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Forgent's logo. Click here to visit the Forgent website! Money rolls in as Forgent licenses JPEG! (UPDATED)
(Friday, July 19, 2002 - 05:37 EDT)

Little-known company with a past in videoconferencing uses a company purchase to turn some fast dollars...

Forgent Networks Inc., which in 1997 acquired San Jose-based Compression Labs Inc., seems set to turn the purchase into a money earner - but the way in which the company is doing so may not please digital imaging enthusiasts. Compression Labs is the company behind a 1986 patent entitled "Coding system for reducing redundancy".

Finally issued on October 6th, 1987 the patent covers something very familiar to digital camera owners - the JPEG data compression technology used to write images by most digital cameras. The code to read and write JPEG files is also widely used elsewhere, from the software used to display and edit digital images from companies like Adobe, Jasc and Ulead, to hardware such as set-top boxes used to display images on a television - and literally thousands of other hardware and software products besides.

After the purchase of Compression Labs, Forgent - then known as VTel Corp. - remained quiet, allowing usage of JPEG compression unhindered. In 2001, VTEL's Products Strategic Business Unit (formed the previous year) was spun off from the company, as management and employees purchased the division. That deal was finalised in late January this year, and a quick change of company name left the new Forgent as a software and services company with no remaining hardware products in its portfolio.

On July 11th, Forgent issued a press release which you can read below that we have a feeling (if its intent is pursued) is going to be very unpopular because it will cost the consumer's hard-earned money. It may also bring back memories of a similar case from a few years back, which generated much ill sentiment towards a company with a somewhat better-known name, Unisys.

At the very end of the 1980s and through the '90s, Unisys began enforcing a patent it had on a compression technique called LZW, or Lempel-Ziv-Welch. Commonly used in GIF and TIFF files, Unisys began requiring those producing commercial software using the algorithm to pay for that usage - including then-dominant online service Compuserve. That was when the story first appeared on most people's radars, and it continued to unfold as even freeware programmers were required to license LZW technology.

Even further down the road, Unisys has suggested that websites using the GIF format may be considered guilty of "contributory infringement" if the program used to create their image didn't have a license - even if your site was non-commercial and you weren't aware of the non-compliance. Suggestions were made that websites could be liable for $5000 - or more - for the fact. (That being said, this really seems to be more of a scare tactic to ensure licensing fees are paid, than something the company would have any way to enforce)... Regardless, this latest suggestion brought on another wave of unhappy sentiments, with websites such as BurnAllGifs.org being an enduring testament to what has become a decade-long public relations nightmare for Unisys.

But back to the present! Forgent has already taken the first steps towards enforcement itself, not only with the press release, but also in securing its first major licensees. The company's 10-Q form filed on June 17th 2002 states:
"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 patent agreement relates to the Company's data compression technology and marks the second such agreement that Forgent has obtained. The first agreement, with another prestigious international company, was signed in April 2002 and generated $15.0 million in revenue during the three months ended April 30, 2002 for the Company. The Company is pursuing additional license agreements with other companies from multiple industries; however, there can be no assurance that additional licenses can be obtained or, if obtained will be on similar favorable terms."
That's the first $15 million plus - the question is, will the rest of the industry meekly hand over the money, or will they find a way around the patent? Unisys found that money can be a strong motivator with its LZW patent - companies quickly realised that they could use the permission for freeware use to avoid paying fees by simply providing the GIF code as a "free plugin" for their software. (This, of course, is what lead to the crackdown on freeware use...)

It remains to be seen just where Forgent are going with this decision. There is, though, a potential that they could require everyone to be licensed - which as well as making them a lot of money, would see consumers paying for those licensing fees with increased product prices, and the abundance of shareware and freeware programs offering JPEG compatibility greatly reduced. There's also the question of related standards - for example the MotionJPEG codec used for the video files generated by many digital cameras, which bears strong similarities to the JPEG format.

Perhaps it is good timing for JPEG 2000, the new standard that the "Joint Photographic Experts Group" wants you to adopt. Uncertainties as to the future of the old JPEG format could spur faster adoption of JPEG 2000 - which isn't hindered by licensing and royalty fees, at least for the basic functionality. It may also spur digital camera manufacturers to put their heads together and come up with a better answer to the "digital negative" than is currently available.

One way or another, this looks like it is going to be a story to watch...

UPDATED 2002-07-22 11:04ET: It seems Forgent's claims in their press release are rather misleading, to say the least. Since this article was written, further investigation has revealed that what Forgent owns a patent for and is licensing is not "JPEG data compression technology" as suggested, but rather a specific element called "run length coding" that is used in JPEG. Watch our continuing news coverage for more details...
Source: Forgent Networks Inc.

Original Source Press Release:

Forgent Networks Clarifies Licensing Arrangement

AUSTIN, Texas, Jul 11, 2002 (BUSINESS WIRE) -- Forgent(tm) Networks Inc. (Nasdaq:FORG) today clarified its licensing program regarding Forgent's JPEG data compression technology, owned by its subsidiary Compression Labs Inc., embodied in U.S. Patent No. 4,698,672.

JPEG is a standardized image compression mechanism and is designed for compressing either full-color or gray-scale still images.

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. 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.

Forgent and a national law firm, who has made and continues to make a significant investment to develop Forgent's IP licensing program, are the sole beneficiaries of the patent license revenue.

"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. "We are in ongoing discussions with other manufacturers of digital still cameras, printers, scanners and other products that use JPEG technology for licensing opportunities."

About Forgent

Forgent Networks provides enterprise video network software and services to improve ease-of-use, reliability and manageability of video networks. Video Network Platform (VNP) is the industry's leading video network management software that improves quality of service and cost-of-ownership for multi-vendor, multi-protocol video networks. Forgent's professional services, which have been contracted by thousands of companies, ensure the successful planning, operation and maintenance of video networks. For more information, call 866/276-FORG (3674), or visit www.forgentnetworks.com.

This release may include projections and other forward-looking statements that involve a number of risks and uncertainties and as such, actual results in future periods may differ materially from those currently expected or desired. Some of the factors that could cause actual results to differ materially include rapid changes in technology, changes in customer order patterns or order mix, the ability to collect certain foreign receivables, foreign exchange rate fluctuations, the intensity of competition, the cost and availability of certain key components, the company's ability to manage product transitions and inventory levels, product pricing pressures, sudden or unexpected changes in demand for videoconferencing systems, litigation involving intellectual property, other issues, and the ability to consummate certain divestiture transactions. Additional discussion of these and other risk factors affecting the company's business and prospects is contained in the company's period filings with the SEC.

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