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12/5/2002
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Sony Hedges Its Bets In Digital-Rights Management

On the heels of its share of the acquisition of digital-rights management pioneer InterTrust, Sony arms itself with licenses for all of ContentGuard's rights-management patents.

Sony Corp. can lay claim to being a potential monster in the area of digital-rights management. The electronics-and-entertainment conglomerate, which last month joined with Royal Philips Electronics in acquiring InterTrust Technologies for $453 million, has licensed all current and future patents held by ContentGuard Inc. That Microsoft-backed company is working to establish its extensible rights markup language (XRML) as the predominant rights-management standard.

Analysts say the deal, especially when combined with the InterTrust transaction, represents an endorsement of rights management as a business tool, and of XRML as a favorite in the race to become a rights-management standard. Licensing ContentGuard's patents also better-positions Sony to develop rights management-enabled products and services regardless of which technology becomes widely accepted. Sony is unique in that it has major stakes in a variety of markets where digital-rights management figures to have influence, including movies, music, consumer electronics equipment, and portable devices.

Terms of the ContentGuard licensing deal weren't disclosed, but IDC contributing analyst Joshua Duhl says that since Sony had paid $28.5 million to license InterTrust's patent portfolio months before the acquisition, it could have paid ContentGuard as much as $15 million. The deal also calls for ContentGuard to receive royalties for any future Sony products or services that use ContentGuard's rights-management patents. Duhl says the licensing agreement indicates that Microsoft, which has invested an undisclosed amount in ContentGuard and competes with Sony in several markets, isn't exerting influence over ContentGuard's business decisions. (It's also worth noting that InterTrust has multiple active patent-infringement lawsuits against Microsoft.)

Bruce Gitlin, VP of business development for ContentGuard, which makes software to protect the delivery of digital content, says the deal's also "good for our credibility" in that it provides a cash infusion and a sign that the rights-management market is poised for growth. Sony execs couldn't be reached for comment, but a Sony spokeswoman says Sony and ContentGuard will work together to explore how XRML can be applied to Sony products and services. Yankee Group analyst Eric Ogren says InterTrust and ContentGuard are the most significant holders of rights-management patents, and that Sony's moves show that it's "betting on both horses." Another standard from the Oasis global E-business standards consortium is probably 18 months away, longer than Sony apparently wanted to wait, Ogren says.

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