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Temperatures Rise in a Thermostat War

Honeywell and programmable-thermostat developer Nest Labs prepare to duke it out in court


Courtroom battles are becoming all too familiar in the mobile industry as smartphone and tablet makers shift from battling it out in stores to using armies of lawyers and patents to disrupt each other through lawsuits. Apple (NASDAQ:AAPL) suing Samsung (PINK:SSNLF), Motorola (NYSE:MMI) suing Apple, Microsoft (NASDAQ:MSFT) suing Motorola and Oracle (NASDAQ:ORCL) suing Google (NASDAQ:GOOG). It’s seemed a never ending series of back and forth legal actions playing out in the world’s courtrooms.

Don’t look now, but the same sort of patent war is about to erupt in an area few people would have expected—home thermostats. With energy costs rising and being “green” a bigger deal than ever, there’s no doubt that the device that regulates a home’s heating and cooling is important. According to an analysis by researchers for the Environmental Protection Agency’s Energy Star program, a programmable thermostat can save a U.S. homeowner $180 a year off an average $1,100 energy bill. But thermostats have historically failed as products that consumers get excited about.

Flash back to October, when Nest Labs arrived on the scene, seemingly out of nowhere, with a very cool looking thermostat that employs advanced artificial intelligence with learning technology, a motion sensor and Wi-Fi (for connectivity to an iOS or Android mobile device). Nest Labs was founded by former Apple engineers—people like Tony Fadell, who was among those instrumental to the development of the iPod and iPhone. The design aesthetic shows in Nest’s $249 Learning Thermostat.

Nice! It’s a thermostat?

The media was all over Nest and what looked like a revolutionary device. To further differentiate the product and reach out to a tech-savvy customer base, Nest chose consumer electronics giant Best Buy (NYSE:BBY) as its initial retail partner instead of building stores and contractors. The product has been consistently sold out. Nest hit a nerve.

There is a problem, though. One of the biggest players in the thermostat industry is Honeywell International (NYSE:HON), a Fortune 100 company that had its own learning thermostat 20 years ago, but declined to release it. Further, Honeywell holds patents on a slew of thermostat-related technologies, and on Feb. 6 the company filed suit against Nest, claiming the new device infringed on seven of those patents. The suit seeks damages as well as an injunction to halt sales of the Learning Thermostat.

More patents than products

According to Slate‘s Farhad Manjoo, who tried out both the Nest and Honeywell’s products, the Nest came out on top for user friendliness and attractiveness while a Honeywell thermostat offering a variety of control features was ultimately more capable (but expensive, complex and required professional installation). Manjoo sums up the current situation by pointing out: “Honeywell seems to have patented a bunch of great ideas in order to just sit on them.

Among the patents being disputed are those that focus on a thermostat that draws power from furnace wiring, a thermostat whose shape is round, and a thermostat programming feature that allows users to answer questions about their temperature preferences.

With Nest announcing that it will fight the lawsuit along with Best Buy, the normally dull thermostat market is beginning to look an awful lot like the mobile space, with broad patents being used by legal teams to disrupt competitors. There has been talk about the value of patent portfolios reaching a bubble state, and this litigation could end up being another example of generic patents being used to stifle competition—exactly the kind of action that has been devaluing the the thousands of patents held by technology companies.

Article printed from InvestorPlace Media,

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