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Yahoo Bows to JPEG Patent

Forgent rocked the tech industry when it claimed a patent covering JPEGs. It looks like the patent may stick.

The Austin, Texas-based company said on Thursday that Yahoo had entered into a patent licensing agreement covering its use of Forgent's data-compression technology.

Forgent claims U.S. Patent No. 4,698,672 (the '672 Patent) covers digital-image compression used in devices, including digital cameras, PDAs, cell phones, printers, scanners and in some software applications.

Terms of the deal weren't disclosed, but Forgent also dismissed its patent-infringement suit against Yahoo.

Steve Szczepanski, partner at the law Firm Kelley Drye & Warren, said signing Yahoo was a significant development.

"Commercial success and licensing all help to set up the validity of a patent," he said.

Often, smaller companies evaluating whether to license or fight look to the leading companies and follow their decisions. "If you can sign up the leader, lot of times other companies follow."

Forgent has pending litigation against approximately 40 companies for infringement of the patent.

In April 2004, it sued 31 tech companies, including HP , Adobe Systems and Xerox . Microsoft was the latest to get slapped.

Yahoo is the seventh former defendant to have licensed the technology. Others include Research in Motion and Audiovox , a maker of consumer electronics products.

The company said it's made more than $105 million from licensing the patent to more than 50 different companies in Asia, Europe and the United States.

Although the terms of Yahoo's license agreement are secret, Szczepanski said that they could be used in Forgent's other litigation to establish damages in the event that it prevailed. "It sets the precedent as to what future licenses should be," he said.

While Forgent inks deals, the Public Patent Foundation has gone after the patent. In November, the organization, dedicated to educating the public while advocating against bad patents and unsound patent policy, petitioned the Patent Office to re-examine the '672 Patent.