Forgent and MPEG: Can you make a living out of a collective patent?

On May 26, the US Patent Office issued a preliminary ruling on another long-running patent fight pitting a small US company, Forgent Networks, against a well-known patent, the MPEG graphic encoding protocol. This battle differs from other high-profile clashes as the challenger is taking on not a big corporate entity, but a broad community of IT researchers and academics. MPEG, as its full name (Moving Picture Experts Group) indicates, is a collective effort. Launched in 1988 by a researcher, Leonard Chiariglione, affiliated with a research lab of Telecom Italia, it was rapidly endorsed by the international standards body, the ISO. The development of MPEG can be seen as an example of private-public co-operation: the standard is widely used and it evolves continuously in response to the progress of technology.

It is precisely the success of MPEG that prompted Forgent’s action. Although the patent under review was filed in 1987, and the company which submitted it was acquired by Forgent in 1997, the latter only started enforcement action in 2002. Amazingly, it managed to obtain significant IP payments (in millions of dollars) from some companies, who would rather pay than litigate. In any case, one wonders about Forgent’s strategy: even the patents deemed valid by US PTO will expire in 2006. Not surprisingly, the market values Forgent, listed on NASDAQ, at 37 million dollars (and the company has some 16 millions dollars in cash).

So far our typology of IP combatants included trolls and gladiators. Forgent represents a distinct category: that of the retarius, a fighter whose main weapon is a net, with which he tries to ensnarl its opponents. Other examples of ‘netmen’ include British Telecom, which a few years started litigation to assert its ownership of the hyperlink.

In any case, Forgent case reminds us that for all of its apparent irresistible progress, the open source movement is not the only game in town.