Wednesday, April 19, 2006

BusinessWeek asks: is a troll, or not?

BusinessWeek presents the current Burst v. Apple litigation in a "is Burst a troll or not?" format. A previous case against Microsoft had resulted in a settlement. Although there is mention of business models, BusinessWeek does not fully crystallize the issues. We see in the saga, more clearly than in NTP/RIM or eBay/MercExchange, that an action by an infringer (Microsoft) disrupted the business model of burst, and thus disconnected the invention/business model link necessary for commercialization. So, there is no product of burst. Is burst, therefore, a troll?
Well, that depends on whether the invention disclosed and claimed in burst's patents is valid and infringed. The text in BusinessWeek suggests patent validity, although some later comments to the article suggests it is not. Whether burst (or anyone else) is gaming the system through trolling depends on the validity of the patent claims, not on the success of the business model, which (as this case illustrates) can in turn be gamed by the accused infringer.

A previous litigation by Burst against Microsoft had presented some interesting "destruction of email evidence" issues (see earlier IPBiz post.

Richard Lang of Burst has brought suit against Apple Computer Inc., which he says infringes on Burst's patents covering superfast transmission of content, such as songs and video, over networks.

So, BusinessWeek asks if Lang is, or is not, a patent troll?

Evidence saying Burst is a troll:

That makes Burst, in many people's eyes, a "patent troll." In recent months tech giants such as Microsoft, Intel, and Yahoo! have vilified the trolls -- tiny companies that don't make anything but simply hold a portfolio of patents. Their business plan consists of cashing in on this intellectual property by suing traditional corporations, the types that produce real products. That infuriates the targets of these suits, who claim that the legal risk forces them into exorbitant settlements, and that the ensuing payoffs increase costs for consumers. For many, the poster child for trolls is NTP Inc., the tiny company that extracted $612 million from Research In Motion Ltd., the maker of the BlackBerry wireless e-mail device.

Evidence saying Burst is not a troll:

But it was never Lang's plan to be in the litigation business. A legitimate visionary, he patented a method for transmitting data over digital networks that turned out to be years ahead of its time. His company once seemed poised to become a major tech player in its own right. But the hardball tactics of Microsoft blew apart Burst's original business model, Lang claims, and gave him no choice but to turn to the courts.

While big companies have been complaining that the patent system is tilted against them, Lang believes his tale demonstrates that the opposite is often true. "There's a million ways for a plaintiff to lose a patent case but only one way to win," he says. "So if you're a big rich company, why not go ahead and go through the [legal] process? Maybe the little guy will run out of money, or run out of courage."

The amount in question as to Apple:

While Lang won't discuss his hopes for the Apple claim, his lawyer cites as a point of reference other cases in which plaintiffs were rewarded more than 2% of infringing revenues. That would be about $200 million so far for Apple. " approached Apple claiming that some of our products violate their patents, but we don't agree," says an Apple spokesperson. On Jan. 4, 2006, Apple filed a suit seeking to invalidate Burst's patents. [a DJ action]

Did Lang really invent something new?

While Lang is controversial, his record as a tech clairvoyant is impressive. When the rest of the world was focused on stuffing 500 channels onto cable TV, he was devising ways to use digital networks to deliver content more efficiently and reliably. Lang recognized that shows could be sent faster than they could be viewed -- in "bursts" that took full advantage of momentary increases in network capacity, rather than in constant "streams." Indeed, at the 1991 Consumer Electronics Show, Lang drew a crowd with a demo in which 15-minute segments of a PBS documentary were zipped to a TV across the booth in seconds. "They were demonstrating things that other people couldn't do," says tech pundit Robert X. Cringeley.

After spending the 1990s trying to perfect "real-time streaming" of content -- often in low resolution with tiny images -- titans including Apple, Microsoft, and Real Media have since embraced Lang's general approach. "We were so outside the box that even in the late 1990s, people didn't get it," says Lang.

By the late '90s his company had grown to 110 employees and was selling a software package called Burstware. Then, Microsoft got in the way. When the software giant upgraded its Media Player software in 2000, suddenly Burst's key product stopped working. Lang is certain it was on purpose, a charge Microsoft denies. Regardless, Burst nearly went bust. Customers backed away, as did bankers who had been arranging a $70 million secondary offering for the company. Within months, he'd laid off all but four staffers and was begging Microsoft for a licensing deal. "Microsoft, like many big companies, wants to wear out their opponents," says Lang. In one e-mail, Burst's contact at Microsoft reported that the company was "going, going..."

Burst survived, though. Convinced that a 2001 release of Windows Media Player infringed on Burst's technology, Lang got an investor to put up $1.5 million to keep the company afloat as it pursued a lawsuit, filed in June, 2002. Without admitting liability, Microsoft agreed to the $60 million settlement a day before a hearing on whether it had destroyed evidence. Although the myth is that trolls get fabulously wealthy, Lang personally ended up with just a fraction of the settlement proceeds, $2.5 million.

Believing the victory validated his patent claims, Lang has expanded his search for licensees. Apple was his first stop, and not only because of its deep pockets. Apple reps had approached him at a trade show back in 1991, and Burst met with Apple in 1999, 2000, and 2002. "The attitude is exactly like it is at Microsoft and everywhere else. If you won't take next to nothing [for Burst's technology], we'll fight you for the next 10 years," he says.


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