What is the LZW patent?
The LZW patent covers methods and apparatus for lossless compression and decompression of digital data. Unisys holds a U.S. patent (number 4,558,302) as well as equivalent patents on the technology in Canada, France, Germany, U.K. and Italy. Equivalent patents are also pending in Japan.
How did Unisys get the patent?
Data compression and decompression is a critical aspect of data transmission and storage and is very much of interest to Unisys and the industry. The patent is the result of research done by Terry Welch at Sperry Corporation in the early 1980s that extended previous work by researchers Lempel and Zev. Sperry Corporation was granted the U.S. patent in 1985. Sperry and Burroughs merged in 1986 to form Unisys, thus Unisys became the owner of the Sperry patents.
Why is LZW so widely used?
It is a very efficient compression method and a highly advantageous way of compressing and decompressing data for a wide variety of purposes. It is easy to implement, operates at high speed and results in high compression ratios without loss of data (that is, it significantly shrinks the file size).
GIF has been in use since 1987. Why is Unisys enforcing its rights now?
Unisys only became aware of the use of LZW in the GIF specification two years ago. We immediately began negotiations with CompuServe at that time and reached an agreement in June, 1994. The existence of the patent has never been a secret. In fact, we have completed licensing agreements for LZW technology with over 100 companies since 1990, for products including hardware, software and on-line information services. With most of these companies, it was the licensees who approached Unisys, not Unisys forcing the taking of a license.
Why did it take you so long -- almost five years -- to figure out that GIF was infringing on your patent?
As is common in industry, we don't have massive people resources devoted to searching and finding products which may be infringing and then undertaking the complex task of reverse engineering the products to determine whether or not they have infringed on the patent. In the case of GIF, as soon as we became aware we immediately sought to protect the patent through a license to CompuServe.
Is this part of a larger campaign to enhance your revenues?
No. The actual revenue derived from this particular patent is not significant. However, Unisys has invested hundreds of millions of dollars in overall technology development and has protected its investments in the form of thousands of patents. We have a responsibility to our shareholders to ensure that we protect these valuable company assets.
Why have you targeted the on-line industry now?
Unisys has not specifically targeted the on-line industry, evidenced by the fact that we have licensed this technology to hardware, software and information services companies over the past several years. We became aware of the applicability of our patent to the GIF specification and we simply undertook negotiations with CompuServe as the primary stakeholder in this specification. The announcement content and timing of CompuServe's action was solely a CompuServe business decision.
The agreement with CompuServe says I can only use GIF in accessing CompuServe? What about other on-line services?
Our relicensing agreement with CompuServe allows CompuServe to relicense the technology only for use in accessing the CompuServe information network. However, commercial, for-profit developers are free to contact us to secure a license for LZW. Non-commercial, non-profit users aren't required to secure a license to use the technology.
Is Unisys willing to negotiate with other developers?
Absolutely. Unisys wants to encourage the use of its patented technology and is therefore continuing to make licenses available under the patent at reasonable and non-discriminatory terms and conditions to any interested party. Keep in mind that Unisys can only license the patented LZW technology. Unisys has no other stake in GIF (other than using it for our own graphics transmission).
What do you consider "reasonable terms"?
While we will conduct negotiations with each applying developer, the CompuServe royalty rate is somewhat indicative of the terms that should cause no financial barrier to product entry into the on-line marketplace, or anywhere else. The CompuServe agreement calls for the company to pay Unisys a royalty of approximately 1% of the selling cost of the product for each product sold and connected to the on-line service. Given the calculation of the average price of CompuServe products, this came out to about 11 cents per product sold and connected.
GIF is used extensively on the World Wide Web. What does Unisys intend to do there?
Unisys in no way wants to discourage end users and developers from making use of this technology. We intend to license commercial software developers. However, non-commercial, non-profit products, including freeware, need not pay license fees. Organizations introducing a World Wide Web server and home page to the Internet are not expected to license the technology if they used a third-party software application to develop their server offering. Only the commercial third-party developer in that case should secure a license.
What about Internet browsers?
Again, our focus is on the developers and not on the end user. Also, our action is primarily focused on for-profit developers. If a developer intends to make a profit or provide a product for commercial use, they should negotiate a license from Unisys.
Will this hurt the use of GIF?
We certainly hope not. GIF has been outstanding for handling graphics files and its use of LZW technology is one of the factors in its success. Again, the licensing terms are very modest and should not be a barrier to its use.
Will users of CompuServe have to pay a royalty to Unisys every time they upload or download a GIF file?
No. Revenue to Unisys under the CompuServe license is independent of the number of files transferred.
What will be the impact on end users and commercial software developers?
There should be no impact on individual end users. We encourage them to take full advantage of GIF. For developers, the impact should be minimal. Again, Unisys continues to make licenses under the patent available to any interested party at reasonable and non-discriminatory terms and conditions. License fees for this technology should not be a barrier to any software developer.
Why did you announce the changes during the Christmas holiday?
We concluded the license with CompuServe on June 21, 1994. CompuServe was given six months to implement the terms of the license agreement. CompuServe asked for, and we granted, a one-month extension. The timing and content of the announcement, and for that matter, the need for the announcement, were entirely of CompuServe's choosing and without Unisys knowledge or approval.
I'm using freeware or shareware that can manipulate GIF files. Can I still use it?
What about freeware developers?
Our focus is on commercial, for-profit developers. Freeware is exempted from licensing fees.
And shareware developers?
Shareware developers that intend to make a profit from their software should negotiate a license with Unisys. Alternatively, if their software is intended to access CompuServe only, they might want to take advantage of CompuServe's relicensing agreement with us.
Was the Unisys patent ever challenged?
The Unisys LZW patent was challenged in 1993, re-examined by the United States Patent and Trademark Office, and the patentability of all claims was reconfirmed in January of 1994. This is a valid and fully enforceable patent.