[M4IF Discuss] News: Forgent claims JPEG patent

[Craig Birkmaier]

http://zdnet.com.com/2100-1104-945735.html
Forgent claims JPEG patent
By Robert Lemos
Special to ZDNet News
July 23, 2002, 4:30 AM PT
A small videoconferencing company is laying claim to the ubiquitous 
JPEG format, igniting a backlash from some consumers and from a 
standards organization.
Austin, Texas-based Forgent Networks posted a press release to its 
site earlier this month claiming to own a patent covering the 
technology behind JPEG, one of the most popular formats for 
compressing and sharing images on the Internet. According to the 
firm, the devices covered by the patent include cameras, cell phones, 
camcorders, personal digital assistants, scanners and other devices.
It took a little more than a week for the statement to find its way 
to the Joint Photographic Experts Group (JPEG) committee, which 
denounced any attempts to derive fees from the standard.
"It has always been a strong goal of the JPEG committee that its 
standards should be implementable in their baseline form without 
payment of royalty and license fees, and the committee would like to 
record their disappointment that some organizations appear to be 
working in conflict with this goal," Richard Clark, managing director 
of U.K.-based Web software company Elysium and the head of the U.K. 
JPEG delegation, wrote on the committee's behalf.
Patent claims are common in the technology industry--the real trick 
is to persuade companies to pay royalties. Scores of dot-com 
companies, for example, claimed to own key e-commerce patents in the 
late 1990s, and their shares often soared when their patents were 
granted.
But most companies failed to generate enough royalties to keep them 
out of bankruptcy court, much less generate million-dollar paydays.
In Forgent's case, because the claim strikes at the heart of a widely 
used consumer technology, it sparked an immediate response from an 
array of people.
"Maybe this type of patent nonsense will finally get more companies 
to see that open standards are in fact a safer way to build their 
products," a member of the Slashdot community wrote in one of more 
than 1,200 comments posted on the tech news and discussion Web site.
Such responses have followed other questionable claims to Internet 
patents, such as Amazon's infamous 1-Click patent and British 
Telecom's claims to have created hyperlinking.
Patent "in the ballpark"
So, is Forgent taking a shot in the dark at generating some royalty 
revenue or does it have a legitimate claim?
In this case, Forgent's patent No. 4,698,672--or "672" as it is being 
called--appears to stand up to initial technical scrutiny, said Rich 
Belgard, an independent patent consultant. It has both a solid 
technical pedigree--created by a research scientist well known in the 
image compression community--and apparently applies to the JPEG 
technology.
"It's in the ballpark of reality," Belgard said.
Moreover, the firm has been able to persuade two Japanese companies 
to ante up cash.
In April, it signed a deal to license the patent for $15 million with 
a large, though unnamed, Japanese digital camera player, according to 
company filings and to an industry expert.
In May, Forgent signed a "multimillion-dollar patent license" with 
Sony for the compression technology, the company said in a press 
release and in filings with the Securities and Exchange Commission. 
Jeffrey Dabbs, a research analyst with San Antonio-based financial 
research firm Kercheville & Co., estimates the actual fee to be 
between $17 million and $18 million.
"They think there is $100 million that they can get from Japanese 
companies," said Dabbs, who owns stock in Forgent.
A patent miracle?
The focus on patents is relatively new for Forgent, a company that 
for more than 20 years had been known as Video Telecom, or VTel, 
before changing its name in August 2001.
A patent deal nearly two years ago that resulted in $45 million 
payoff whetted Forgent's appetite for the world of intellectual 
property. Since then, a new management team has taken the company 
from a maker of videoconferencing hardware with declining revenue to 
a video technology firm focusing on software and patents. Its 
portfolio includes nearly 40 patents, with another 35 in the works.
The claim to JPEG technology ownership arose from a data compression 
patent that Forgent acquired from videoconferencing hardware maker 
Compression Labs in 1997, said Ken Kalinoski, chief technology 
officer for Forgent.
If he's right, it couldn't come at a better time for the company, 
whose revenue has hit the doldrums. In 1997, the company collected 
$200 million selling high-end video conferencing solutions and 
services, but for the latest year, ending July 2001, sales fell to 
$38 million.
In a corporate restructuring and management shakeup, the company 
exited the video hardware business in August 2000 and slashed more 
than 250 jobs.
Kalinoski believes patent 672 has incredible potential. However, 
while Forgent has gotten two companies to sign its licensing 
agreement, sooner or later the patent will be contested. Kalinoski 
believes the company is ready.
"This is not a willy-nilly scenario that has come up," he said. 
"There has been six months of due diligence as to what this patent is 
all about."
Patents filed on Internet technology and business practices have 
taken off in recent years and are nearly always contentious.
Two years ago, Unisys accelerated its program of collecting royalties 
on the Graphics Interchange Format, or GIF, another popular format 
for graphics on the Web. Unisys started pursuing licensing in earnest 
after the Web caught on with mainstream consumers, and it reached 
agreements with Microsoft and AOL in 1996.
Other companies have resorted to a controversial tactic of applying 
for patents while pushing the technology in question in standards 
committees.
In 1995, Dell Computer agreed not to enforce its patent rights for 
the technology included in the VL-bus graphics standards, as part of 
an agreement with the Federal Trade Commission. The FTC had charged 
Dell with pushing for the adoption of a technology in the standards 
committee, without disclosing when asked, that the company held a 
patent.
Sun Microsystems and Rambus have both been investigated for similar actions.
Who was first?
Forgent didn't do any of the original work of the patent that they 
now own; that was done by Compression Labs' Wen-Hsiung Chen and 
Daniel Klenke.
Chen, who joined Cisco after selling Compression Labs and a second 
firm to the networking giant, published several papers in the 1970s 
and 1980s on image compression and transformation. Some experts 
credit him with the creation of a specific kind of image 
manipulation--the discrete cosine transform--used in the JPEG format.
Yet he or others may have published all the components of the 672 
patent more than a year before before the application date for the 
patent. Known as prior art, such publications can undermine a patent.
"There is a lot of work around that can predate the Forgent patent," 
said the JPEG's Clark. "Most of the JPEG standard was pretty well 
formulated by the time this patent came out."
While Chen and Klenke applied for 672 in October 1986, the same year 
that the Joint Photographic Experts Group was formed, the push for 
the standard had begun more than four years earlier. Three 
international standards bodies--the International Organization for 
Standardization (ISO), the International Telegraph and Telephone 
Consultative Committee (CCITT), and the International 
Electrotechnical Commission (IEC)--had begun the search for an image 
compression standard in 1982.
Clark of the JPEG group said Chen may have sat on one of the committees.
Chen could not be reached for comment, but Kalinoski of Forgent 
denied the claim and stressed that he believed that Chen never took 
part in any committees. "We have had those discussions with Wen and 
absolutely he has confirmed that he had no part in those standards 
discussions."
Even if he had, it's unlikely his participation would be considered 
improper, said patent expert Belgard.
"Even if he was on the committee, if there was no rule (prohibiting 
patent applications on the standard), then...it's not illegal," he 
said.
That leaves the question of prior art as the issue that will 
determine whether the patent is valid.
While the debate rages, Forgent refuses to slow its royalties effort. 
Kalinoski said the company is looking for more royalties from other 
digital camera makers and the company is looking at companies in 
other industries as well.
One certainty: Forgent has a wide swath of the Internet in its 
sights, as it will consider any company that doesn't pay to use JPEG 
a pirate.
"This is very analogous to the music industry, who have said that the 
people who have been using our methods and materials have been 
stealing our intellectual property and this needs to stop," Kalinoski 
said. "We are just asking for the same thing."