The JPEG Enforcer - InformationWeek

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2/17/2006
05:32 PM
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The JPEG Enforcer

Dick Snyder is unapologetic about going after companies that have used JPEG technology in their products. He's CEO of Forgent Networks, a company that acquired the patent for JPEG compression technology when it bought Compression Labs in 1997. In the past four years, it has collected $105 million in licensing fees, with hundreds of millions of dollars in new fees in the offing.

Since 2002, fees from JPEG licensing have represented more than 90% of Forgent's annual revenue, which was $9.9 million last year. "Why in the world wouldn't we get the value of it? We were the ones who developed the technology," Snyder says. "Our shareholders expect us to get value for it. The reason the patent system was set up was to reward and protect the people who develop innovation."

Still, critics characterize Forgent as a patent troll because of its aggressive pursuit of licensing fees and for waiting years to do so. Forgent has identified 1,100 companies that use JPEG compression in their products and has sued more than 40, including Dell, Fuji, and IBM. It didn't start to widely enforce its JPEG patent until earlier this decade, about 15 years after it was awarded. So what, Snyder says. Just because you have a patent that compresses data doesn't tell you "to what extent that patent influences current commercialized products," he says. Investigating specific products and determining if they're using the technology takes time, he maintains.

Snyder disavows the troll label, noting that licensing revenue helps fund Forgent's nascent scheduling software business, which pulled in $731,000 in revenue in its latest quarter. Forgent turned to patent enforcement when its teleconferencing business floundered about six years ago. The JPEG patent will expire at the end of this year, but Forgent can continue to collect fees for past infringements.

One critic, Jason Schultz, staff attorney at the Electronic Frontier Foundation, a civil liberties group, says that while Forgent's business model is legal, it doesn't contribute to society's benefit. "Is this a good thing?" he asks. "Is this helping the world be a better place? Is this helping innovation?"

The answers are clear to Schultz and Snyder--just not the same.

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