DRM patent holder seeks 12 percent of iTunes/iPod gross from Apple

DRM patent holder seeks 12 percent of iTunes/iPod gross from Apple

Summary: Earlier today, I received an e-mail from Peter C.W.

TOPICS: Patents
Earlier today, I received an e-mail from Peter C.W. Chung who is associated with a Hong Kong-based company called Pat-rights that claims to hold a patent on the digital rights management (DRM) techniques that Apple uses in its iTunes software and iPod portable digital audio players. The e-mail, which was a reproduction of a posting on Pat-right's Web site, says:

"Everyone knows that iTunes allows a user to play purchased music tracks to up to 5 computers, without repaying the money, under the condition that the computers are registered. The computer registration involves a process of identity verification in which a user is required to key in into the computer the correct Apple ID and password he used to purchase the song....This is certainly a patentable technology. If iTunes does not patent it, there must hbe a very good reason for them not to do so- someone else has patented this...Pat-rights named the technology as 'Internet/Remote User Identity Verification', earned a US Patent 6,665,797 therefore, and world-wide patents pending. In the end of 2003, Apple indicated in its communication to Pat-rights that Apple had no interested in licensing it and maintain silence ever since then."

The posting goes on to identify Damascus-based patent litigator Joseph J. Zito as the attorney that will be representing Pat-rights in its dispute with Apple. According to the United States Patent and Trademark Office's records, the patent was granted to Tse Ho Keung in December 2003. Though I'm not a patent attorney, the filing details a process that unquestionably resembles the process used by Apple's iTunes to enforce the DRM policies that Apple applies to music that's sold for download by its iTunes music store. The filing never mentions digital audio usage but instead discusses the process in the context of software usage. This morning, during a telephone interview, Zito said that "In the instance of licensing through subscription, digitized music and software are the same thing."

Here's a transcription of the interview:

Q. Is Pat-rights going to sue Apple?
A. My client developed a software method for verifying subscription on-line prior to allowing download. We expect to be successful in licensing negotiations with Apple. They're a good company that understands intellectual property rights and we think they'll be reasonable.

Q. Your client is demanding 12 percent of Apple's gross on the gross proceeds from iTunes and iPods. Is that negotiable?
A. I can't comment on negotiability. I need to negotiate that with Apple.

Q. What has been the timing of the events so far?
A. My client was first in touch with Apple during the months of December and January so Apple has been aware of the issue for a couple of months. I didn't get involved until February when the client contacted me for the first time. I sent a letter to Apple last wednesday and they received it this past Monday (Feb 28, 2005).

Q. Your client's posting says that Apple is being given 21 days. Does that mean that if things aren't worked out by then that you'll file a lawsuit on March 21st?
A. That's our intent.

Q. The posting mentions treble damages. What are those.
A. If the court finds that Apple willfully infringed on my clients patent, it can enhance the damages up to 3x.

Q. When I read the patent, it looks like it can be broadly applied to other DRM schemes. Do you and your client share that view?
A. It's fair to say that there are appplications to other DRM schemes.

Q. So, your client could go after others after Apple?
A. Yes, there could be others after but that goes into the area of what my client is intends to do with his patent rights and I'm not aware of any plans. You'll have to talk to him.

Q. Have you identified which other DRM schemes could be infringing?
A. My client knows of them but I would rather not say before he has made decision on what he's going to do.

Q. Does your client have a working implementation of the patent or is just a design?
You're asking if it's a paper patent. That's going to be an important issue in this case as it is in all such cases. This case will hinge on a lot of things so I'd rather not comment on what our plan is.

Q. The name "Pat-rights" suggests that the company is a holding company for patent portfolios. Is it?
One could take that from the name, but as far as I know, he's enforcing his own rights

Q. But if he wins or Apple settles, theoretically, he'd have enough money to buy other patents up.
A. Yes, he would have enough cash to form a company like [Nathan Myhrvold's Intellectual Ventures].

Q. Why did your client pick you?
A. He did some research on this, talked to a lot of people, found out that we do a lot of patent lititgation, and cold called us. He did his homework and called the right firm. We're feared. I don't know if we're well respected. But we're feared.

This is the world that that those who abhor patents on software fear most -- patent holding outfits whose purpose in life is to extract royalties from others. In the case of DRM, I haven't even scratched the surface of the mess that patents on DRM techniques is inviting. Today for example, it's a royal pain for end users to have to deal with different DRM techniques for each of their digital activities. If you have to go to two different online destination to get the downloads you want, chances are that one DRM technology on your device won't do. Right now, it's largely a one-to-one relationship. This is the sort of situation that end-users may not put up with for very long -- which could mean an eventual defacto standard.

Like what almost happened in the Eolas case where one patent holder controls the rights to a technology that's used by virtually everyone on the Internet, a DRM monopoly could give a patent holder control over a significant portion of the Internet if not the entire Net altogether (since digital rights applies to virtually every activity we engage in on the Net). This why the world is watching and waiting to see how the European Union will resolve its deliberations over software patents (the vote is Monday and things are looking good for patent holders).

What's the solution to the problem at hand? It's hard to say. If all DRM software patents were invalidated, then it's likely the Net would gravitate to a single open standard and everybody would be able to breath a sigh of relief. Software and content developers including musicians could give up on the idea of DRM being applied to their content and then the technology would end up being useless. But that's not about to happen as, in the course of protecting their business models, both the software and entertainment industries are looking to keep piracy at bay. There's simply too much too lose. There's also too much to gain for the company that ends up with the intellectual property rights to a defacto DRM standard should one emerge and Pat-rights isn't the only company looking to rule the DRM landscape with its patents. More to come.

Topic: Patents

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  • EU, are you paying attention?

    I patented "paying attention" while using a computer.. but I'll let it slide..

  • "This is certainly a patentable technology."

    Logging in is a patentable technology?

    Folks, we are in huge, massive, industry-destroying trouble if crap like this can be let in...
    • I patented selling a product for a profit

      Wait for my lawsuit settlement cash to start rolling in....
      tic swayback
  • I can't believe this won't be killed off by "Prior-Art"

  • Biggest land grab in history.

    So long as content owners want the false security of DRM, there'll be people to sell it to them.

    So, unless Microphobia is too intense, audio and visual will belong to wm-.

    But just think how many products can be sold to content owners, and each and every one of them a failure to protect digital rights. Oh, some will be harder to crack than others, and some methods of breaking may be more sophisticated than a magic marker ring around the cd or a push on the Shift button. But the world's chosen task is preventing DRM from taking away the right to use property as intended, vigilante style, and it's easy to anticipate total success.
    Anton Philidor
    • A fool and his money...

      ....well, you know the rest.
      tic swayback
  • Old dogs, new tricks

    Has anybody read this patent? In the "BACKGROUND OF THE INVENTION", it mentions hardware to aid in software protection methods for other software commercial products. It further says that the object of this "invention" is to replace this hardware with software, which is what is being patented. In other words, this patent covers implementing functionality that is already being implemented in various pieces of hardware.

    Does this person now have a collar on implementing this functionality in software or can anybody reverse-engineer one of these devices and produce functionally equivalent software? It seems like this person did not invent the process or any specific method, he just "invented" another way to implement it using software. Am I missing something here? Can you actually patent a software implementation of a process that has already been invented and implemented by other means? Does this person have dibs on copying hardware DRM implementations in software?
  • Why are people feeling sorry for Apple?

    Isn?t Apple one of the companies lobbying the EU for software patents? I say let Apple, MS, HP, IBM, Sun and others eat their own dog food. When MS gets sued for a cumulative amount of about $5B in one year over software patents, then I?ll be satisfied.
    P. Douglas
    • if only it was "Anti-piracy software"

      DCMA does not apply here because no one could argue that Fair Play is "Anti-piracy" Fair play is some luke warm version of protection to protect Apple's iPod product. It is too easy and obvious to copy the songs into the clear and burn them on CD's to call this anti-piracy.
  • A iTunes customer's voice

    I understand why we need the patent system, but when thing like this happen, it may affect cosumer rights.

    First, the patent holder may sell the patent to whoever offers the highest price, what happen if Microsoft get it ? MS wouldn't accept fee from Apple for a license! ;

    Second, if Itunes can no longer do computer registration for us, then the songs I purchased may soon become not playable on any computers as I frequently change the hardware. And, once the hardware changes, their FairPlay CRM software will refuse to play music.

    Third, up till now, I do not know whether the 5 computer registration is a consumer right or iTunes may change it from time to time or reduce it to ZERO ?!
  • Re: Why the Patent 6665797

    As far as I know, the USPTO is very careful when issues a Patent.

    I see from the patent document that it is first filed on 1995, and issued on 2003, so there is no reason to doubt its validity.

    Whether a patent should be granted depends on 3 factor: novelty, inventive step, usefulness.

    I see the patent is useful and not being conceived by any people at that time.

    Is it a very interesting idea to protect music software by another e-wallet software ?
  • At the end of the Story-the fool...

    As we all know, the fool use his money, very very little money in patenting his foolish inventions anywhere, everywhere in the world...and at the end of the story, he become a billionaire !!

    There is more to be told about the fool. He not only patented DRM, he also patented mobile commmerce(local transaction). Believe it or not, here below is claim 8 of the fool's Australian Patent AU 773789 :

    8) A method used for general transaction purposes such that a transaction request may be of any transaction amount, comprising the steps of :
    receiving, by a communication means, information related to a transaction, including an account identifying information obtained from a participant of said transaction, at the location of said communication means ;
    obtaining by an obtaining means, said information related to said transaction from said communication means directly or indirectly from a remote location;
    transmitting, by a transmitting means, at least a part of said information related to said transaction obtained, remotely and directly to a wireless portable device under control of said participant ;
    conveying, by said portable device, said at least a part of information to said participant ;
    receiving, by said portable device, information for verifying identity of said participant from said participant, as a precondition for generating an electronic confirmation on the correctness of said at least a part of information ;
    receiving by said obtaining means, said electronic confirmation ;
    wherein said at least a part of said information including the transaction amount of said transaction .

    His US m-commerce patent application is about to be granted.

    I wish I were the fool !!
    The fool