Microsoft, Tiscali sued over European download patent

Microsoft Corp., Italian Internet service provider (ISP) Tiscali SpA and OnDemand Distribution PLC (OD2) are facing a patent infringement lawsuit in a German court over their Western European on-demand music service.

E-Data Corp., of Long Island, New York, filed the lawsuit last Tuesday in the German court of Mannheim, seeking an injunction against the German subsidiaries of Microsoft, Tiscali and OD2 to defend its European patent EP 0 195 098 B-1, also known as “the Freeny patent.”

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, according to Gerry Angowitz, special assistant to the chairman of E-Data.

“We selected Germany as it is a fairly large jurisdiction. Our European patent also covers nine other European Union countries (the U.K., Austria, France, Switzerland, the Netherlands, Italy, Luxembourg, Belgium and Sweden), and though we do not want to tip our hand, we are looking at filing lawsuits in the other jurisdictions,” Angowitz said on Monday.

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.

“At the time, Freeny was thinking more in terms of audio tape but he was wise to realize that the invention should not be limited to any form of content carrier,” said Koos Rasser, managing partner of Howrey Simon Arnold & White LLP, the law firm representing E-Data.

“We are right at the point where (Internet-based) digital services are coming on-stream and we’ve only recently begun to take legal actions, ” Rasser said on Tuesday. “Perhaps it is not surprising that Microsoft has chosen to offer such a service but these companies don’t appear to have done their homework on patent rights before launching the service in Europe.”

The pay-per-song service from Microsoft, Tiscali and OD2 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.

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

The court in Mannheim was picked because it has a reputation for acting quickly, Rasser said. “If statics (of the court’s past decisions) are any guide, the matter should be resolved in six to eight months,” Rasser said.

E-Data filed a similar lawsuit against OD2, of Bristol, England, in the U.K. in June, Rasser said. “We started writing letters which they ignored so we filed suit to get them to focus on the issue. That litigation has since been put on the back burner while we are preparing negotiations in the U.K.,” he said.

Another E-Data lawsuit filed at the end of July against Dutch publisher Satellite Newspapers NV, in the Hague, the Netherlands, was settled several weeks ago, Rasser said. Satellite Newspapers is a global distributor of digitally-transmitted newspapers. It uses its proprietary digital content distribution network to supply content from newspaper publishers to its kiosks, which are located in places such as hotel lobbies, according to the company’s Web site.

Because E-Data’s U.S. patent has expired, Apple Corp.’s popular digital music store, iTunes, is not subject to such a lawsuit, though E-Data is “keeping a close eye” on Apple’s plans for iTunes in Europe. “We’ve no issue with Apple, at least for now. There are some rumours in the press that they are preparing an iTunes service in Europe, so we are watching closely,” Rasser said.

E-Data’s lawyers have written to Apple to alert them to potential patent problems should iTunes be launched in Europe without proper licensing agreements. “Apple never acknowledged having received the letter though they should now be aware of the patent issues,” Rasser said.

E-Data is also tracking Napster and its parent company Roxio Inc., both Angowitz and Rasser said. Napster is set to be relaunched as a fee-collecting online service in the U.S. on Oct. 29, and the company plans to eventually launch the service in Europe.