Forgent, a previously little-known company, received much press in 2002 when it first began attempts to secure multi-million dollar licensing deals for US patent number 4,698,672. It obtained the patent in 1997 when, under its previous name of VTel Corp., it acquired San Jose CA-based Compression Labs Inc. Forgent claims that JPEG image compression standard uses technology described by that patent, although its original creator never attempted to prevent any infringement of its patent by software and hardware using the JPEG format. In April 2002, an unidentified Japanese digital camera manufacturer signed a US$15 million licensing agreement with Forgent, and the following month Sony Corp. likewise signed an agreement (estimated to be in the region of US$16 - 18 million). These licensing deals brought the issue to the public eye, and started the ball rolling on a process that has already earned Forgent significantly more than the entire value of the US$80 million stock transaction which was required to take control of Compression Labs.
In April 2004, Forgent filed suit against 31 companies claiming infringement of its intellectual property. The case against one company - Adobe Systems Inc. - was dismissed shortly thereafter when it signed a licensing agreement. Over the following eight months, Forgent filed suit against a further 12 companies. By this stage, the company said it had already generated some US$100 million in revenues through licensing deals with over 35 companies. Shortly thereafter, two more of the companies against which Forgent had pending legal action - Audiovox and Onkyo - signed licensing agreements, and were dismissed from the legal action.
Microsoft Corp. became the first to challenge Forgent, when it filed suit against the company claiming noninfringement, invalidity and unenforceability of the '672 Patent in April of this year. In response Forgent followed with a countersuit claiming infringement of the patent by Microsoft. Since then things have remained fairly quiet, with the case being transferred to the United States District Court for the Northern District of California, and a Markman Hearing Date of February 13, 2006 set for the case.
In the last month, two more defendants have signed licensing deals and been dismissed from the case - Axis Communications Inc., Color Dreams Inc. (d.b.a. StarDot Technologies). Licensing deals have also been announced with two companies that had not been involved in the legal action - Research in Motion Ltd., and Electronics for Imaging Inc.
As we understand it, the current list of companies that are continuing to challenge Forgent's legal action is as follows:
- Acer America Corp.
- Agfa Corp.
- Apple Computer Inc.
- BancTec Inc.
- BenQ America Corp.
- Canon USA
- Concord Camera Corp.
- Creative Labs Inc.
- Creo Inc.
- Creo Americas Inc.
- Dell Inc.
- Eastman Kodak Co.
- Fujifilm Photo Film Co. U.S.A
- Fujitsu Computer Products of America
- Gateway Inc.
- Google Inc.
- Hewlett-Packard Co.
- International Business Machines Corp.
- JASC Software
- JVC Americas Corp.
- Kyocera Wireless Corp.
- Matsushita Electric Corp. of America
- Microsoft Corp.
- Mitsubishi Digital Electronics America Inc.
- Oce' North America Inc.
- PalmOne Inc.
- Panasonic Communications Corp. of America
- Panasonic Mobile Communications Development Corp. of USA
- Ricoh Corp.
- Riverdeep Inc. (d.b.a. Broderbund)
- Savin Corp.
- ScanSoft Inc.
- Sun Microsystems Inc.
- Thomson S.A.
- TiVo Inc.
- Toshiba Corp.
- Veo Inc.
- Xerox Corp.
- Yahoo Inc.
The fact that 39 companies - many of them household names and leaders in their respective fields - have still declined to sign up for licenses with Forgent has to be seen as an indication that they expect to win in court. As we've noted in the past, that's apparently a viewpoint that is shared by the Joint Photographic Experts Group's committee (creators of the JPEG standard), considering their statement that prior art which would invalidate the patent exists. The JPEG committee have set up an ad-hoc group to collect historical material relating to the JPEG standard, something which will likely be of great use in determining the validity of the patent.
Our Viewpoint
Morally, there is little question that Forgent's standpoint on enforcing patents that went unenforced for some 16 years - six years after the company took over Compression Labs - is disturbing. Compression Labs themselves were part of the Internet Engineering Task Force's standards-setting process for JPEG, and last year the Federal Trade Commission launched a private investigation into whether the company used unfair tactics by not disclosing its patent application during that process. There is little question that if companies implementing JPEG code in their products had originally been subject to heavy licensing fees for use of the patent in question, JPEG images would not likely be the defacto standard that they are nowadays.
Therein lies one of the major problems with current patent law, however - there is simply no guarantee that any standard doesn't infringe on existing patents, knowingly or not. Companies can afford to apply for thousands of patents every year, and these are often granted for applications that would seem to be little more than common sense. Patents are often so open-ended that they can appear to apply to subsequent inventions far beyond the scope of the original patent. It seems that companies can stand to profit significantly in the future simply by submitting vast quantities of patent applications using the loosest possible wording, and then knowingly sitting on those patents whilst subsequent inventions infringe on them - until they become standards which are nearly impossible to abandon overnight.
The answer seems to be simple, at least on face value - the patent application process needs to be made a lot more stringent, ensuring that junk patents are not granted and that the wording of patents is sufficiently detailed to ensure they apply only to the invention in question. Patents should also be looked at in a manner similar to that used for trademarks, where (once you are aware that your patent is being infringed) you only have a certain amount of time in which to challenge this - after which you are considered to have abandoned the patent. Unfortunately, it seems unlikely that the patent process will be overhauled unless there is sufficient outcry from the public to ensure that things are changed.
In the meantime, we can but wait until next year when the matter is finally looked at by courts, and the validity of the patent determined. Forgent's patent expires in the US in October 2006, and foreign equivalents of the US patents will have expired by September 2007. At that time, it will no longer be enforceable against new companies - although as we understand it, the company will still be able to continue action against companies which it had notified of the infringement before the patent expiry.
