Artical on USVO patent, featured in Business
USA Video hopes to cash in on patent
By Robert A. Hamilton - More Articles
Published on 10/29/2000
Mystic - Is it possible that USA Video should be getting royalties from virtually everyone who transmits video images over the Internet?
At least one Boston law firm seems to think so.
Eight years ago, when USA Video Interactive won a patent on its method of delivering video images over a computer network, there was little fanfare because so few businesses or residences had the fiberoptic cable that would be required to receive that much data.
But as information flow has increased to many thousands of times the data transfer rates of a decade ago, the firm of Sullivan & Worcestor has dusted off the patent and agreed to represent the company in enforcing it.
“The exact words they used were, 'This is a very interesting patent,'” said Edmund Molina, president of USA Video. “It could be potentially very valuable.”
Molina contends that, as written, the patent doesn't just cover the company's Wavelet technology, but any digital video over a switched network — telephone lines, for instance. Potentially, he says, it could cover any use of video on the Internet. “It's a very broadly worded patent,” Molina said. The first line of the claims section of the approved patent states that what USA Video developed is “a system for transmitting video programs to remote locations over a switched telephone network.” In all, it makes nine claims, going into considerable technical detail.
Paul R. Gupta at Sullivan & Worcestor, a Boston firm with 140 lawyers and offices in New York and Washington, D.C., has taken the case under an equity arrangement: the law firm gets a stake in a subsidiary that is being formed just to hold the patent. The rest of the subsidiary will be held by USA Video. In other words, they don't get paid unless they collect something on the patent.
Company spokesman Anthony J. Castagno said USA Video will not disclose how much of a subsidiary the law firm will hold, but it is a minority percentage.
Not necessarily so
But Jeffrey R. Kuester, chairman of the American Bar Association's Committee on Patents and the Internet, said it isn't necessarily true that a patent written in the infancy of an industry is broadly applied as the industry matures.
“Patents that were written without the Internet in mind, or even referenced, are sometimes held not to cover the Internet as it exists today,” said Kuester, of the Atlanta firm Thomas, Kayden, Horstemeyer & Risley. “The Patent Office's job is to only give you rights to the advance that you developed.”
But Kuester said it will take a thorough analysis of the nine separate claims in the USA Video patent to determine just how broadly it could be applied. In the case of the USA Video patent, he said, the company makes nine claims about its system, some of them dependent on the others – so that if one of those elements is not present in a modern system, the patent would not cover the new use. “A lot of times, this kind of situation is much more complicated than you can put into a single sentence,” Kuester said. “It's a very detailed and lengthy process, to determine if a particular use might infringe a patent.” In the meantime, investors seem to be recognizing that USA Video could be a long time proving any claims it might have against on-line video users.
The company's stock, which once traded near the $10 level, dropped as low as $1.72 in the last year; it has been trending downward since climbing to near $3 a share in late September, trading in the $1.50 to $1.75 range this week.
Failed claims
There have been several court cases in the last few years involving old patents that the owners are seeking to enforce against the new technology of the Internet, though most have been unsuccessful.
Wang, for instance, patented a “videotext” system in the early 1980s that it claimed was the basis for Internet browsers, most notably Netscape Navigator and America On Line.
But last December the U.S. Court of Appeals upheld a lower court ruling dismissing the suit, claiming that the new browsers were “generically and fundamentally different.”
Similarly, E-Data sued dozens of companies claiming that its patent describing a process for selling via electronic kiosks was being violated by anyone selling software on line such as CompuServe, Intuit, Broderbund and others.
The court, however, ruled that E-Data's patent covered only the kiosk-type vending stations where consumers made a selection and downloaded the data onto a blank disk or tape.
There have been efforts recently to develop patents that might cover modern Internet technology. Lycos, for instance, has obtained a patent covering its search software. But Internet experts said patent enforcement on the Internet is an entirely new area, since many businesses give away software or web page content, so there is nothing on which to base damages.
Advancing technology
USA Video designs streaming video and video-on-demand systems for use on the Internet or closed computer networks.
Though the company has existed for more than a decade, it has only recently begun to report sales, in part because slow data transmission rates have limited the widespread use of the technology until now.
Molina said the company started developing its video-on-demand system in 1987, applied for a patent a few years later, and won a patent in 1992. A short time later, it formed a partnership with Rochester Telephone which was interested in delivering video over its system. Time Warner was doing the same thing in Florida and Bell Telephone was experimenting with a technology in Virginia.
“So you had these two huge companies doing video on switched networks competing against us, but we were the only ones with a patent,” Molina said.
But by 1995 most of the systems had shut down because of bandwidth problems: most of the video delivered over computer networks was of poor quality because the data transmission rates would not support quality pictures.
Increased use
In the past few years, though, faster computer modems and other technologies such as cable television modems and Digital Subscriber Lines have allowed for much faster transmission of data, so the use of video on the Internet has been increasing.
“This patent could be extremely valuable in our business relationships ... now and in the future,” Molina said.
Gupta, a Phi Beta Kappa graduate of Yale who earned his law degree at Harvard in 1971, represents computer, internet, and telecommunications companies, and sits on the boards of four national e-commerce and computer technology publications, according to his firm.
Though Gupta was unavailable for comment, USA Video released a statement in which he said, “I reviewed the patent and claims of prior art and believe it is strong and eminently enforceable ... I am looking forward to bringing the company's shareholders tangible benefits from this pioneering and visionary patent.”
But Kuester said the question remains whether a patent that was applied for 10 years ago can truly cover the Internet of today, particularly since the technology has advanced so much just in the last six or eight years.
“The courts so far has really restricted patents back to the technology that existed at the time the patents were issued,” Kuester said. “But it's often hard to boil it all down.” |
