Meet Richard Lang. The founder, CEO, President, and Chairman of the Board of Burst.com seems to know how to rest on his laurels and get paid for it too:
The youthful-looking 52-year-old lives on an 11-acre estate among apple trees in the hippy town of Sebastopol, north of San Francisco, where he plays guitar in local bands and his wife runs an "equine experiential learning institute" that helps clients get in touch with themselves by riding horses. But there's nothing laid-back about his strategy at Burst.com, the Santa Rosa (Calif.) company he co-founded 18 years ago. With just two employees, Burst holds 10 U.S. patents, and its focus is on asking big companies to license its technology—and suing them if they don't.
That's exactly what's happening this week, as Burst.com filed a patent infringement countersuit against Apple yesterday, claiming that iPods, iTunes, iTMS, and Quicktime all violate Burst's patent rights. The suit seeks triple damages plus court costs, which could add up to over US$1 billion, and an "injunction against further infringement" which would more or less shut down iPod and iTMS sales. While Apple could handily afford to just roll over and pay up, its shareholders would then storm Cupertino wielding stylish pitchforks and well-tempered firebrands, so Apple should be expected to defend vigorously against the claims, as most lawsuit defendants tend to do.
The original suit here came in January from Apple, seeking to invalidate Burst's patents and Apple's infringement thereof in a preemptive strike, as it were. Skimming the suit filing and the patent texts (4963995, 5995705, 5057932, and 5164839), it seems like Burst is trying to patent caching and asynchronous playback of downloaded media files.
The '995, '932, '839 and '705 Patents contain one-hundred eighty-six (186) patent claims covering various aspects of receiving, processing and delivering audio and/or video content. In general, the patents disclose techniques that enable efficient handling and delivery of audio and/or video content, while maintaining the integrity and quality of the content and its playback.
If it seems strange for Apple to start defending against legal claims that haven't been filed yet, consider that Burst got a $60 million settlement from Microsoft on similar claims last year. Microsoft settled the day before a scheduled hearing on the very convenient disappearance of certain e-mails regarding business with Burst, and the Redmond giant now holds proper, paid-for licenses for the Burst patents. Back in January, Burst claimed that it really just wanted Apple to pay up for a license, and then there wouldn't have to be any nasty, ugly lawsuits.
Incidentally, that $60 million brought Burst's 2005 revenues up to $60,300,000. The $300,000 not accorded to the lawsuit settlement isn't explained in the company's annual report, but are not related to those license fees. Technically, Microsoft paid for the license, not damages or anything else. In any case, it's a huge jump from the 2004 revenues of $2,500. That's right: two thousand five hundred dollars. This company has given up on competing in the marketplace—Lang says he had to because of market pressure from Microsoft—and switched to all litigation, all the time. Ask SCO how that business plan seems to be working out in the long term (though NTP might have some advice for Burst).
So what did Burst do with the windfall from Ballmer & co? Invest in the business, restart operations, hire a few engineers? Oh no. First, it paid off its long-term debt (good boys) of $1.5 million, and the rest got turned into a one-time dividend. It seems that Lang held about 3 million shares in the company, out of a total of 43 million, so he got $3 million out of the deal personally. Not bad. The patents may or may not hold water in court—they have never been upheld by a judge or jury—but they sure seem to keep the good times rolling for a select few.
[ Discuss ]