Friday, January 09, 2009

bad news for photogs

earlier today i received this rather disturbing e-mail from pictage founder and CEO Jason Kiefer:
Dear Valued Pictage Partner:

Last week Pictage completed a settlement of a patent infringement lawsuit brought against Pictage and some of our clients by VPS, LLC. Among other things, VPS's patents cover the online display of digital images and sale of products based on those digital images. VPS has licensed these patents extensively and requires that companies (including professional photographers) providing online sales of products based on online digital images pay VPS a license fee or royalty on all such online sales.

As part of the settlement with VPS, Pictage is paying a multi-million dollar fee for a license covering past and future online sales on All of your past sales and those you will make in the future on are covered by the license to Pictage and the fees paid by Pictage. However, it is important to note that any sales that you have made or will make on any other website (including your own) are not covered by the license to Pictage.

The fees that we are paying VPS make it impossible for Pictage to continue to honor our legacy commission rate of 10%. Effective immediately, our commission rate will be 15% of online consumer sales. Those currently at 15% will see no change. In addition, we will now charge a monthly fee of 1.5% (still substantially below the best available credit card processing rates) for all sales made though our Pictage Payment Processing (P3) system.

I thank you again for your ongoing support. If you have any questions, comments or concerns please feel free to contact me.

Best regards,

Jason B. Kiefer
Founder & CEO

this means that VPS, LLC holds the patent to selling images online.

the patent, filed in 1997, lists John H. Jebens, Lowell D. Carlson, and Jeffrey Scott James as the inventors of the data management and order delivery system. the data in question are specifically digital images. these people are either jerks or geniuses, i haven't decided yet.

i have read nearly all of the 30 some odd pages of the patent and it seems that it not only covers the sale of images online, but any system in which digital images are stored, searchable, and distributed. of course, i have no legal training and haven't thoroughly read this document so i may have misunderstood some of the minutiae and there could be a way around this. i haven't found it and apparently neither has pictage's legal team or else they wouldn't have settled.

pictage was not alone in the suit. VPS also went after Edward Fox Photography, Artisan Events, Pret-A-Poser Photography, George Street Productions, Thomas M. Slack Photography, Glen A Bog Photography, and David Wittig Photography, all Illinois based photographers. in 2002 VPS filed a similar lawsuit against Eastman Kodak Company and in 2004 filed a suit against Shutterfly Inc. Jones Day, who represented Kodak claims that they "settled favorably for [their] clients."

i supposed this leaves the door open for litigation against any company that allows people to upload images and then distribute them. these could include flickr, photobucket, stock photo agencies, social networking sites, and a myriad of other outlets if they haven't paid the licensing fees already. there could be other companies out there that VPS has filed a suit against, i just haven't found them.

does this fail the test of non-obviousness, commonly called the "graham factors" (reminds me of graham crackers!)? the court held that obviousness should be determined by looking at:
1. the scope and content of the prior art;
2. the level of ordinary skill in the art;
3. the differences between the claimed invention and the prior art; and
4. objective evidence of nonobviousness.
In addition, the court outlined examples of factors that show "objective evidence of nonobviousness". They are:
1. commercial success;
2. long-felt but unsolved needs; and
3. failure of others.
i'm surprised that these legal teams have not been able to find prior art. people must have been doing this type of thing before VPS filed their patent. maybe?

i wonder if this violates any antitrust laws. perhaps VPS's willingness to license their patent remedies this. is this just a case of a company being a patent troll?

this reminds me of the whole forgent and JPEG fiasco from few years ago that john told me about. for those of you who haven't been keeping up on forgent networks' affairs (the company changed it's name to asure software), the company had generated a fairly decent income since 2002 by suing users of JPEG technology, starting with camera companies and moving on to computer manufacturers, web publishers, and so on. it all came to an end in 2006 when the patent office invalidated key portions of the patent thanks to the Public Patent Foundation. PUBAT, which is a non-profit organization that seeks to limit perceived abuse of the US patent system, had found prior art. PUBPAT, please help us out with this VPS thing!

for those of you who don't know, JPEG is a commonly used method of compression for digital files of photographic images. The name "JPEG" stands for joint photographic experts group, the name of the committee that created the standard.

over the years there have been talks about reforming the patent law and i have mixed feelings about it, but that's a discussion for another day.

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