Verance on Wednesday filed a lawsuit in federal court in Portland, Ore., charging Digimarc with violating antitrust and unfair competition laws, the latest legal blow in a long-standing intellectual property dispute between the two companies. Among other things, the suit alleges that Digimarc illegally submitted Verance's digital watermarking technology to a standards group.
The case could have wider ramifications for copyright holders, who may have to wait longer for a standard to emerge, analysts said. A previous copy-protection scheme for DVDs, known as CSS, was broken two years ago by Linux programmers, leaving Hollywood studios scrambling to find a replacement.
The suit "is going to delay an adoption of a standard for DVD copy-protection," said Phil Benyola, digital media research associate for investment company Raymond James Financial. "The longer they hash it out in the Portland courts, the longer it's going to take for the industry to (accept a) solution and get some compliant software out there."
The company is an active member of the Video Watermarking (VWM) group, a coalition of consumer-electronics companies that includes Hitachi, Macrovision, NEC, Philips Electronics, Pioneer and Sony. The group hopes to create a scheme based on digital watermarking technology that will allow film studios to distribute content online without giving ground to potential copyright pirates.
A digital watermark places a unique bit of code into a sound or image file to make the file difficult to copy or play without permission from copyright holders.
The lawsuit marks the latest chapter in an ongoing saga between Verance and Digimarc. In September, Digimarc filed its third patent-infringement lawsuit against Verance, related to embedding a digital watermark in audio or video content.
"These new claims have no merit," Digimarc CEO Bruce Davis said in a statement. "We remain comfortable that the courts will affirm our views regarding the infringements by Verance and the matters raised in their counterclaims."
San Diego-based Verance, which is not part of VWM, said it told the standards body that it would not allow its patents to be used in the standard, pending a resolution of the litigation. Verance said VWM submitted its digital watermarking technology in early November to the DVD Copy Control Association, an industry group aimed at fighting DVD piracy.
Among other things, the industry group has been involved in lawsuits aimed at stopping the distribution of computer code known as DeCSS, which makes it possible to defeat the CSS copy-protection scheme. In a setback to those efforts last week, a state appeals court in California ruled that the code is speech and thus could be entitled to protection under the First Amendment.
In a separate case in New York, a judge last year ordered Web site publisher 2600 to remove the code, saying it violated a federal law that prohibits making or distributing tools that subvert copy-protection schemes. That case is on appeal.
Although Verance has not joined the VWM, the company, like Digimarc, has played a key role in standards efforts. An audio version of Verance's technology was chosen by the Secure Digital Music Initiative, an industry group formed to protect digital songs from piracy.
"We've had a long history participating in and supporting standard setting bodies," said Bob Bagnall, spokesman for Verance. "We obviously believe in that concept and support it...but really any potential slowdown to the DVD video standard setting really comes from the efforts of Digimarc up to this point."