Honeywell’s TAWS suit riles competitors

 - April 21, 2008, 10:07 AM

Honeywell’s patent infringement lawsuit against the makers of terrain awareness and warning systems (TAWS), filed on May 10 in U.S. District Court in Delaware, has stirred a hornet’s nest of criticism by top executives from companies named in the suit.

Claiming that the lawsuit is as much to do with underhanded marketing tactics and customer intimidation as it is with any genuine legal issues, several charged that Honeywell is trying to plant seeds of doubt in customers’ minds as the market for TAWS heats up.

A Honeywell spokesman dismissed such allegations, saying the suit simply is an effort to prevent competitors from profiting from Honeywell’s patented intellectual property. Attempts to portray the lawsuit as anything but, he said, could only be interpreted as “spin” dreamed up by executives and attorneys for companies named in the suit.

Honeywell is suing Universal Avionics, Goodrich Corp. and Sandel Avionics, the three primary competitors to Honeywell’s Enhanced Ground Proximity Warning System (EGPWS), the terrain-alerting product introduced by AlliedSignal in 1996 and brought under the Honeywell umbrella when the companies merged in December 1999.

The lawsuit claims that Honeywell’s competitors willfully infringed on a number of patents related to EGPWS. Attorneys for Honeywell are requesting a jury trial and are seeking damages for what they claim is an obvious contravention of Honeywell’s engineering expertise as it relates to several key pieces of the technology used to combine the EGPWS terrain database with GPS-derived position to keep aircraft from flying into mountains. Honeywell is also asking that competitors be “permanently enjoined” from selling their TAWS products.

Spokespeople for the companies named in the lawsuit declined to comment on the specifics of the case, but several executives speaking privately called it a tactic designed to cast doubt in the minds of customers and dealers. One executive even alleged that Honeywell salespeople in the field are sharing details of the lawsuit with dealers, and said this was “proof that [the lawsuit] is nothing more than a scheme meant to scare our customers.”

Another executive called the lawsuit “a nefarious plot” that demonstrates how insidious this rampant corporate greed can be.

“Honeywell is trying to keep us out of its sandbox, but we’re not going anywhere,” he said. “This is marketing dollars being spent, believe me. They are going to try and bleed us to death. It’s a tactic, but our customers are too savvy to fall for it.”

The Honeywell spokesman sternly refuted the assertions, saying executives for companies named in the suit were making emotionally charged claims intended to damage Honeywell’s image. He stood by the lawsuit’s central complaint that competing TAWS makers have infringed on several Honeywell patents, thereby profiting from the pioneering work of the company’s small engineering group in Redmond, Wash., which he said invented the concepts that led to the introduction of EGPWS.

Lawsuit ‘Long in the Works’
The lawsuit, he added, has been in the works “for a long time,” and was triggered when Honeywell’s legal staff recognized that competing avionics makers were selling TAWS products that violated a number of EGPWS patents. He said the decision to go ahead with the lawsuit was made only after consultations with a wide range of people inside the company, including managers in Phoenix, the company’s aerospace headquarters, and Redmond. Lawyers from Honeywell corporate headquarters in Morristown, N.J., he added, will try the case.

“The purpose of the lawsuit is to make sure we protect our patented technology so that we can continue to develop new technologies for our customers,” said the spokesman. “It is not a marketing tactic.”

The spokesman went on to say that Honeywell had specifically directed its sales force not to discuss the lawsuit with dealers or customers. He could not say whether all salespeople had heeded the instruction, but given the specific nature of the order he said he doubted any members of Honeywell’s sales staff ever talked with dealers about it.

“If they did, they shouldn’t have,” he said.

Given that Honeywell has asked for a jury trial, emotion-laden arguments and counter-arguments will figure prominently in the suit, legal experts said. That could prove a double-sided sword for all the parties involved since the charges will be aired in an open forum and customers will have no choice but to form their own opinions about such claims.

One analyst said that although the lawsuit in all likelihood will drag on for years, Honeywell’s competitors have scored an important early victory in the court of public opinion.

“The perception is that Honeywell is trying to maintain market control by legal means,” said Michel Merluzeau, senior aerospace market analyst for Frost & Sullivan of San Jose, Calif. “In essence, competitors are saying that Honeywell is attempting to stall market penetration by competitors and other would-be entrants using underhanded means.”

The contretemps that have already arisen from the suit make for a compelling story, whether such claims are true or not, he said.

“On the one hand you have a company with declining market share in several areas of general aviation, and on the other you’ve got companies such as Universal Avionics and Sandel,” he said. “These smaller players are fast becoming emerging forces in business aviation. Honeywell, frankly, is worried.”

TAWS Deadline Nears
The FAA has mandated the installation of TAWS equipment in most turbine-powered business airplanes and airliners by March 2005, a market that includes some 18,000 aircraft. But after September 11, the avionics retrofit market has slowed considerably, with buyers apparently waiting until closer to the TAWS rule’s effective date to purchase and install equipment. In the meantime, competing TAWS makers have been adjusting prices downward in an effort to secure market share. With well over 8,000 EGPWS units in the field already, Honeywell holds the overwhelming lion’s share of the TAWS market. Still, competitors have been making inroads. Specifically, Universal’s TAWS and Sandel’s ST3400 TAWS/RMI products have been attracting notice from business aircraft operators and regional airlines, two key TAWS markets. Analysts agree TAWS will be a hot seller between now and spring 2005, and point out that competition benefits customers.

Another intriguing aspect of the lawsuit, said Merluzeau, involves potential anti-trust issues that may arise as the case goes forward. When Honeywell merged with AlliedSignal in December 1999, the U.S. Department of Justice and European Commission jointly agreed to permit the combination to occur. In its separate final decision, written just weeks before the merger was approved, the EC’s Competition Commission issued a detailed report in which it spelled out its concerns about the new Honeywell’s potentially damaging influence on the avionics market. The report discussed TAWS and EGPWS in extensive detail.

Language in the report, said Merluzeau, makes it clear that the EC looked forward to the introduction of many competing products to EGPWS. In fact, Honeywell lawyers told the commission that no fewer than five competitors to EGPWS were about to emerge, a fact that apparently helped assuage the concerns of commission head Mario Monti, the same man who two years later would lock horns with General Electric CEO Jack Welch during that company’s famous failed bid to acquire Honeywell.

In allowing the merger to go ahead, the commission required Honeywell to offer avionics interface technology to competing TAWS makers free of charge for an indefinite amount of time. Clearly, said Merluzeau, the commission never considered that Honeywell would turn around and sue its competitors for patent violations.
“But as long as Honeywell leaves European companies alone, the EC will probably keep out of the way,” he said.

ACSS Not Yet Named in Suit
One European company that is now actively developing a TAWS device is Thales Avionics, the French firm formerly known as Sextant. Along with partner L3 Communications, Thales is the minority stakeholder in a new company called Aviation Communication & Surveillance Systems (ACSS) based in Phoenix. ACSS plans to build a combined TCAS and TAWS product called T2CAS. Interestingly, ACSS is not named in the lawsuit, despite the fact that it is actively marketing its forthcoming product.

At this point, the reason ACSS escaped the wrathful notice of Honeywell attorneys has not been openly revealed. It could be that lawyers determined the ACSS terrain-alerting device, originally developed by Dassault, does not violate EGPWS patents. Or, as Merluzeau speculates, Honeywell may be wary of testing the EC on this issue. Or, perhaps, it could just be that Honeywell lawyers are not quite prepared to take legal steps against ACSS.

Asked if ACSS could become a target of the lawsuit at some point down the road, the Honeywell spokesman said he would not speculate on future legal action. He then added, “But we will vigorously defend our patents,” a statement that seemed to leave open the possibility that ACSS could also find itself embroiled in a lawsuit soon.

Floyd Chapman, an aviation patent attorney with Wiley, Rein and Fielding of Washington, D.C., said the suit probably would not raise red flags with the Department of Justice or European Commission, but added that the implications for the industry could be far-reaching.

“It’s a very interesting case, one that could get thorny,” he said.

A source inside the European Commission’s merger task force said it is not the job of the EC to keep tabs on private lawsuits in the U.S. Defendants, however, could raise objections with the EC on their own, a move that potentially would put Honeywell at risk because it might trigger a task-force investigation, he said.

Attorneys with knowledge of patent law said the suit speaks volumes about just how far large multinational corporations will go to protect assets and keep competitors from treading on what they consider to be their exclusive turf. But so far, legal maneuvering by Honeywell attorneys has been impeccable, said one lawyer. 

“It appears Honeywell is indeed raising doubt in the minds of dealers and customers, but I can’t say that was their intent,” said an attorney who was involved in Litton’s 1993 patent infringement lawsuit against Honeywell, and who asked that he not be identified.  “In all likelihood this case will drag on for many years and cost all the parties involved millions of dollars. It is to Honeywell’s benefit to have this lawsuit hanging over customers’ heads. For everyone else, it is imperative to get it over with as quickly as possible.”

The lawyer continued that an apparent strategy by Honeywell was to drop the lawsuit in competitors’ laps rather than tip them off ahead of time, a move that made good legal sense, he said. Otherwise, attorneys for the defendant companies might have gone before a judge to ask for a declarative judgment, he said. By surprising competitors with the suit, Honeywell maintained the upper hand.

A key defense against the lawsuit, he said, should involve attempts by defense lawyers to show that the Honeywell patents are not valid. Also, Universal, Sandel and Goodrich should enter into a joint defense agreement, allowing lawyers for the three companies to work in tandem and mount a more effective defense against Honeywell, he said.