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Update: Forgent Claims Rights To JPEG Patent

July 18, 2002
By: Mark Hachman

Viewing a digital photo album, scanning a picture, even browsing the Web—all of these could become a little more expensive now that a small video firm has claimed it owns the fundamental rights to the implementation of the JPEG standard.
Forgent Networks, an Austin, Tex.-based video networking firm, has laid claim to one of the fundamental technologies underlying the World Wide Web. Even more significantly, the firm has already convinced two firms, including Sony Corp., to pay millions of dollars in royalties.

Forgent representatives declined to make executives available for interviews, although a company spokeswoman answered some of ExtremeTech's questions. According to the spokeswoman, Forgent began reassessing its patent portfolio after a management restructuring about eighteen months ago.

"We own the rights to this patent, we feel it's a legitimate business procedure, and companies do this all the time," the Forgent spokeswoman said.

What the patents cover


The patent in question is No. 4,698,672, titled "Coding system for reducing redundancy", approved in 1987 and assigned to Compression Labs Inc., a Forgent subsidiary. The patent specifically references patent No. 4,302,775, "Digital video compression system and methods utilizing scene adaptive coding with rate buffer feedback", also assigned to Compression Labs but in 1981. Neither patent specifically contains the acronym "JPEG", although it stands for "Joint Photographic Experts Group", the organization which standardized JPEG through the International Standards Organization in 1990.

"Forgent has the sole and exclusive right to use and license all the claims under the '672 patent that implement JPEG in all 'fields of use' except in the satellite broadcast business," according to a statement on the company's Web site. The spokeswoman could not answer why satellite broadcasting was excluded from the fields of use.

"Forgent's 'fields of use' for licensing opportunities include digital cameras, digital still image devices, personal digital assistants (PDA's), cellular telephones that download images, browsers, digital camcorders with a still image function, scanners and other devices used to compress, store, manipulate, print or transmit digital images," the statement continues.

Interestingly, both patents Forgent cites refer to data compression schemes used in video and other applications, although Forgent is claiming they refer to static JPEG images, as well. Forgent owns approximately 40 patents, some through acquisitions, such as the 1997 merger with Compression Labs. Approximately 35 more patent applications are pending approval, the Forgent spokeswoman said.

Although claims on patents and technologies are issued frequently, enforcing them is often far more difficult. However, Forgent convinced Sony Corp. and another company to license the patent, as evidenced by the company's June 17 quarterly filing with the Securities and Exchange Commission. In it, Forgent recorded $22.3 million in revenue--$15 million of which derived from licensing the patent to a third-party company, which the SEC filing does not name. The spokeswoman said Forgent was not asking for licenses, but one-time fees.

"In May 2002, Forgent signed a multi-million dollar patent license agreement with Sony Corporation, a leading manufacturer of audio, video, communications and information technology products for the consumer and professional markets," the filing adds. The Forgent spokeswoman characterized the unnamed company as a "unnamed multinational global consumer electronics company," which she later added was also based in Japan.

"We wanted to ensure the investment community and the general public are clear about the terms of our valuable JPEG data compression technology, one of the many technologies we have in our patent portfolio," stated Richard Snyder, chairman and chief executive officer at Forgent, in a statement. "We are in ongoing discussions with other manufacturers of digital still cameras, printers, scanners and other products that use JPEG technology for licensing opportunities." The Forgent spokeswoman declined to comment on which firms Forgent was negotiating with.

Actually, the so-called JPEG standard is not actually the standard in common use on the Internet. Instead, most JPEG files are apparently built around the JFIF standard, which was developed by the Independent JPEG Group and was placed into the public domain by C-Cube Microsystems, according to the JPEG home page, before C-Cube was acquired by LSI Logic.

A Unisys patent on LZW, which covers the compression algorithm used in GIF, TIFF and other graphics file formats, should expire in June 2003. Electronics For Imaging Inc. also filed suit in January against almost a hundred companies including Microsoft Corp. and IBM, alleging that those companies' products infringe EFI's own imaging patents. EFI's patent enters the public domain later this year, meaning it has until then to procure royalties.

Mining for patents

Although the patents were filed in the 1980s, the Forgent spokeswoman said the company only began reassessing its portfolio after a new management team concluded that the company could not survive in the video hardware business. Employees bought out the products division in January, which is operating as Vtel Products Corp. Vtel Corp. changed its name to Forgent in early 2001. Forgent still maintains a services organization. Forgent contracted with a third-party law firm--whose name Forgent is contractually prohibited from disclosing, according to the spokeswoman--to contact companies about paying fees. Patents typically expire after 20 years.

"We do have other patents we could pursue with licensing agreements," the spokeswoman said.


Interestingly, Vtel Corp. hired Gordon Matthews, the so-called "father of voice mail", as Forgent's chief patent officer. Soon after his appointment, Matthews began a "strategic patent program," offering bonuses to employees for ideas they could patent.

"For us, the [strategic patent program] is not just a way to create a portfolio of meaningful patents," Matthews said in a May 2001 interview with CIO Magazine. "It's also a way to attract and retain world-class employees. If employees know there will be a payoff later for ideas they come up with today, they're likely to stay around."

Some Japanese companies have settled patent litigation of this sort rather than go to trial; for example, Toshiba Corp. paid out about $2 billion in settlements for a class-action suit alleging it shipped floppy disk drives with defective controllers; other American PC manufacturers refused to settle.

If the patent is successfully enforced, however, the Internet and consumer-electronics industry could face another enforcement process such as that embarked upon by Rambus Inc.

Rambus, a Los Altos, Calif.-based memory technology designer, began asking companies to license a DRAM patent, which Rambus claimed to be the basis of all SDRAM and DDR DRAM, as well as its own Rambus DRAM. Rambus' patent rights were acknowledged by smaller DRAM companies, like Hyundai, but contested by the largest DRAM firms, such as Micron Technology. Those suits continue today.


Clarification: An earlier version of the headline claimed that Forgent was a startup company. Forgent has been in business for nearly 20 years, according to a company spokeswoman, but changed its name from Vtel Corp. to Forgent early last year.
http://www.extremetech.com/article2/0,3973,389261,00.asp
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