Microsoft, others settle E-Data patent lawsuit

E-Data has settled a patent dispute with OnDemand Distribution (OD2), Microsoft and Italian ISP (Internet service provider) Tiscali SpA over their Western European on-demand music service, with OD2 agreeing to pay past and future royalties to E-Data.

E-Data, of Long Island, New York, filed a lawsuit last October in the German court of Mannheim, seeking an injunction against the German subsidiaries of Microsoft, Tiscali and OD2 in an attempt to defend its European patent EP 0 195 098 B-1, also known as “the Freeny patent.” It also filed a similar lawsuit against OD2, of Bristol, England, in the U.K. in June.

The patent covers the downloading and recording of information, such as music, news articles and films, from a computer onto a tangible object such as a CD or a sheet of paper.

As part of the terms of its settlement, any financial arrangements between E-Data and OD2 cannot be publicly disclosed, said Koos Rasser, managing partner of Howrey Simon Arnold & White, the law firm representing E-Data. The arrangement with OD2, which provides back-end operations for Microsoft’s and Tiscali’s online music services, also resolves all outstanding litigation with Microsoft and Tiscali, Rasser said.

Representatives from Microsoft, Tiscali and OD2 could not immediately comment.

Charles Freeny Jr. was originally granted U.S. patent, 4,528,643 in July 1985 for his “system for reproducing information in material objects at a point of sale location,” according to the Web site of the U.S. Patent and Trademark Office. The technology was subsequently patented in the 10 European countries. The U.S. patent has since expired but remains active in Europe.

The pay-per-song service from OD2, Microsoft and Tiscali is offered under both the MSN Music Club and the Tiscali Music Club brands, and draws from an OD2 music catalogue of over 200,000 tracks from the five major labels and a handful of independents. OD2’s distribution platform utilizes Microsoft’s Rights Manager v.7 software.

The settlement between OD2 and E-Data was reached before any injunctions had been issued and therefore, users experienced no interruption to the OD2 service due to legal reasons, Rasser said.

E-Data said that the settlement with OD2 sends an “important message to other companies infringing upon E-Data’s intellectual property,” Rasser said. He added that “OD2’s service in Europe parallels iTunes Music Store,” from Apple Computer, which is expected to launch in Europe sometime this year.

“We are in dialogue with Apple, though I wouldn’t consider it negotiations,” Rasser said. “We are explaining to Apple why we believe they need a licence and they are telling us why they believe they do not.”

As for Napster and its parent company Roxio, E-Data has yet to enter into discussions with the company as Napster has not fully fleshed out its plans for a European launch of its service, though it too is expected this year. “We just decided that Napster should be on our radar screen (for the time being),” Rasser said.

Representatives from Apple and Napster also could not immediately comment.

Following its success with OD2, E-Data has initiated “an aggressive new licensing and patent enforcement campaign” in the European Union countries where it owns the rights to the Freeny patent, which will also include the transfer of stock photographs from computer to CD or paper, Rasser said.

As a result, E-Data is currently in talks with “a number of prominent companies in Europe” it considers to be infringing upon its intellectual property, and “may seek injunctions against these companies if necessary,” Rasser said.