11 seamless voice and data connections between a wide range of devices through shortrange digital two-way radio. Bluetooth is the technology generating several new products in mobile and multiuser gaming. For instance, the N-Gage QD, Nokia s new Bluetooth-enabled mobile gaming system and mobile phone, has not been without its complaints. Because the product uses Bluetooth, some have complained about the inability for users to back up filed or addresses from the N-Gage onto a personal computer without Bluetooth. This exhibits just one of many opportunities for chip manufacturers to provide innovations to allow Bluetooth wired devices to function more effectively, particularly in the area of mobile gaming. 7.2 WiMax WiMax is the technology creating much of the current buzz in the wireless industry these days. For manufacturers in the wireless industry, this provides an excellent opportunity to create new innovations in applications for WiMax. The IEEE standard of WiMax is seen as a major complement to Wi-Fi, particularly because WiMax may further the FCC s goals of expanding Internet access to rural areas. 7.3 Voice over Internet Protocol (VoIP) VoIP, or IP Telephony, allows telephone calls to be made over a data network (e.g., broadband Internet connection). VoIP employs a technology called packetswitching (as opposed to the circuit-switch technology of tradition telephones), where the connection between receivers remains open just long enough to send a small chunk of
12 12 data (i.e., a packet). The sending computer chops data into these small packets, and when the receiving computer gets these packets, the packets are assembled into the original data. VoIP could potentially be a boon for many startup companies since the packetswitching technology provides an opportunity for the creation for many new applications. Unlike some other wireless technologies, the FCC has not established a comprehensive policy on VoIP. The emergence of VoIP technology would likely spell the beginning of the end for traditional telephone services, and the FCC has tried to walk a fine line between supporting the technology while also being cautious to protect traditional telephone companies. How the FCC continues to tread this fine line will undoubtedly be an intriguing development during the next few years. VIII. Conclusion It is an exciting time for startup companies in the wireless industry. It is an industry loaded with potential opportunities for companies to flourish, particularly in light of the FCC s recent policies encouraging the emergence of wireless technologies. However, it is also an industry with many potential pitfalls, and a startup company in the wireless industry must use sound IP and business strategies to ensure its success in the wireless market. Dennis Fernandez is the managing partner of Fernandez & Associates LLP in Menlo Park, CA. Fernandez & Associates LLP specializes in High-Technology and Intellectual Property Rights, focusing on patent protection of advanced electronic circuits, semiconductor chip designs, network communication systems. The firm counsels earlystage electronics, communications, and biotechnology companies and venture investors.
13 13 Fernandez & Associates LLP specializes in developing and enforcing defensive and offensive US and international patent strategies for early-stage biotechnology, software and semiconductor technologies.
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