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Skyhook Wireless defends turf against giants

Technology attracts competition from Apple and Google

TED MORGAN TED MORGAN
By Hiawatha Bray
Globe Staff / September 17, 2010

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Skyhook Wireless Inc. is a tiny Boston company that had an idea so big, that two of the mightiest tech companies on earth — Google Inc. and Apple Inc. — are trying to imitate it. And that means a rough road ahead for the 32-person firm, which pioneered the concept of mapping the world according to signals from Wi-Fi Internet routers.

“You always want to build a company that matters, in a space people care about,’’ said Ted Morgan, Skyhook’s chief executive. “The downside is when it’s a space people care about, people are going to fight you for it.’’

On Wednesday, Skyhook filed two lawsuits against Google, the giant Internet search service it claims is muscling its way into the smaller company’s business. One suit, lodged in federal court, attacks Google’s technology to track the location of cellphones by using nearby Wi-Fi signals violates four Skyhook patents. The other suit, filed in Suffolk Superior Court, charges Google with breaking state law by strong-arming Skyhook’s business partners into halting their use of its location system.

The suits allege that Google’s actions have cost Skyhook tens of millions in revenues. “We need to defend our turf,’’ said Morgan. “This is severely impacting our business.’’

Skyhook has a warmer relationship with Apple Inc., the consumer electronics titan, which adopted the Skyhook system for its iPhones. But in April, Apple said that future products would use its own location technology instead of Skyhook’s. “What they decided was, they were going to try out some technology of their own,’’ Morgan said.

However, Apple continues to support the Skyhook system on its older products, and Morgan said that his company’s relationship with Apple remains friendly. “They’re still the same customer of Skyhook they’ve always been,’’ he said.

But Apple’s new policy shows that the company is weaning itself away from reliance on Skyhook. Charles Golvin, a principal analyst for Cam bridge-based Forrester Research, said that if Internet giants abandon Skyhook, the company faces a grim future. “If they can’t sell this service, based on their database, they have no hope of survival,’’ Golvin said.

The Skyhook-Google lawsuit, and Apple’s go-it-alone strategy, herald the coming fight to dominate location-based services — advertising and selling products or services based on a person’s location. Two-thirds of the planet’s population now own cellphones, and many use the devices to read news, watch videos, or make purchases. Selling the right products to such consumers often requires knowing where they are, and the market for providing such information is booming. The market analysis firm Juniper Research estimates that location-based services will generate revenues of $12.7 billion worldwide by 2012.

Many smartphones use the satellite-based Global Positioning System to provide users with driving directions or nearby points of interest, but GPS signals don’t always get through. Skyhook supplements GPS by finding locations based on the radio signals from millions of Wi-Fi Internet routers in homes and businesses. The company’s court filing says it has mapped 250 million Wi-Fi hotspots in cities and towns around the world, at a cost of millions of dollars.

Morgan said that Skyhook has filed nearly 50 patents covering its technology, and has been granted 15.

Google is already in hot water over a separate issue involving its Wi-Fi mapping activities. Earlier this year, the company admitted that its system intercepted personal information being transmitted over Wi-Fi hotspots. Law enforcement officials in Europe and the United States are investigating whether privacy laws were breached, and Google has been hit with a number of class action lawsuits. Skyhook has claimed that its Wi-Fi mapping system does not intercept such data, and poses no risk to privacy.

Meanwhile, Skyhook’s state lawsuit claims that cellphone maker Motorola Inc. and a second unnamed phone maker, called “Company X,’’ broke their contracts to include Skyhook technology in their phones, after Google threatened that it would not certify such phones as being fully compatible with Google’s Android operating system. Morgan said the phone makers were told, “if you want to ship an Android phone, don’t have Skyhook on it.’’

Motorola did not respond to requests for comment. A Google spokesman said the company had not been formally served with the lawsuits and could not respond.

Morgan said that Skyhook had attempted to resolve its dispute with Google, right up to Wednesday’s court filing, but nothing came of it. “We’ve been trying to talk to them for months, but have gone nowhere,’’ he said.

Emily Nagle Green, the president of Yankee Group, a technology consulting firm in Boston, said the dispute between Google and Skyhook demonstrates the value of the technology.

“Skyhook made itself pretty indispensable pretty quickly,’’ said Green, adding that neither Google nor Apple want to be dependent on a single, small company for vital location data. And both companies can afford to bypass Skyhook by building databases of their own, she said. “It just points out how fragile anybody’s hold is on one corner of the market,’’ said Green. “You don’t own anything long in this day and age.’’

Morgan said he has every intention of hanging on. “Big companies are going to try to own this space,’’ he said, “and we’re going to have to defend our position in it.’’

Hiawatha Bray can be reached at bray@globe.com.