Interactive Networks, an interactive-TV pioneer that crashed and
burned into bankruptcy, is trying to rise from the ashes.
After sorting out a legal mess, the company hopes to collect royalties from
Internet and interactive-TV firms that may unknowingly have infringed on its
The list of potential licensees includes major players such as Microsoft, Intel, and NBC, which is a shareholder in Interactive
Networks, now based in Belmont, California. Microsoft owns WebTV, Intel has
pushed its Intellicast technology, and NBC has its own
In its heyday, Interactive Networks burned through $155 million in capital
from investors such as TCI, Sprint, NBC, and Motorola.
After settling litigation earlier this year over a $20 million loan from
those investors, chief executive Bruce Bauer is ready to collect patent
licensing revenues from companies--particularly in multiplayer online games
or interactive advertising--that use technology Interactive Networks has
"The value to the company is primarily its assets and intellectual
property--its suite of patents," Bauer said in an interview. "We have been
working for more than a year strategizing our patent enhancement and
Interactive Networks' pursuit of patent revenues could rekindle a debate
that has raged about patents and growth of new mediums such as the Internet.
Some argue that patents simply slow development, while others suggest they
let inventors profit from their creations that others might merely copy
without patent laws.
Last month IN hired one of the company's original technology gurus, Robert
Brown, to become its chief technology officer--and employee No. 4. His
mission: Turn the patent portfolio into revenue.
"When multiparticipants play along with games of skill or chance, such as
live sporting events, game shows, and other programming events for prizes or
scoring, that technology may fall under IN's patents," Bauer said last month
in a statement. The goal is to license the patents or strike strategic
Interactive Networks holds at least six patents today and part of Brown's
mission is to apply for additional ones. Bauer describes a 1986 patent, 4,592,546, as the basic patent underlying Interactive
Networks' technology. It is titled "Game of skill playable by remote
participants in conjunction with a live event," and cites as an example
several remote users playing a game while watching a televised football
game. A key element is using two separate forms of communication.
The other foundation patent is 5,083,800, issued in 1992. It covers computer games that involve a
one-way communications channel like a FM radio signal or phone line.
The interactive-ad patent, 5,643,088, involves integrating interactive advertising
with an online game.
Interactive Networks today has roughly $10 million in the bank, as a result
of settling the last litigation over the $20 million loan. The lenders
agreed to convert the debt into shares in the company after IN filed a
According to filings with the Securities and
Exchange Commission, after the lawsuit settlement Interactive Networks'
largest shareholder is AT&T, which
acquired a 20.1 percent interest in Interactive Network when it acquired
TCI. NBC owns 9.4 percent, Gannett 5.7 percent, and founder David Lockton,
who is no longer affiliated with the firm and is still involved in legal
disputes with the company, 1.7 percent.
Bauer hopes to hire a top law firm on a
contingency basis to pursue patent infringers and collect royalties from
He also has created an advisory board, including Gregg Freishtat, chief
executive of VerticalOne, that is helping Interactive Networks collect licensing revenue.
"A lot of the vision of how the services and products Interactive Networks
brought to market in the set-top box is applicable to the Internet market,"
Freishtat said in an interview.
"Many of the companies that entered into the Internet and enhanced-TV
arenas...are potential licensees of our intellectual property," Bauer
in a statement announcing the advisory board.
Interactive Networks has one licensee from the company's earlier
incarnation, London-based Two Way TV, a subsidiary of giant Cable & Wireless
Communications. Two Way TV is planning to roll out its service in the
United Kingdom over the next 12 months, Bauer said, and he's interested in
a joint venture to bring the service into the United States.