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2/24/2006
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Patent Threatens Rich-Media Apps With License Fees

A tiny San Francisco Web-site development company claims its patent covers all rich-media technology implementations, including those that employ tools such as Flash, Flex, Java, Ajax, and XAML, when the apps are accessed over the Internet.

Another big patent fight may be looming. The U.S. Patent and Trademark Office has granted a broad patent that could force tens of thousands of businesses to pay royalties for processes that have become standard at many companies. The patent awarded to Neil Balthaser and his tiny San Francisco Web-site development company, Balthaser Online, covers the use of rich-media applications over the Internet.

The patent--issued on Valentine's Day--covers all rich-media technology implementations, including those that employ tools such as Flash, Flex, Java, Ajax, and XAML, when the rich-media application is accessed by any device over the Internet. Balthaser doesn't claim his patent covers the tools themselves, only the rich-media Internet apps they help create. Examples range from interior decorating software to Google Earth to streaming audio.

The patent could produce a multimillion-dollar payout. "The considerable value of the patent in the rich-media and rich Internet applications areas cannot be overstated," Balthaser's patent lawyer, Don Pelto, said in a statement.

But standing in the way could be large tech companies and tech users who might question the 83 claims in the patent, contending they cover too many processes that are neither novel nor nonobvious, two conditions required to get a patent. "It's kind of unbelievable that [the patent] has such a wide-ranging use because it covers so many technologies," says Bola Rotibi, a senior analyst at Ovum, an IT advisory firm. If the patent is enforced broadly, she says, "anybody who does anything with rich applications will have to pay royalties to the company."

If a patent challenge occurs, it could be years before Balthaser is raking in dollars from licensing fees. Instead, he may be forced to tap the vault to finance a patent defense. "We're ready to defend it vigorously if we have to," Balthaser says.

There are alternatives that might let Balthaser avoid legal scuffles. Selling the patent to perhaps a top-tier IT or Internet company is an option, he says. Then the buyer would have to worry about enforcing it.

Of course, that approach could create some mischief in the marketplace. Imagine Microsoft acquiring the patent and limiting Adobe--the owner of the Macromedia Flash development environment--from employing processes to use rich media over the Internet. But odds are that wouldn't happen. Instead, the new patent holder most likely would use the patent to protect its franchise while making money licensing processes to others, including competitors, in the way Toyota manufactures the Prius hybrid car while licensing its technology to other automakers. "At the end of the day, no one wants to kill Web 2.0, no one wants to kill rich Internet applications; that doesn't make sense for anyone," Balthaser says. Then again, few people thought patent holder NTP would seek to shut down the BlackBerry wireless E-mail service in the United States.

Balthaser won't say which companies he's talking to about a possible sale, or when a deal might be finalized. Rotibi points to Adobe, Google, Microsoft, and Yahoo as having made significant investments in rich Internet and interactive technology. These companies have made a bet that rich Internet media, along with more capable handheld devices and embedded technology, is the gateway to a market that sees a convergence between consumer, workplace, and appliance interactions, she says. Rich-media apps are "a defining market--not unlike the effect the PC had for Microsoft--and the bedrock of future software applications," she says.

The developer community expressed a great deal of skepticism about the patent claims, and many posters to online sites last week cited examples of what they claimed were prior art, which could be used to challenge the patent. And there were jokes: "If only Al Gore had applied for a patent after inventing the Internet," one poster mused. So if Balthaser's patent doesn't hold up, he'll end up making as much money from his invention as Gore did from his.

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