Have Patents, Will Travel

Execs at Dot Hill Systems Corp. (Nasdaq: HILL) hope newly awarded patents will be their ticket to more OEM deals.

Dot Hill this week announced it's gotten two patents, following one it obtained in May (see Dot Hill Gets Controller ID Patent, Dot Hill Wins Patent, and Dot Hill Gets Mirroring Patent). The patents relate to controller technology acquired when Dot Hill bought Chaparral for $62 million back in February (see Dot Hill Picks Up Chaparral).

This is a big reason why we made that deal,” Dot Hill marketing director Omar Barraza says of the Chaparral patents. This echoes comments by CEO Jim Lambert, who said months ago that he wanted Dot Hill to own its controller technology in hopes of gaining more OEM deals (see Dot Hill Picks Up Chaparral).

Prior to the Chaparral buy, Dot Hill's OEMs, including Sun Microsystems Inc. (Nasdaq: SUNW), which now accounts for 84 percent of Dot Hill’s revenue, were concerned that Dot Hill did not own its own intellectual property (see Sun Sings New Storage Song, Sun Dogs Dot Hill and Sun Shines on Dot Hill). Instead, its controllers have largely come from Infortrend Technology Inc. Though Dot Hill will continue to OEM these controllers, it now has more flexibility in how it augments them for specific vendors' applications.

The patent won in May is for technology that alleviates bandwidth congestion between RAID controllers in storage networks by using a shared bus rather than I/O channels. One patent issued this week describes a way to prevent ID conflicts on SCSI buses, which speeds system configuration. The other patent allows parity mirroring between controllers to enhance performance in RAID arrays.These technologies should help Dot Hill get into the running for deals it couldn't bid on before. For instance, Dot Hill is said to be competing with Adaptec Inc. (Nasdaq: ADPT), Engenio Information Technologies Inc., and Xyratex (Nasdaq: XRTX) to create a low-end system for Hitachi Data Systems (HDS).

There are other plans, too: Barraza suggests that, in the future, Dot Hill could use the patented techniques to design systems that separate storage controllers from disk arrays. (Can you say "blade storage"?)

Chaparral’s technology might signal a move in yet another direction for Dot Hill. Chaparral’s controllers are designed for media-rich applications and best suited for broadcast and gas and oil companies (see Chaparral Paddles Up the RIVA and Vixel, Chaparral OK Storage for Macs). “Chaparral went after a different market than Dot Hill,” says one consultant, who asked not to be named. In this consultant's view, the new techniques might give Dot Hill the means to chase smaller OEMs that cater to vertical markets, such as Silicon Graphics Inc. (SGI) (NYSE: SGI) or Avid Technology Inc. (Nasdaq: AVID).

One thing: Dot Hill doesn't seem interested in licensing its patents. Whatever Dot Hill does with the technology, it is likely to keep to itself. Barraza says the idea is to make it tough for the competition to duplicate Dot Hill, not to generate licensing revenue: “There’s really not a lot of cross-licensing that occurs in this business."

— Dave Raffo, Senior Editor, Byte and Switch0