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Patent ruling tugs at Net downloads

SightSound Technologies wins a ruling in its patent case against Bertelsmann subsidiaries that could have wide-reaching effects on the business of Net music and video downloads.

SightSound Technologies, a digital media company, has won a ruling in its patent case against Bertelsmann subsidiaries that could have wide-reaching effects on the business of Net music and video downloads.

Mount Lebanon, Penn.-based SightSound holds three patents related to the sale and download of digital music and video over the Internet. In 1998, the company sued the Internet site CDNow, owned by media titan Bertelsmann, for infringement of patents filed in the late 1980s. The case is the first and only test so far of the validity of SightSound's intellectual property holdings.

Last Thursday, a federal judge in the Western District Court of Pennsylvania and Pittsburgh granted SightSound's motion for summary judgment against Bertelsmann's divisions, paving the road for the 5-year dispute to go to jury trial. The court also dismissed Bertelsmann's request to avoid trial, which was based on the assertion that SightSound had not filed the proper information with the United States Patent and Trademark Office.

"We are very pleased with the Court's thorough and well-reasoned opinion and we look forward to taking this case to trial," said SightSound's lead counsel William Wells, of law firm Kenyon & Kenyon.

CDNow's parent company Bertelsmann could not be immediately reached for comment.

If a jury decides that SightSound has a right to enforce the patents, it could affect almost any business that sells downloadable music or video online, including the major record labels and music studios. This is increasingly important, as a number of download services emerge to offer people a legal way obtain video and music content online.

The patent ruling, while not final, is a sign that more of the most basic technologies and techniques underlying online media may be privately "owned" than previously thought. For example, Acacia Media Technologies has claimed it owns patents on the process of transmitting compressed audio or video online--one of the most basic multimedia technologies on the Net. So far, it has signed up licensees such as Mexican satellite telecommunications company Grupo Pegaso and Radio Free Virgin, the online music division of Richard Branson's Virgin group of companies.

The patents--granted to SightSound in 1992--give the company control over a technique for "electronic sales and distribution of digital audio or video signals," specifically over a "telecommunications line." SightSound is suing to stop CDNow from pursuing "any infringing activities," as well as to claim unspecified damages.

Read in a business environment 10 years after the patents were granted, the language is broad. They don't cover a specific technology for encoding or transmitting data; instead, they outline a basic model for sending a digital audio or video signal from one place to another over telecommunications lines, in which a copy of the audio or video is stored on a consumer's computer and a credit card is used for payment.

CDNow had contended, amongst other myriad objections, that this description didn't cover Internet transmission. But in almost every case, the judge's ruling on the scope of the patents agreed with SightSound's contentions.

A pretrial and settlement conference between the parties is scheduled for Nov. 12. A full trial could take place within the next year, unless the parties settle.

CNET News.com's John Borland contributed to this story.