March 1, 2000 9:00 AM PST

Palm division hit with patent suit

3Com's Palm division may have hit a bump on its road to tomorrow's initial public offering in the form of an ill-timed patent infringement lawsuit.

Virginia-based start-up E-Pass Technologies filed the lawsuit in a New York federal district court, alleging that Palm improperly included a number of the company's patented security technologies in its popular devices.

But analysts question the timing of the suit, coming the same week as the much-anticipated public offering, as well as the merits of the case. Palm, whose devices account for about three-quarters of all handheld computers sold, has been marketing its products since 1996. E-Pass has not yet released its first device, according to the company, but has held the patents since 1994.

"The IPO didn't have anything to do with it," said Donald DeLuca, an executive at E-Pass. "It didn't factor in at all."

De Luca declined to comment on the specifics of the suit, or the patents allegedly violated, referring those issues to attorney Stephen Weiss, of the Moses and Singer law firm. Weiss did not return calls seeking comment.

"Not only do 3Com's products utilize the E-Pass patented technology, but 3Com advertises, promotes, and sells its products with literature that instructs customers on how to use its products in ways described very specifically and in great detail in the 1994 patent," Weiss said in an earlier statement.

3Com's Palm does not comment on pending litigation as a matter of policy, a spokesperson said.

According to the E-Pass statement, 3Com's Palm division infringed upon U.S. Patent number 5,276,311, filed by E-Pass founder Hartmut Hennige in 1994. The company's Web site generally outlines the cause for the complaint: Palm devices resemble the technology outlined in the patent, according to the site, because they are in the shape of a card, they are used to select data from a variety of sources, they have input means for recognizing and responding to passwords, and because they can access data sets for specific applications.

"With the timing of the IPO, it's very, very suspect," said Diana Hwang, an analyst with International Data Corp, adding that the Palm is much larger than a card-sized computer. "Does this mean all the other device manufacturers are infringing as well? This needs to be scrutinized very carefully."

Still, Hwang reserved judgment, noting that other recent technology-sector lawsuits, such as one filed and then settled by Toshiba regarding faulty computer drives, have concluded in unexpected ways. "The timing is really suspect, but it could be true, for all I know."

 

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