HMV, OD2 sued over download patent

Music distribution Web sites are the first European targets of E-Data, which owns a patent that could be interpreted as covering most Internet downloads

A small US company has sued the HMV Group and online music distributor OD2 over a far-reaching European and US patent that it claims covers a broad range of Internet downloads.

The lawsuits are the latest twist in a legal saga dating back to 1996, when New York-based E-Data began its campaign to turn its intellectual property into revenues by selling licenses and filing lawsuits. If E-Data's patent is validated in court, industry observers say the company could become one of the richest companies in the IT industry.

The latest suits allege that OD2 and HMV, which collaborate on a music-download service on HMV's Web site, violate E-Data's so-called Freeny patent, named after inventor Charles C. Freeny, Jr. The company is also suing Satellite Newspapers of the Netherlands.

The UK lawsuits were filed last month in the Patents County Court of London, and the Dutch lawsuit in the District Court of The Hague. E-Data said it has notified many other European businesses of alleged infringements and will continue filing lawsuits as necessary.

According to E-Data, the Freeny patent covers "the downloading and recording of information, such as music, news articles, films, etc., from a computer onto a tangible object, such as a tape, a CD, or a sheet of paper".

The 1985 patent, European patent EP 0 195 098 B-1 or US patent 4,528,643, specifies "a system for reproducing information in material objects at a point of sale location" where the information is transferred from a remote location, and an authorisation code is used. (Full details can be found on the US Patent Office Web site.)

In March 1999, the US District Court for the Southern District of New York ruled that defendants had not infringed E-Data's patent and that the patent had a scope too narrow to apply to Internet downloads in general. The patent, the court said, applied more to downloads through "kiosks" and other physical retrieval systems.

However, an appeals decision in 2000, confirmed in 2001, gave new life to the patent. While E-Data is not pursuing downloads that reproduce information on a hard drive, it argues the patent is valid if the information is reproduced on physical media such as a CD or on paper.

"The website of HMV, one of On Demand Distribution's customers, specifically permits the consumer to burn downloaded music onto a CD, or record it onto a portable playing device," said E-Data president Tibor T. Tallos in a statement. "Similarly, a Satellite Newspapers kiosk is capable of receiving files and on-demand printing of newspapers. We believe these activities are in clear violation of our patents."

In the US, E-Data has signed up more than 30 licensees who preferred not to challenge the company's claims in court. Defendants in the ongoing lawsuit, including CompuServe, Broderbund Software, Intuit and Waldenbooks, have claimed that if E-Data's patents are upheld, it would entitle the company to a licence fee on all Internet downloads.

"This is the case that would not die," said Carl Oppedahl, attorney with Oppedahl & Larson, which is defending Softlock Services in the case, commenting on the 2001 decision. "It has been going since 1995, and it isn't over yet. If the patent owner prevails in its view, they stand to be wealthier than Microsoft."

CNET News.com's Paul Festa contributed to this report.

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