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BT hit with ruling in patent case

British Telecommunications suffers a blow in its bid to charge royalties for hyperlinks when a New York judge hearing a case brought against Prodigy Communications issues a ruling.

British Telecommunications suffered a blow Wednesday in its bid to charge royalties for hyperlinks when a New York judge hearing a case brought against Prodigy Communications issued a ruling on the first phase of the proceedings.

In what is known as a Markman ruling, U.S. District Judge Colleen McMahon said many of BT's claims that its patent closely mirrors methods common to the Internet were not valid. The Markman ruling is the phase of the trial that is concerned primarily with putting the words of the patent claim into plain English.

The two parties now have 30 days to file motions for a summary judgment, and if the case is not dismissed after that a full trial will begin in September.

British Telecom's suit against Prodigy is a test case, and if BT wins it is likely to pursue other Internet Service Providers (ISPs) for license fees. Before the case went to court, BT had contacted Prodigy and 16 other ISPs, including America Online, in June 2000, asking them to buy a hyperlink license. BT has not indicated what it would charge, but any costs would likely be passed on to business and consumers who have Web sites.

David Weaver of Houston-based law firm Vinson & Elkins, who acted on behalf of Prodigy, said that although his client is likely to push for summary dismissal, a decision has not yet been made.

But the Markman ruling, said Weaver, weighs heavily in Prodigy's favor. "If you look at the opinion, it is evident that the judge spent a great deal of time considering the issues and wrote a thorough opinion," he told ZDNet UK. "The court adopted the majority of Prodigy's proposed constructions."

Prodigy was not successful on some issues, said Weaver, "but we are generally pleased with the results of the ruling."

In her ruling Wednesday, McMahon said BT's claim referred to the idea of information that is stored on a central computer and is accessed by remote terminals. "In this patent, the computer is a single device, in one location," McMahon wrote. "It is referred to as 'central' because it is connected to numerous physically separate stations, called 'remote terminals,' by the telephone lines of a telephone network. So there is a computer, connected to many remote terminals." Prodigy's lawyers believe that this analysis indicates that the patent does not cover the Internet but is instead confined to a system where there is one central computer.

The patent, number 4,873,662, was issued to BT in the U.S. in 1989 and expires in 2006. The company said it only discovered the patent in a routine trawl through its own patents four years ago.

According to Weaver, the patent was filed in the U.S. in 1976. "The Patent and Trademark Office here analyzed it, and for 12 years said there is nothing new in this patent application," he said. "So for 12 years they rejected the claims that were asserted, but the patent attorney representing BT kept pressing BTs case and eventually convinced the U.S. Patent and Trademark Office to issue the patent."

Some patent experts arguing against BT's case point to a video of a demonstration delivered by Douglas C. Engelbart, who had been working with a group of 17 researchers in the Augmentation Research Center at Stanford Research Institute, in Menlo Park, Calif. In a live demonstration of the online system, called NLS, which the researchers had been working on since 1962, Engelbart demonstrated the ability of NLS to jump between levels in the architecture of a text, making cross-references, creating Internal linking and live hyperlinks within a file.

Matt Loney reported from London.