Back in the day, my first exposure to the concept of a Patent Troll was in the corporate persona of Unisys, which was clubbing GIF users right and left with their LZW patent. People were outraged, but in this case, Unisys had a more or less unassailable position. The LZW algorithm they picked up from Sperry was used to both encode and decode GIFs, and the patent was pretty solid.

The outrage came about because of the trollish nature of their enforcement. The use of GIF as a standard image format on the web was well established for years and years before Unisys started hitting people up, and relatively succesfully. The tactic of waiting for a technology to get established before revealing a patent and enforcing terms is legal – there is no requirement to defend a patent in order to protect it – but it is one that is widely despised.

Well, the LZW patents have long expired, and a new villain appeared on the stage a few years ago. Forgent Networks, in Austin, Texas, bought the assets of Compression Labs, and picked up U.S. Patent No. 4,698,672, which is only vaguely related to JPEG coding. Nonetheless, after a spectacular win against Sony in a jury trial, Forgent has been lining up lawsuits and just as fast, signing licensing agreements and collecting over $100M in fees, which pretty much amounts to all their revenue.

Things were going Forgent’s way quite nicely until an organization named PUBPAT asked the USPTO to take another look at the patent, with pretty disastrous results for Forgent. And they did it totally within the lines, by exposing prior art that invalidated patent fluff. When this was first announced, Forgent put a happy spin on it, but it was pretty obvious things were not going well for them.

At the time, I flagged this a big deal, but Matt Mahoney said:

Good news, but a bit late. Doesn’t the patent expire in about 4 months? If I understand correctly it is good for 20 years from filing, Oct. 27, 1986.

As it turns out, no, this doesn’t matter, because Forgent’s lawsuits are all for back damages, and they can keep filing those for years and years in the future. Everyone who was using JPEG imaging while the patent was in force was in line to be tapped, regardless of whether or not the patents had expired.

Richard Snyder, President of Forgent
Now the folks at Forgent are starting to see the light. Instead of bravado, Forgent president Richard Snynder is whining:

We are shocked and disappointed at the outcome of the claims construction ruling. We find it difficult to reconcile the outcome of the ruling with our continued belief in the patent and our case. We are currently weighing our options and will decide our course of action in the near future.

In other words, Forgent is screwed, and nobody but their shareholders will be crying.

The one big question I haven’t seen addressed is this: if the companies that did cave in and purchase licensing agrements did so based on a faulty patent, shouldn’t they be getting their money back? I’m not sure where civil law stands on this. I mean, they may still be stuck with paying the tab, because the ’672 patent didn’t go away, but it is weakened. Companies like Yahoo!, Pegasus Imaging, Research In Motion, and Sony are going to be feeling like saps if they don’t get a rebate. Hope they kept their receipt and the bar code from the box.

If the contracts don’t provide for a refund, and the law doesn’t provide for a refund, expect to see Forgent the unhappy recipient of many lawsuits from angry licensees in the near future.