Tuesday, August 10, 2004

We're In The Money: Forgent Networks Inc. has a modest software business, but lately it's been showing a swagger reminiscent of another line of work: trial lawyers.

While it tries to build its line of scheduling software, Austin-based Forgent has been hiring lawyers to extract revenue from the company's store of old patents. Already, Forgent has reaped nearly $50 million by claiming that one of its patents covers JPEG, the popular standard for digital images. Sony Corp. and Adobe Systems Inc. are among the tech giants that have settled with Forgent. More riches may be on the way: In April, Forgent sued 31 tech companies, most of them Fortune 500 members, in U.S. District Court in Marshall, Texas for allegedly infringing on the JPEG patent.

Two of Forgent's former lawyers say the company has only scratched the surface with the patent and that the potential payoff could be in the hundreds of millions of dollars. Now Forgent is escalating its strategy. The company is demanding payment for a patent it says underlies the digital-recorder technology behind TiVo Inc. It's also hired the 650-lawyer Baker Botts law firm to examine 40 additional patents.

Then there's Jenkens & Gilchrist, the Dallas-based law firm handling enforcement of the JPEG patent. Under a fee agreement, Jenkens receives 50 percent of the revenue from licensing the patent, plus some expenses. The law firm's take so far is an estimated $50 million.

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