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Sony ordered to pay $25m in patent claim
(Wednesday, April 2, 2003 - 03:25 EST)

We told readers almost a year ago about a company called Forgent Networks, which claimed to have patents covering the JPEG image file format, and had successfully signed licenses with a number of companies based on the claims.

A press release distributed by Imerge Consulting Group (below) alerted us to a similar case which resulted in a $25 million judgement against Sony Corp. in late February. Sony was the second company to sign a license with Forgent, and the number of cameras it sells coupled with the fact it agreed relatively quickly to pay for a license may have made it a target for other companies looking to turn a quick profit on old patents they had been granted or purchased.

Now, St. Clair Intellectual Property Consultants Inc. through the law firm of Robins, Kaplan, Miller & Ciresi has successfully sued Sony claiming that the company's cameras infringe on four patents dating back to as long ago as 1992, which it purchased in 1995. The judgement was nowhere near the staggering $171.4 million dollars in royalties St. Clair felt it was owed on Sony's $3.01 billion in camera sales since 1998, but at $25 million on patents it obtained for only $65,000, the company is doubtless still laughing all the way to the bank.

Sony said in February that they would appeal the decision, and whilst it disputes the validity of the patents, it went on to say that even if the patents were valid and it infringed on them, reasonable royalties would be no more than $5.73 million. Likewise, according to the Joint Photographic Experts Group's committee, Forgent's patents may well be invalid because prior art exists for the technologies used in the JPEG standard.

The four patents in question in this case are identified as having been invented by Marc K. Roberts, Matthew A. Chikosky and Jerry A. Speasl. We did a little digging at the US Patent and Trademark Office, and turned up 6 patents (4 of them identically titled and submitted over a period of years), amongst which number the patents in question are counted. They are as follows:

#6,496,222 - Digital camera with memory format initialization
#6,323,899 - Process for use in electronic camera
#6,233,010 - Electronic still video camera with direct personal computer (PC) compatible digital format output
#6,094,219 - Electronic still video camera with direct personal computer (PC) compatible digital format output
#5,576,757 - Electronic still video camera with direct personal computer (PC) compatible digital format output
#5,138,459 - Electronic still video camera with direct personal computer (PC) compatible digital format output

We aren't trained lawyers, and can't comment on the validity of St. Clair's patents, although we do question where the "new" invention in patent #6,496,222 is, since personal computers have been able to detect and correct improper formatting of "removeable digital memory" for decades. Simpy applying an existing idea to a different product (a digital camera) shouldn't necessitate a new patent - patents are not supposed to be issued if the invention in question would be immediately obvious to those acquainted with the field.

There can be little doubt that the practice of patent speculation leaves a bad taste in consumer's mouths. Large corporations will often quickly settle cases because it can be cheaper than protracted legal battles, and this can encourage a certain type of company to dig through its patent portfolios searching for patents that might be seen to cover technology used in a product they had no part in creating. Worse still, a flimsy patent process that often allows junk patents to be granted means that companies are submitting patent applications that are loosely worded - or even simply repeat somebody else's work with a different wording - in the hopes of later being able to gain a quick fortune from such a patent.

The patent process - which initially was created to protect individual inventors from large companies stealing their ideas, but now serves the exact opposite purpose - is due for an overhaul. That unfortunately will not happen as long as the general public allows the current situation to continue without calling for reform. In the meantime, corporations will continue to fight such cases only when it is likely to save them money, and either way the costs of licensing patents or fighting in the courts will be handed to the consumer in the form of more expensive end products.

One interesting footnote to this item is that in our research, we read that court documents have suggested that Sony sold $900 million in digital cameras in fiscal 2001 alone, and currently sells some $100 million in digital cameras every month with a 28 to 30 percent market share.

Source: The Detroit News Technology

Original Source Press Release:

Patent Infringement Legal Assault on Worldwide Digital Camera Vendors Widens

Belmont, CA (April 2, 2003) -- According to Imerge Consulting Group sources, the legal assault on worldwide digital camera vendors gained new momentum this past February with a federal jury in Wilmington, Del., awarding a small Michigan company $25 million in damages against Sony Corporation regarding a patent case argued by the Minneapolis law firm of Robins, Kaplan, Miller & Ciresi.

According to Imerge Consulting Group's principal analyst, Ron Tussy, "this lawsuit is similar to out-of-court settlements reached by Forgent Networks and Dallas based law firm, Jenkens & Gilchrist regarding JPEG coding and decoding in which Sony paid $16 million USD just to get rid of it rather than fight it in the courts. Other vendors also have settled with Forgent in the past year and rest assured, RK & C will come knocking on the same Japanese and Taiwanese vendors' doors in the near future seeking out-of-court settlements worth millions of dollars with this very important precedent now established."

The jury found that Sony Corp. infringed on four patents related to digital camera technology held by St. Clair Intellectual Property Consultants Inc. of Grosse Pointe, Mich. According to Imerge Consulting Group sources, Sony has now settled this suit rather than fight it further.

Patent trial attorney and partner of Robins, Kaplan, Miller & Ciresi represented a five -person St. Clair firm in winning this award, deemed the third-largest of this kind awarded by a jury so far this year according to the National Law Journal.

According to information received by Imerge Consulting Group, the suit against Sony Corp. involves technology used in almost all digital cameras sold today, which enables the cameras to select among multiple image file formats such as JPEG and MPEG.

According to attorney Shultz, "Sony has the most significant market share and that's why we sued them first." According to Robins, Kaplan, Miller & Ciresi, Sony Corp. generated $3 billion in sales from 70 different camera models that were multiple format digital cameras from July 1998 to the end of 2002.

According to Imerge Consulting Group sources, St. Clair acquired the four patents in 1995 from the inventors. The inventor's company, Personal Computer Cameras Inc., will share in the award.

According to Imerge Consulting Group's principal analyst, Ron Tussy, "monetary assessment regarding this latest patent infringement situation and its ramifications potentially could reach over $1 billion in settlements for past violations and future licensing. We have not read the four patents involved in this and are still investigating their longevity or whether these patents refer to other devices for our vendor clients and the imaging industry at large."

According to analyst Tussy, "clearly a Sony verdict and settlement was sought first because of their market position in the industry, but also because Sony has shown a propensity to settle rather than fight as they have proved with the Forgent issue. The problem with Sony's settlement is that it sets a precedent now with all other vendors who may have tried to pool resources together to fight this suit. We have heard that similar pooling of legal funds is now taking place regarding the Forgent issue. Sony missed their opportunity to rebuke this in court and now it will negatively effect the businesses of all other camera vendors."

� 2003 Imerge Consulting Group

Imerge Consulting Group is a privately held firm that provides a broad spectrum of market intelligence, decision support, validation, business development, market research and analysis to assist imaging corporations, wireless and beyond-the-PC vendors, component providers, institutional investors and fund managers.

Imerge Consulting Group also provides the ICG-SRS, the most affordable syndicated research service in the imaging industry, providing yearly imaging reports, newsletters and analyst inquiry services.

Imerge Consulting Group is also a provider of the most widely respected topical reports and forecasts in the imaging industry, providing unparalleled insights, analysis and forecasting for imaging devices and appliances, camera phones, digital cameras, digital minilabs and digital kiosks, embedded and external flash memory, imaging components, CMOS and CCD imaging sensors and digital photo print fulfillment.

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