Below is the transcript of our interview with Richard Morgan, executive director of Amphion Innovations, following the company's favourable court ruling in its patent case involving Microsoft and SAP.
Sarah Lowther: Amphion Innovations has received a favourable ruling in its long-running strategy to protect its patented technology from widespread unlicensed use. For more, we’re joined by Amphion Innovations’ chief executive, Richard Morgan. Richard, what is the connection between Amphion, DataTern and these patents?
Richard Morgan: Amphion, the parent company, is a venture capital firm that invests in and supports the growth and development of early-stage companies that are trying to commercialise inventions, usually in the medical technology and software area. We have a few at any one time of these because we spend a lot of our time, as well as our money, supporting the companies.
One of them is a company called FireStar, and FireStar was the company that started these moves to try to get the unlicensed use licensed. It became quite difficult for FireStar to continue with that. Amphion helped out and in the end, Amphion actually acquired the patents, and arrived at a sharing agreement with FireStar so that FireStar could continue to develop its new products. We then put the patents into a wholly owned subsidiary called DataTern. DataTern is a part of Amphion and FireStar is a partner company as we call it.
SL: Where did the patents originate and what are they for?
RM: What originally happened was people were trying to solve the problem of allowing what are called object-oriented applications to be seamlessly, automatically connected with what are called relational databases. The world is full of object-oriented applications these days, with media files and other things which are complex datasets. But the database technology has remained very much dependent on relational databases and it’s quite a daunting task to take something from the real world – an apple or a cup – and put it into basically what’s like a spreadsheet. It’s rows and columns in a relational database, if you like.
The solution, which was invented by the engineers behind this technology, was a mapping tool, and it facilitated the automatic integration and the mapping of the object-oriented applications into the relational database and vice versa, so it enabled the two technologies to co-exist and to function effectively together. That was the origin of the work that was done and the software that was written. The patents were filed on the basis of two critical inventions that were made that enabled this mapping process to take place.
SL: Richard, were the patents ever incorporated into any product or service?
RM: Oh yes. FireStar – all our companies do, and FireStar did – set out to develop a product and it had a product on the market called ObjectSpark, which was a tool. If you were facing this problem as a software developer, you could buy the tool and use it as an automatic translator, if you like; a communicator between the applications and the database.
That product was on the market for a while and it was FireStar’s flagship product for a while. However, it ran into some difficulties, because a lot of unlicensed users came into the market in competition with FireStar.
SL: What kind of success has DataTern had in the past in seeking licensing agreements?
RM: After we ran into this problem in the marketplace it became clear that it was going to be impossible to compete, because some of the companies were quite large and well-funded and a lot of them were using our technology without our permission. We concluded that it was going to be very hard to make a success of ObjectSpark as a product and so we started to look at the companies that were doing this kind of thing, offering tools and services in competition with ObjectSpark and who were infringing our patents.
We started a programme in 2006, initially with a company called RedHat. They were the company we first approached to offer a licence and since then we have licensed over 40 companies and generated quite a considerable amount; over $20mln of licensing revenue from those activities.
SL: How many companies is DataTern currently seeking licencing agreements from?
RM: That’s a problem for us, because we think there are really many hundreds of companies that are using these technologies. We currently have 20 – actually it’s just gone down to 19 – remaining in our current actions. It’s gone from 20 to 19 because we’re just in the process of concluding a licence agreement with one of the 20, so that will leave 19 companies.
They’re in three different jurisdictions. These are US patents and they’re in Massachusetts, in Texas and New York.
SL: What does this ruling mean for DataTern going forward?
RM: It’s very important for us because the court in New York handed down a ruling. It is called a Markman ruling, which is an interpretation of the patents, what’s called a claim construction, which we felt was flawed and didn’t properly reflect the patents. As we were permitted to do, we appealed to the Federal Circuit Court of Appeals, which is where all such patent cases go. You start in the district court and then you appeal to the federal circuit, which is a specialised court, considering mainly patent cases. To have the appeal heard by a panel that’s obviously used to looking at this kind of technology and adjudicating patents and claim constructions was an important thing for us.
We appealed on two grounds. One was that the companies, Microsoft and SAP, who brought actions against us in New York, did not have jurisdiction. That was one ground for the appeal and the second was that the Markman ruling itself was flawed and should be reconsidered and a different Markman ruling handed down.
The verdict, the ruling that was handed down just the other day was actually mainly about the jurisdictional issues. We feel it’s very favourable, because we argued in the district court that they did not have jurisdiction and the cases were allowed to proceed. Now the federal circuit has said that we were right, and that they didn’t have jurisdiction in the case of Microsoft in particular. We feel that the ruling is favourable, and will allow us to continue our campaign to get companies licenced.
SL: Finally Richard, how long do you think that campaign will last?
RM: The patents have a life through the end of 2017. A lot of these technologies are very, very widely used today. So almost every IT system in a company, for instance, would have applications that were using this technology in one form or another. A lot of the tools that these companies used were sold to independent software vendors, who then built applications that were bought by big companies - banks, insurance companies and so forth. There are many, many hundreds of people out there - companies, mainly - that are infringing, we believe.
There’s a lot out there that we’d like to get licenced. We’re only interested, really, in arriving at a fair and equitable licence agreement with the users. We’d like to make it possible for them to continue to do what they’re doing and obviously to give us a fair return on the investment we’ve made in developing these technologies.
SL: Richard, thank you very much for making something that’s very intricate and complex into something that’s very easily understandable.