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CompuServe-Unisys GIF Tax Protest
From: David Farber <farber () central cis upenn edu>
Date: Mon, 2 Jan 1995 20:52:38 -0500

Anyone know the patent date . Bet it is a weak patent  djf


January 2, 1995


An Open Letter to Our Colleagues In the Online Communications
Community:


The announcement by CompuServe and Unisys that users of the GIF image
format must register by January 10 and pay a royalty or face lawsuits for
their past usage, is the online communications community's equivalent of
the sneak attack at Pearl Harbor.


The announcement of the CompuServe-Unisys GIF Tax on December 29,
during the lull between Christmas and New Year's Day, was clearly timed
to cause maximum damage while an unsuspecting public celebrated the
holidays.


We at TeleGrafix Communications have no quarrel with those who seek to
protect their intellectual property and profit from it.  Indeed, we are in
business to do the same.  We believe those who develop software are
entitled to reap financial rewards from their labors.


But in our opinion, the timing and circumstances of the
CompuServe-Unisys action indicates this is a shakedown of the online
communications community by two powerful corporations, rather than a
reasonable effort to protect intellectual property.


The GIF format has been in widespread public use since 1987.   Its
widespread use and royalty-free licensing has been encouraged by
CompuServe for years.  Neither CompuServe or Unisys have made any
significant improvements to GIF or its underlying LZW algorithm and
compression process to justify charging for what has been free.


Giving GIF users only 14 days to comply with sudden, unexpected demands
to pay the private CompuServe-Unisys GIF Tax or face prosecution for past
usage of what had been promoted for seven years as free, open standard
software is unconscionable. It is especially outrageous since CompuServe
and Unisys admit in writing that they decided to require licensing SIX
MONTHS AGO in June, and didn't announce it to the public until now.


According to the CompuServe-Unisys GIF licensing agreement, the
settlement of the patent dispute was executed on June 21, 1994.
CompuServe agreed to implement the agreement "as soon as reasonably
practicable and in no case later than six (6) months after the date this
Agreement is executed..."   That six month period ended on December 21,
1994 -- but CompuServe did not make the licensing terms public until
December 28.  Indeed, CompuServe appears to have violated the terms of
its own settlement agreement with Unisys.


While many of the messages we have read online in reaction to the
CompuServe-Unisys GIF Tax decree express both dismay and disbelief,
virtually none have analyzed the actual provisions of the licensing
agreement.  It is in this area that TeleGrafix Communications wishes to
contribute to the dialogue.


In our opinion, the CompuServe-Unisys licensing agreement is both
illogical and overly broad.  Let's examine some of its key provisions. All
quotes cited are directly from the agreement.


1. CompuServe will license Developers who want to use GIF technology.
The term "developer" is defined as "the other undersigned party to the
agreement," and it seems to apply to ANYONE who contemplates
distributing any product that uses the GIF format.


2.  Developers will be licensed to sell or distribute "Products" that "use
and exploit GIF...solely within the Field of Use."   The term "Field of Use"
is defined as "primarily for accessing the CompuServe Information Service
and for manipulating and viewing data received through the CompuServe
Information Service."  The licensing agreement further defines the term
"Products" as being  "software that is developed or distributed...which is
designed for and used primarily for accessing the CompuServe Information
Service and for manipulating and viewing data received through the
CompuServe Information Service."  IT APPEARS THAT THE ONLY LAWFUL
USE OF GIF WILL BE FOR COMPUSERVE-RELATED PRODUCTS.  Using GIF
images in any other manner, such as on CD-ROMs or bulletin board
systems, is prohibited.   Most of the thousands of products that have used
GIF in some manner are henceforth contraband.


3. Developers may no longer  "use, copy, modify or distribute the GIF
specification, except as expressly permitted by CompuServe."  This states
that the GIF specification can no longer be shared, published or uploaded in
any manner without the express consent of CompuServe.


4. Members of the public are prohibited from using any software product
containing GIF until they have become a REGISTERED user of the product.
The customer also must agree to use the product "primarily for accessing
the CompuServe Information Service and for manipulating and viewing
data received through the CompuServe Information Service."  This
virtually eliminates the concept of freeware or shareware containing GIF
capabilities, since prospective customers can no longer try out these
software products without registering them first.


5. Software developers must pay $1.00 for a license to use GIF, PLUS a fee
equal to the GREATER of 1.5% of the selling price of the product, or $0.15
per "Disposition."  Disposition is defined as "the sale, lease or license or
any other grant of rights to a Product or any new Product."  All royalties
must be paid quarterly.  Noncommercial and freeware usage of GIF
technology is NOT exempted from the royalty requirement.   Because the
royalty provisions and definition of "Disposition" are so broad in scope, it
appears that a GIF Tax payment may be due to CompuServe-Unisys each
time a GIF image is transmitted via BBS or Internet.  The operators of a
BBS or World Wide Web site with hundreds or thousands of GIF images
online could easily be bankrupted by these licensing requirements.


6. CompuServe must be notified of ANY new product using GIF when it is
first offered to customers.


7. Persons using GIF must keep records of its use, and CompuServe has the
right to audit those records every year upon seven days notice.  Persons
using GIF must pay the cost of the audit if a royalty underpayment of 10%
or more is discovered, along with 12% interest on any underpaid royalties.


8. Even if the patent is later found by the courts or the U.S. Patent Office
to be invalid and unenforcable, or if the patent expires, any developer
must "return all copies of the GIF specification and any confidential
information of CompuServe then in its possession or control to
CompuServe, (ii) stop using the Licensed Technology, and (iii) stop
distributing  Products."  This states that EVEN IF THE PATENT IS
OVERTURNED OR EXPIRES, YOU MUST STOP USING OR DISTRIBUTING GIF.


9. Even though CompuServe has publicly disseminated the text of the
agreement it wants GIF users to sign, the terms of the agreement are to
remain confidential.  This is illogical, to say the least, since they have
posted it for public download on their own system.


10. Developers have to indemnify and hold CompuServe harmless for any
damages if their CUSTOMERS somehow use GIF technology in a way not
permitted by the licensing agreement.


11. Unisys has the right to enforce the agreement, as well as CompuServe.
Further, Unisys has the right to pursue legal action or seek damages
against Developers even after the agreement has terminated.


TeleGrafix Communicatons Inc. will not sign such a licensing agreement.
We think most other software developers, BBS sysops and Web site
operators also will refuse to sign.


We encourage our colleagues in the online communications community to
evaluate the CompuServe-Unisys action, and to lodge appropriate protests
directly with those companies.


We believe that the CompuServe-Unisys GIF Tax drives a stake through the
heart of Internet development.  It will cripple the World Wide Web, NCSA
Mosaic, and other Internet multimedia technologies that rely heavily on
GIF imaging.


Fortunately, we at TeleGrafix Communications do not depend on GIF
imaging in our new RIPscrip 2.0 online multimedia technologies.  We chose
to implement the JPEG image format and only recently decided to add GIF
support as a convienience to our customers.  Due to the restrictive
conditions of the CompuServe-Unisys GIF Tax and licensing agreement, we
must now reevaluate our plans for supporting GIF use in the upcoming
release of RIPscrip 2.0.


While our company hopes to profit financially from our advanced RIPscrip
2.0 technology, we will not demand royalties from those who have used
the freeware versions of our earlier RIPscrip 1.54 products and/or
technical specifications.  The RIPscrip 2.0 specification also will be made
public for third-party use after it is finalized.


We expect that the CompuServe-Unisys action will spell the death of GIF
as a commercially viable technology, shifting the attention of the online
communications community to JPEG imaging.


Sincerely,


Pat Clawson
President & Chief Executive Officer
TeleGrafix Communications Inc.
Huntington Beach, CA


Voice: (714) 379-2140
Fax: (714) 379-2132
BBS: (714) 379-2133
Internet: rip.support () telegrafix com


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