David DeJean

Patent troll? Say it ain't so, Paul Allen

By David DeJean
September 16, 2006 3:55 PM EDT
Digeo is a company that's famous for two things, and neither of them is the product it makes. Thing One: it is funded by Vulcan, the venture company owned by one of the iconic figures of the computer business, Paul Allen, co-founder of Microsoft. Allen is also the chairman of Digeo's board. Thing Two: Digeo has done far better extracting licensing fees for its patent portfolio out of companies like Palmsource and, presumably, Yahoo, than it has selling its interactive-TV systems.

There's a great Joe Nocera column in Saturday's New York Times business section, "Tired of Trolls, a Feisty Chief Fights Back," about Audible.com, a company Digeo sued for patent infringement, asking for $400,000, and Audible's resistance to the suit. If you care at all about the festering mess that is the United States patent system you should read it (even though it requires access to the restricted Times Select area of the newspaper's Web site).

Audible isn't the first company Digeo has sued: Palmsource settled for an undisclosed sum in 2004. Digeo sued Musicmatch at the same time. Musicmatch was bought by Yahoo in late 2004, and presumably one of the parties settled the Digeo suit -- at least Google doesn't breath a hint of continued hostilities.

Audible, however, is fighting back, and so far it's winning because it turns out Digeo was suing under false pretenses -- it didn't own the patent it was accusing Audible of infringing. It's not giving up, though. It's going back to the bankruptcy court where it bought the patent and meanwhile keeping Audible in its sights.

Digeo doesn't like being called a patent troll, says Nocera, but its business plan is nakedly apparent in a letter a Digeo executive sent to Audible's lawyers after Digeo lowered its price and Audible still refused to pay. Nocera quotes an e-mail from Jim Blaisdell who says he is "perplexed as to why Audible has not taken Digeo up on it offer to settle for $300K." The message goes on to point out the "high legal fees" Audible was paying and adds, "Surely you understand that the prospect of convincing a jury that Audible doesn't infringe or that the Patent is invalid is an expensive one."

Donald R. Katz, the CEO of Audible, is more than a little upset with Paul Allen, and I think he's got a point: "It's hard enough to build a small public company in to a large one," he told Nocera, "without people with leadership positions in the business community putting up impediments that shouldn't have to be."

So how about it, Paul Allen. Nocera says 10 or more companies have paid Digeo off. Are you going to reimburse them, now that it turns out you didn't have a legal leg to stand on? Are you going to rein in Blaisdell and Digeo? Are you going to help stop the patent madness? Have you got what it takes to actually be a leader? Or are you a patent troll?