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Patents May Raise Price of Information Highway

By Don Clark
The Wall Street Journal
(Copyright (c) 1993, Dow Jones & Co., Inc.)

Software patents could turn the information highway into a toll road.

Compton's NewMedia, the largest seller of software on CD-ROM disks, will disclose today that it has received a fundamental patent on multimedia programs that store and retrieve graphics, sound and animation as well as text. The company, a unit of Tribune Co., could use the patent to seek royalties on competitors' CD-ROM sales, as well as similar search-and-storage methods used with interactive television.

And Compton's isn't the only company asserting broad claims to innovations in software. TestDrive Corp., Tektronix Inc. and Starsight Telecast Inc. are seeking to enforce fundamental patents as well. If successful, such efforts could raise costs in the multimedia business and reignite a long-running debate over whether patents encourage or discourage innovation in the fast-moving software field.

Compton's licensing plans will be outlined tomorrow at the Comdex trade show in Las Vegas. Analysts think the patent could spur a battle with Microsoft Corp., another big force in CD-ROMs that is challenging Compton's in the market for multimedia encyclopedia software.

"This has to be the big news in the industry for some time to come," said Jonathan Epstein, publisher of Multimedia World, an industry magazine based in San Francisco. "People are going to have to take this seriously and consider whether they want to knuckle under and pay royalties to Compton's," added Ronald Star, a San Francisco patent attorney.

Last week, TestDrive , a 25-employee company in Santa Clara, Calif., announced a patent on a promising technique that lets computer users try multiple programs on a CD-ROM before they buy them. If they like one, they may give a credit-card number to the software supplier and receive a code that gives full use of the software. Nathan Schulhof, TestDrive 's chief executive, believes the patent will also cover systems for controlling electronic delivery of movies, music and other data to the home.

Tektronix, based in Beaverton, Ore., has won a patent on software that uses indexes to display video images. Starsight Telecast, a company in Fremont, Calif., has sued two competitors over patents for on-screen menu systems that may become crucial for navigating through expanded TV services.

"Not only will there be toll takers on the information highway itself, but on the on ramps leading to it," said Ronald Laurie, an attorney in Menlo Park, Calif., who specializes in technology law.

Software patents are a relatively new battleground. Most disputes in the business have focused on copyrights, which protect artistic expression, such as the appearance of computer-screen displays. But a Supreme Court ruling in 1981 cleared the way for the use of patents, which give 17 years of exclusive protection to an invention after an examination by the U.S. Patent Office. To receive a patent, Mr. Laurie noted, a program must include an original process and a detailed description of how to implement it.

Compton's says it fulfilled both requirements in 1989. CD-ROMs, which resemble compact disks and offer very large storage capacity, had until that point mainly stored textual information, said Stanley Frank, Compton's chief executive officer. To search the disks, users typically typed in a word or group of words and were presented with a list of references that contained the words.

For its multimedia encyclopedia, Mr. Frank said, Compton's set out to develop a system that stored graphics, animation and sound, and allowed users to search through the database by means of graphics as well as text. A mouse pointing device let a user click on a map of the world to find information about a place, for example, or on a timeline to research history.

The company applied for the patent in October 1989, just after the release of Compton's Multimedia Encyclopedia. The patent, described as a "multimedia search system using a plurality of entry means which indicate interrelatedness of information," was granted Aug. 31. Only programs sold after that date could infringe on the patent.

Compton's, which distributes about 150 CD-ROM titles created by it and 20 affiliated developers, plans to license the invention widely. Mr. Frank said software developers may use the technology if they enter into a distribution relationship or joint venture with Compton's, or if they use its authoring software. Others may pay a small royalty; Mr. Frank would not immediately disclose the amount, but people familiar with Compton's plans expect the fee to be 1% to 2% of sales.

"In no way do we want to be preventive or punitive," Mr. Frank said. "We want to work with everybody to continue to grow this vibrant and exciting industry we've developed."

But others don't expect a warm response to Compton's plan. InfoTech, a market-research concern in Woodstock, Vt., estimates that there will be 7,183 CD-ROM titles in print by the end of this year. Many of them use graphical information-storage techniques similar to Compton's. "There will be anger and disbelief, because there will be a lot of products that have been on the market that overnight become unlawful," said Patricia Thayer, a patent attorney in San Francisco.

Microsoft is considered a likely target for Compton's because of its strong CDROM sales, which include a multimedia encyclopedia called Encarta that competes with Compton's flagship product. Tom Corddry, Microsoft's business unit manager of multimedia publishing, said he couldn't comment on the significance of the patent until Microsoft had time to study it.

Patent attorneys predicted that competitors will attack Compton's patent by finding earlier inventions that would prove the company's work was not original. That may not be too difficult, because the database area has produced so many products over the years, said David Binney, a patent lawyer in Seattle.

As more such patents emerge, programmers' already-thin profits could be squeezed by the need to pay royalties to several patent holders. "It strikes me that things are a little crowded already," said Robert Barr, an attorney in Palo Alto, Calif.

Nick Arnett, a consultant who is president of Multimedia Computing Corp. in San Jose, Calif., argued that Compton's patent could discourage vital research needed to make it easier to search through growing masses of digital information. "Information navigation is the single largest obstacle," he said. Such broad patents "are going to be a significant deterrent to the real growth of the industry."

A public outcry recently caused Optical Data Corp., a company in Warren, N.J., to give up any plan to enforce a patent on videodisk technology used in the classroom. William Clark, the company's chairman, said Optical Data put the patent in the public domain in reaction to fears that the company would file suits against teachers. "There was a huge outburst, and we retreated," he said.


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