Intellectual property lawsuits dog storage industry
The proliferation of patent litigation among data storage companies could stifle technological innovation and drive up costs to the user.
There's been a recent spate of high-profile patent lawsuits, and the longer this patent litigation goes on, the more potential it has to become a drag on innovation and to drive up the costs of doing business, experts say.
The first major patent infringement spat occurred on Sept. 5 whenNetApp launched a lawsuit against Sun Microsystems with much more fanfare than is usually reserved for IP disputes. On the day Sun CEO Jonathan Schwartz was presenting his vision of taking over the world through giving away IP to the open source community, Network Appliance Inc. (NetApp) was holding a press conference to send Schwartz a message: "Not with our IP you don't."
Power struggle in the storage world
While the trend toward open source creates strife in one corner of the market, the rise of new technologies and the proliferation of successful newcomers such as Riverbed Technology Inc. is causing a power struggle between new companies and the old guard. Hence the lawsuit brought this week by Quantum, alleging that Riverbed's data reduction technologies violate data deduplication patents held by Quantum subsidiary Rocksoft Ltd.
"Now's the time for Quantum to take action, because Riverbed has been quite successful," said Tony Asaro, senior analyst with the Enterprise Strategy Group. "If Quantum is going to get anything out of it, it would be following Riverbed's successful initial public offering (IPO) and proof to the market it's a force to be reckoned with." Quantum has been aggressive in enforcing Rocksoft's IP and was granted a stake in Data Domain's IPO earlier this year.
Disk drive patent in question
Last week it also came to light that the U.S. International Trade Commission (ITC) is investigating whether Seagate Technology LLC, Western Digital Corp., Toshiba America Information Systems Inc., Hewlett-Packard Co. (HP) and Dell Inc. violated patents involving a method of bonding electrical components within disk drives. The patents are formally held by two individuals, Steven and Mary Reiber of Lincoln, Calif.
According to Colleen Chien, assistant professor of law at Santa Clara University Law School and an expert in U.S. patent law, it's difficult to tell if a business is hiding behind the Reibers' names in this case or if the Reibers are representing themselves. She said it is unusual for individuals to bring patent investigations before the ITC in matters like this. The seemingly random collection of defendants in this case (seemingly off the hook are disk drive vendors Hitachi Global Storage Technologies and Fujitsu as well as other big storage systems vendors) could be based on where overseas the drive components in question are being manufactured.
According to Chien, patent lawsuits of all stripes have proliferated over the last decade as patent law, once a state-by-state crazy quilt of statutes, has consolidated and solidified under federal authority. "There have been some big awards granted, and people have come to see [patent litigation] as a worthwhile endeavor."
But both Chien and Asaro warn that if patent litigation becomes more popular, it will ultimately present a drag on innovation and raise the cost of doing business, with increased costs being passed on to the customer.
"Small companies are more vulnerable and hurt more by lawsuits brought against them by big companies," Chien said. "Small companies are also highly innovative and can come up with patents of their own to assert against the larger companies, but they don't have the time or bandwidth to do it."
As a result, patent litigation could become a blunt instrument in the hands of legacy vendors that don't want new upstarts infringing on their turf. "If someone gets a broad enough patent, it can prevent others from entering a new area of research."
Then there are the costs associated with litigation, settlements and licensing agreements for companies of all sizes. "How much of that cost is passed on to the consumer is a matter of how captive the audience is for a given product," Webster said. "If you have a lock on your customer base, you can [raise prices] -- it depends on your competitive position."
Worst of all, according to Asaro, patent litigation among vendors can create fear, uncertainty and doubt (FUD) among users of their products. "If I just invested a million dollars in Riverbed, I don't want to hear there's a lawsuit that threatens the product," Asaro said. "I don't want to be involved at all in something like that. Don't bring me any more problems."
Meanwhile, storage analysts were divided on what impact the cluster of cases, brought in the last month, will have on the industry long term. "It may be just the law of averages playing itself out," Webster said.
But Asaro predicted the IP strife will only continue. "Companies are creating a lot of capital right now, and the IT landscape is changing dramatically," he said. "Whenever big money is at stake, these things are going to occur more frequently."
