Sightsound tries patenting digital music downloads

[James Love <love@cptech.org>]

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http://dailynews.yahoo.com/headlines/wr/story.html?s=v/nm/19981002/wr/sightsound_2.html

                                                                          
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Friday October 2 9:46 AM EDT 

Sightsound tries patenting digital music downloads

By Jennifer Sullivan

SAN FRANCISCO (Wired) - If Sightsound.com gets its way, anyone who wants
to sell digitally downloadable music or videos would have to pay it a
licensing fee.

Sightsound.com (http://www.sightsound.com) has two patents for the
``method'' of selling digital audio and video files across the Internet.
The company says its patents also cover any ``player'' software that
charges for each download.

With these patents, Sightsound.com, based in Mt. Lebanon, Pennsylvania,
could extract royalties from any record company or entertainment
retailer that wants to set up shop on the Net. The likes of RealNetworks
(Nasdaq:RNWK - news), LiquidAudio, and online record labels like
GoodNoise could be affected. Already, Sightsound.com is selectively
staking its claim.

``There are a limited number of inappropriate download relationships
taking place on the Net that are protected by our method,'' said Scott
Sanders, president and CEO of Sightsound.com. Sanders said the company
will pursue license fees.

Sightsound.com calls itself a ``download service provider.'' It supplies
software and consulting to other companies that want to set up audio or
video download sites. Sanders said the company is planning for an
initial public offering, and recently met with analysts.

In March, the company licensed the patents for an undisclosed sum to
online music promoter and software maker a2b music, a subsidiary of AT&T
Corp. (T - news) And Sightsound.com is suing online music retailer N2K,
which runs Music Boulevard. The claim alleges that N2K's
e-mod technology for buying music online is infringing on
Sightsound.com's patents. N2K has until Thursday to answer the
complaint, first filed in January, Sightsound.com said.

N2K officials would not comment on the suit.

Already, some online music companies are paying up to avoid possible
litigation.

``We felt it was a wise thing to negotiate and obtain a license-not only
for a2b music but for folks that use our platform,'' said Howie Singer,
chief technical officer for a2b music, which negotiated a license with
Sightsound.com.

Patent attorneys said a company that holds a controversial patent, like
Sightsound.com, can increase its clout significantly by getting a
technology giant like AT&T or International Business Machines Corp (IBM
- news) to agree to a licensing agreement.

This is not the first time the US Patent and Trademark Office has
granted a sweeping patent for a key electronic commerce concept to a
single
company. The patent holders could charge a toll from all other comers.

Net auctioneer Priceline.com (http://www.priceline.com) has a patent on
its business model, a ``name your price'' reverse auction. Postage-meter
maker Pitney Bowes claims its patents cover most methods of
electronically selling snail-mail postage. And in 1996, a three-person
outfit called E-Data asserted that its patent covered all methods for
purchasing and downloading merchandise, news, fonts, and software.

The patent holder has the advantage, lawyers said. But the patents can
be challenged successfully. Patent consultant Gregory Aharonian said
many patents can be invalidated in court if a defendant can find ``prior
art,'' or technologies that predate the patent. Many electronic commerce
concepts, for example, can be proved to have existed on primitive
internets like France's Minitel or Videotext, a failed interactive TV
project in the early 1980s.

``There are lots of fairly generic patents the US Patent and Trademark
Office grants that may or may not turn out to be valid,'' a2b's Singer
said.

The fact that both Sightsound.com and N2K are willing to undertake
expensive patent litigation indicates both parties are confident in
their claim, lawyers said.

In any case, Sightsound.com will proceed with the lawsuit and with
pursuing licensing agreements. ``We're going to be one of those
overnight sensations that was 13 years in the making,'' said Sanders.

Some companies are changing their business plans to avoid patent
entanglements.

``We plan to partner with a technology company in order to avoid
possible conflicts like these,'' said Alan Manuel, co-founder of
CDuctive, a Web site that sells customized CDs.

(Reuters/Wired)