Skyhook, Fighting for Its Life in Suit Against Google, Cries Foul: “Call in the Referees and Review the Tape”

9/16/10Follow @wroush

Boston-based Skyhook Wireless, in what could be a fight for its life, is taking a double-barreled legal shot at Google. In a pair of lawsuits filed against the search and advertising giant yesterday, the seven-year-old, 32-employee startup says Google illegally copied its location-finding technology and then leaned on business partners to use Google’s version instead of Skyhook’s.

Skyhook’s pioneering Wi-Fi- and GPS-based location finding software is used in millions of mobile devices. But larger competitors, including Google and Apple, have been hard at work on their own positioning technologies. The point of the suits, according to Skyhook CEO Ted Morgan, is to keep Google from using its market power to squash smaller competitors in the field. “We believe we have built this market, and we’re going to protect what we have done,” Morgan told Xconomy yesterday.

The first lawsuit, filed in Massachusetts’ Suffolk Superior Court, says Google interfered with contracts Skyhook signed with Motorola and Samsung to put Skyhook’s “XPS” location-finding system on the manufacturers’ latest generations of Android mobile phones. In the same complaint, Skyhook says Google unfairly used its control over the Android operating system to force Motorola and Samsung to use Google’s own location technology on their phones in place of Skyhook’s.

Claiming that Google’s actions will “irreparably harm” the startup, the suit asks the court to force Google to, in effect, butt out of the Motorola and Samsung contracts, and to pay Skyhook monetary damages.

The second suit, filed in U.S. District Court for the District of Massachusetts, says Google’s location-finding system infringes on four Skyhook patents. Issued between 2007 and 2009, the patents cover technologies that allow mobile devices to determine their locations based on their proximity to mapped Wi-Fi networks. Skyhook is again asking for an injunction—but in this case, it’s one that would shut down Google’s in-house location service entirely. Skyhook also asks for money damages.

Google has not reacted publicly to the lawsuits, and the company did not respond to Xconomy’s request for comment last night. [Update 2:00 p.m. PDT 9/16/10: Google corporate communications officer Andrew Pedersen replied to my query today, saying "We haven't yet been served, so we won't be able to comment on the complaint until we've had a chance to review it."]

It’s understandable why the Mountain View, CA-based company might be proceeding cautiously in this case, since there’s far more to worry about than the prospect of a protracted legal battle or financial settlement with a small Boston startup. What’s really at stake in the lawsuits is who will have access to the bonanza of location data generated by consumers using location-aware applications on their mobile phones.

This data, which reveals not only where mobile device owners are located but often what they’re doing, is of huge potential value to brokers of targeted mobile ads and other commercial offers. It’s in order to gather such lucrative data, Skyhook alleges, that Google is imposing its own Google Location Service on handset makers, and in the process violating the open spirit of the Android ecosystem.

Skyhook’s troubles with Google started this spring. As we reported at the time, Motorola announced on April 27 that it had forged an agreement with Skyhook to use Skyhook’s XPS for geographical positioning on its forthcoming Droid and Cliq Android phones rather than Google Location Services, a free location finding system available to all makers of Android devices.

Skyhook depends on such licensing agreements for its revenue. And manufacturers are happy to pay, according to Morgan, because Skyhook’s database of Wi-Fi access point locations is more comprehensive, and its positioning algorithms more accurate, than those supplied by competitors like Google. “The evidence shows that we are winning,” Morgan says. “Device makers pay us rather than using the free stuff from Google, and the only reason that could be is because these device makers value the quality of our system.”

But Google “reacted very poorly” to the news about Motorola’s decision, says Morgan, who co-founded Skyhook in 2003 with Michael Shean, the company’s senior vice president of business development. The very next week, Morgan says, Google changed the standards it uses to certify that mobile phones are “Android compatible” specifically to define phones carrying XPS client software as non-compliant. Shortly thereafter, Morgan says, Motorola co-CEO Sanjay Jha got several calls from Google vice president of engineering and Android overseer Andy Rubin, informing him that Motorola couldn’t ship Android phones containing XPS.

“What they told us is that they came under a tremendous amount of pressure,” Morgan says. “The company got several high-level calls from Andy Rubin to their CEO, which resulted in what’s called a ‘stop-ship’ order. They said, ‘You can’t sell this product because it’s not certified.’ And the carriers won’t touch it if it’s not certified.”

Skyhook’s Superior Court complaint tells much the same story, but in more detail. In the end, according to the complaint, Motorola had to ship its phones in mid-July with Google Location Services installed rather than XPS. As a result of Motorola’s breach of the contract, the complaint says, Skyhook “lost millions of dollars in royalties.”

Morgan says he doesn’t blame Motorola in the matter. “They had bet the company on that platform,” Morgan says. “They had no choice. But we have a deal where our stuff is supposed to be on every Motorola phone, and that’s why we have got to call in the referees here, and have someone review the tape to see whether things are being done appropriately.”

According to the Superior Court complaint, the same events played out in the case of a second Android device manufacturer, Samsung. (Skyhook calls Samsung “Company X” in the complaint, explaining that it’s contractually prohibited from disclosing the details of its contract with the company. But it can easily be deduced from clues in the complaint that Company X is Samsung.)

The Korean firm actually started shipping XPS-equipped Android devices to retailers in Europe in early summer. But after Skyhook announced its partnership with the company on July 2, Google “issued a direct ‘stop ship’ order,” according to the complaint. Samsung was forced to drop XPS, and “continued the launch of its Android device with Google Location Service,” allegedly costing Skyhook millions more in lost royalties. The complaint also says that “Google’s interference harmed Skyhook by preventing enhancements to Skyhook’s database that would have occurred but for the deprivation of the data expected from these phones.”

Skyhook’s main allegation in the Superior Court complaint is that Google violated Massachusetts law by intentionally interfering with its contracts and “advantageous relationships” with Motorola and Samsung, in an example of what the complaint calls “unfair and deceptive trade practices.”

But in the bigger picture, the company is trying to protect its access to data: not just data about the locations of Wi-Fi access points, but data about when, where, and how people use their location-aware mobile devices. That’s information that the provider of a positioning system, by processing millions of location lookups every day, can siphon off and re-use for commercial purposes. (In demonstrations during the Boston and San Francisco marathons, for example, Skyhook has shown how its “SpotRank” service can pinpoint changing concentrations of mobile-device users over time.) When manufacturers of Android handsets choose XPS over Google Location Services, all of this location data flows to Skyhook, not to Google—which would be more than enough reason for the search giant to see Skyhook as a threat. As the Superior Court complaint puts it: “The more devices that include Google Location Service, the more data Google can collect about users’ locations. This data, in turn, is worth billions of dollars to Google.”

At the same time, Morgan says, Skyhook is trying to call attention to the gap between Google’s public stance on Android and the way it deals with makers of Android devices.

The publicly stated goal behind the Open Handset Alliance, a group of companies set up by Google to promote an open-source software stack for mobile phones, was to free handset makers from the restrictions once imposed by wireless carriers on mobile software developers. “We wanted to make sure that there would always be an open platform available for carriers, OEMs, and developers to use to make their innovative ideas a reality,” the Android project’s About page states. “We wanted to make sure that there was no central point of failure, where one industry player could restrict or control the innovations of any other.”

But now Google itself stands accused of restricting and controlling mobile innovation, by telling handset makers that non-Google positioning technologies aren’t compatible with Android.

“Eric Schmidt himself says that Android is open and anyone can do whatever they want with it, and that is for the betterment of the industry,” says Morgan. “My standpoint is, the actions and the words are not aligned. And some of those actions, we feel, have unfairly damaged us, and we’re asking the courts to take a look at it.”

Skyhook’s federal patent infringement lawsuit against Google is harder to parse. The startup says Google location based services infringe on four U.S. patents owned by Skyhook—No. 7,414,988, granted in 2008, No. 7,433,694, also granted in 2008, No. 7,474,897, granted in 2009, and No. 7,305,245, granted in 2007. The patents cover both methods for updating databases of Wi-Fi access points locations and algorithms for calculating a device’s position based on its proximity to those access points—technologies that are at the very heart of Skyhook’s system. The methods Google is using to collect its own database of Wi-Fi access point locations (a process carried out by the same vehicles that canvas city streets for the Google Street View visual search service) represent willful infringements on Skyhook’s patents, according to the complaint.

But the complaint doesn’t specify—and at this point in the legal process, Skyhook isn’t required to say—exactly how Google’s positioning technology overlaps with its own. Morgan says he can’t comment in detail about the patent suit, because “that is a little thornier, legal-wise.” But at heart, he says, the company is simply out to protect the multi-million-dollar investment it’s made in its patent portfolio.

Morgan says he only decided to file the two suits around noon Pacific time on Wednesday, after attempts to negotiate a solution directly with Google’s Rubin failed. It’s the first time Skyhook has taken another players in the location space to court. After Apple decided to scrap Skyhook’s XPS in August in favor of its own home-grown location technology, my colleague Greg Huang asked Morgan whether a suit might be pending. At that time, he demurred, pointing out that the company had “never engaged in any litigation.” But Morgan told me the company decided yesterday to let loose with simultaneous patent-infringement and contractual-interference suits against Google because “Google’s actions are damaging our company, we need to respond, and those are the assets we have to respond.”

I asked Morgan whether he feels Skyhook has the stamina and resources to go up against a Goliath the size of Google. “We feel we have the staying power, based on the growth of the business and the revenue generated to support it,” he answered. “Otherwise we wouldn’t go down this path. It’s a reluctant path. Mike and I would rather do things business-wise—we like selling software and working with customers, and the legal side is very unappealing to us. But [the patents] are the six-foot brick wall we built around the company, and we are going to defend ourselves.”

Compare this story to:

Competitor Sues Google Over Location Software for Smartphones (New York Times)
Skyhook Sues Google in a Location Battle Royale (GigaOm)
Skyhook sues Google over Motorola mapping deal (CNET)
Skyhook Wireless suing Google over wi-fi location biz (Mass High Tech)

Wade Roush is Xconomy's chief correspondent and editor of Xconomy San Francisco. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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