And In This Corner . . .

Neither Verance nor Digimarc have made friends in the consumer world, as they continue to develop and implement watermarking technologies used to restrict the use of digital media, such as DVD-Audio and CD discs. Audiophiles, in particular, are resisting any form of restriction technology, such as watermarking, that alters the digital data on a disc at the expense of audio fidelity.

So it is with some amusement that we watch the watermarking heavyweights litigate each other in an attempt to control the patents underlying the restriction technology. Consider the irony: they are accusing each other of "misappropriating" the patents that prevent folks from misappropriating digital files.

On October 23, Digimarc announced that it had filed an amended complaint in its recent lawsuit against Verance charging infringement of newly issued patent 6,307,949. Digimarc claims the '949 patent "concerns various core watermarking techniques, such as exploiting natural variations in the signal being encoded to partially represent the watermark data—reducing the amount of signal change that must otherwise be made." The amendment to the suit brings to six the number of patents which Digimarc claims Verance has violated.

Digimarc's Bruce Davis commented at the time, "The Patent Office continues to grant additional patents on the fundamental inventions by Digimarc that are being misappropriated by Verance. We expect more such patents will issue over the coming months." This was followed in early November by an announcement from Digimarc stating, "Verance is charged with infringing six Digimarc patents in three separate lawsuits. Four of the patents were submitted for Patent Office re-examination; resolution of the remaining three re-examinations is expected shortly. The first and second litigations, suspended during the re-examination process, will likely restart in the first quarter 2002."

Then last week, Verance countered by accusing Digimarc of infringing US Patents 5,901,178, 5,719,937, and 5,963,909 owned by Verance and also accused Digimarc of "illegally submitting Verance's inventions to the DVD standardization group." Verance claims the infringement occurred through Digimarc's participation in the submission of a digital watermarking technology for consideration as an industry standard for copy protection of audiovisual works. Verance says it has also notified the standards body reviewing the submissions that it will not license its patents to Digimarc or any affiliated company for use in this standard, pending the resolution of ongoing litigation between the two companies.

Verance's Bob Cerasoli says, "Verance generally prefers to resolve patent licensing issues through direct business negotiations. However, we cannot permit this blatant misappropriation of our intellectual property and will not license any party to use Digimarc's proposed system so long as their litigation against us continues. Digimarc's attempt to obtain market power through unfounded and repetitive litigation is disturbing on its own. That they should compound these bullying tactics with a blatant effort to offer Verance's innovations under their own name is unconscionable."

Adding insult to injury, Verance also announced last week that it has filed suit in Portland Oregon accusing Digimarc of "manipulating and excluding competition in the digital watermarking technology market through an illegal agreement with Macrovision to eliminate Verance as a competitor." Verance says it has also charged Digimarc with "patent misuse and fraud by violating its obligations as a member of the Secure Digital Music Initiative standards setting organization."

Cerasoli claims Digimarc is trying to eliminate Verance as market competition in the field of digital watermarking "because of our leadership position" and that it is "impeding the ability of those industries that support new digital music and motion picture formats to implement standards." Verance says its suit charges that Digimarc conspired with Macrovision to protect and extend Macrovision's "current monopoly position."

Not true, says Digimarc, which responded the following day with a statement saying, "Verance seems to believe they can use a barrage of misinformation, unfounded assertions, and inflammatory rhetoric to divert attention from the pervasive infringement of our patents throughout their products and services. These new claims have no merit. We remain comfortable that the courts will affirm our views regarding the infringements by Verance and the matters raised in their counterclaims."