Burst.com faces off with Microsoft

Microsoft is being sued by US software developer Burst.com for allegedly stealing patented media transmission technology and using it in Media Player 9. Although Microsoft denies the allegation, the Redmond giant was told by a judge last week to search through back-up tapes and produce any emails that relate to dealings with its former partner.

Richard Lang, founder and chief executive of Burst.com, claims his company grew from nothing into a $200m (£127m) business with hundreds of staff over a period of ten years, and then almost imploded during the dot-com downturn. Burst.com is still trading, but Lang is one of only two full time employees left and is now facing a legal battle with one of the wealthiest and most powerful companies in the world.

Q: What is the concept behind your transmission technology?
We had a vision in 1987 of a delivery mechanism -- a way of distributing audio and video over electronic networks. In 1988, we launched the company as a partnership, and by 1990, we were an official corporation and had received £2m in VC investment.

Prior to our technology, the approach to distributing video and audio was the broadcast model -- where you have a television or cable station that simply plays audio or video in real time. This means that if it was a 30 minute programme, it took 30 minutes for that programme to be delivered and 30 minutes to watch it.

By using a number of different components -- including digital compression and storage -- we designed a system that could deliver video in chunks. It would send anything from a couple of minutes worth of video, an entire two-hour programme or anything in between at a very rapid rate. The information would be stored wherever the viewer was and would require either a set top box or a PC.

Q: When did Microsoft get involved?
We spent the following seven years building a portfolio containing 37 patents, nine of which were filed in the US. The balance were in countries including the UK, Japan, Korea, India and Australia.

In 1997, other companies introduced the industry to the concept of video streaming as a way to avoid long download times. Although this required a little buffer on the receiving end, it was still a broadcast model, because although in theory the buffer would be depleted and refilled at the same rate, in the real world, the Internet is not a direct uncluttered connection. It took a few years for the industry to realise that real-time streaming was inherently flawed and would not produce video of the quality people are used to seeing on their televisions.

In 1999, we introduced a product called Burstware, which was an alternative to real time streaming that solved the delivery quality problems and incorporated our intellectual property. The company grew very rapidly, we got some very high profile customers, and were valued at around $200m with 110 employees.

During this period, at their invitation, we became a Microsoft partner. Our technology consisted of server and desktop products, and since Microsoft had a monopoly on the desktop, we had to work with them to make sure our player would work with Windows.

Q: So what happened to sour the relationship?
For two years we worked with Microsoft. We expected Microsoft to license our technology and incorporate it. But, during this time, we saw the market implode and many of our best customers walk away. We had to shrink the company down to 20 staff and later to five, and eventually went down to just two full time employees -- me and our vice president of operations.

Microsoft offered us a one time payment of $1m for global rights to everything we owned. We rejected that offer and went back to them with what we thought was a more honest and reasonable offer, which they discounted.

So we thought that was the end of the story. Then, at the end of 2001, Microsoft held a press conference at one of the trade shows and announced what they called the third generation video streaming technology, which appeared to be almost exactly our product -- except they were calling it Corona at the time.

In early 2002, Bill Gates made the official introduction and they changed its name to Windows Media Player 9. In our view this incorporates information they were given under a special non-disclosure agreement, and uses our patents without a licence.

At that point, we realised that we had been had, but we were able to find a couple of very good law firms that were willing to represent us on a contingency basis. So we filed a suit against Microsoft to try and resolve it.

They have our technology, there is no doubt about that, and we see that as a great validation of our technology, but we haven't been paid yet, so the lawsuit is an attempt to be paid.

Q: Were you concerned from the outset that this kind of might happen?
We were aware of Microsoft's reputation, but we had no choice but to work with them. Microsoft had -- and still does have -- a monopoly over the PC desktop. They also have strong influence in other areas, so there was no way we could be in our business and not deal with Microsoft.

However, we did do our best to protect ourselves. We negotiated a special non-disclosure agreement -- it wasn't the standard one. We also put our best foot forward and took a lot of time to try and ensure that we would not be taken advantage of.

They had a reputation and it appears they are living up to it, but we would like to believe that it is possible to have a favourable and mutually beneficent relationship with Microsoft. Even today, we would rather not be suing them, we would rather be working with them -- they forced us into this corner. We have been in this business for 16 years and all we really want is to get paid for the contribution we made.

Q: What advice would you give to a small company thinking about doing a deal with Microsoft?
That is a tough question, because the advice I would like to give them is just make sure you do a good job of protecting yourself, put your best foot forward and everything will work out, but that is what we did and we are still waiting to find out if everything works out. I'd have to add something -- have your lawyers ready just in case it doesn't work out!

At this point, I have faith in the justice system but more than that -- and time will tell if I am correct or not -- but I have faith in human beings and would like to believe Microsoft is a collection of human beings who are capable of doing the right thing.

The corporate soul may be tarnished but on an individual basis, it is possible to redeem themselves. I know that sounds like a naive statement, but if you don't look at the world in that way, it is a pretty ugly world you're left with.