New Digital Media Patent Could Upset Apple Cart

Jun 28, 2006 (04:06 PM EDT)

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A company formed after the burst of the Internet bubble to control assets of defunct ZapMedia Inc. has received a patent from the U.S. Patent and Trademark Office that could potentially send shock waves through industries that distribute digital audio and video content over the Internet.

ZapMedia Services, which now owns Patent No. 7,020,704, has put it up for sale. Organizing negotiations, Atlanta-based Lava Group Inc., which manages patents and intellectual property, has been fielding calls from executives becoming aware of ZapMedia's portfolio.

ZapMedia's patent describes a distribution model for audio and video digital content, a combination of streaming media from a portal to many devices, and what some might consider a digital rights management platform.

The patent, issued in March, is the first in the portfolio to gain approval. Three other patents are pending, said Lava Group president and CEO Robert Frohwein on Wednesday. "The patent covers content that's acquired and licensed over the Internet, as well as content that you may have acquired or licensed and uploaded to the portal," he said. "Until now, the patent has really flown under the radar because it's not assigned to a particular company. Claim No. 7 is particularly important."

Claim No. 7, which pertains to the media asset management system, is expected to create the most controversy. The first portion of the claim refers to a user account that corresponds with at least one person, and a virtual media asset library with reference to multiple assets the user has a license to access. The second portion of Claim No. 7 refers to software that can connect the media portal to more than one device.

Andrew Floam, an attorney with Rockville, Md.-based intellectual property law firm Edell, Shapiro & Finnan, wrote and filed the patent in 1999, when he worked at the Atlanta intellectual property law firm Needle and Rosenberg. "I haven't thought about the patent in years and wondered what happened to it," he said. "I thought the idea was a little out there at the time because no one distributed audio and video media assets on the Internet."

Floam remembers ZapMedia having difficulties gaining the rights to distribute media assets over the Internet. Ironically, Apple Computer Inc. may not have been the initial innovator to many of these emerging technologies and could become subject to third-party patent rights, he said.

ZapMedia, however, isn't interested in enforcing the rights. Instead, the company plans to leave that up to the patent's new owners.

But even after the patent changes hands, for a company to successfully enforce a patent, it must withstand challenges, according to John Ward, partner at patent strategist Greenberg Traurig LLP. Many times disputes are settled with reasonable royalties, he said. It's a cost of doing business.

Maybe so, but Ward seemed most impressed that ZapMedia's patent dates back to the fall of 1999, two years before the birth of Apple Computer Inc.'s iPod. CEO Steve Jobs unveiled the iPod on Oct. 23, 2001, as a Mac-compatible product with a 5-GB hard drive that put 1,000 songs in your pocket, according to Wikipedia.

"The patent seems fairly broad and could potentially apply to some companies providing downloadable music and movies," Ward said. "When you enforce a patent there are many ways to interpret the actual terms of the patent, which can narrow the scope and present obstacles to enforce."

A diagram in the patent describes the business model and the method in which content would flow from multiple media providers through an Internet portal and to consumers. On the surface, some industry experts believe the drawing appears similar to the distribution model used by Apple's iTunes Music Store, RealNetwork's Rhapsody, MTV/Microsoft's URGE, Napster, MSN Music, Wal-Mart Music, as well as movie download sites Vongo, CinemNow, MovieLink and others.

The patent is owned by ZapMedia Services, successor to the assets of ZapMedia Inc., a privately held $30 million funded Atlanta-based start-up that developed the technology. In its heyday, ZapMedia co-branded products and services with others, such as Microsoft Corp., and inked a $270 million deal with media conglomerate Gannett Co. Inc. ZapMedia focused on convergence technology, bringing custom entertainment to consumers. The goal was to allow consumers to access movies, music, video via the Web, as well as play CDs and DVDs through their existing televisions and stereos. The ZapMedia "ecosystem," developed in-house, consists of the ZapStation hardware reference design (device), ZapMediaEngineSM (software), and the ZapMedia Entertainment Service (portal).