Round One to Apple in the Burst lawsuit.

Thanks Jim was wondering what the status on the case was.

Good news so far

Burst dispute entirely settled for $10M:

Apple Settles With Burst
SAN FRANCISCO (MarketWatch)—Burst.com Inc. said Wednesday it has settled a lawsuit filed against Apple Inc. for infringing patents related to technology used to store and transfer video and audio files, and will receive a one-time cash licensing payment of $10 million. Burst (BRST: 0.55, +0.03, +5.8%) said in a statement that it in turn has agreed not to sue Apple (AAPL:168.46, -0.39, -0.2%) in the future for infringing patents related to the technology. Burst sued Apple in 2006 for infringing the patents, which it said covered technology used in Apple’s popular iPod devices. “Burst plans to continue identifying and evaluating companies who represent licensing opportunities,” the company said in the statement.

Friday could prove to be an interesting day, especially with no afternoon trading in which to have the usual afternoon sell-off.

$10M? In the overall scheme of things, that’s essentially: nothing.

I’m glad I didn’t spend sleepless nights over this for the past few months that I’ve been aware of it; nor let the potential Burst situation have the slightest effect on my AAPL investment decisions.

$10M, over, and done. I like the sound of that.

Some of the news stories about the settlement say it also enables Apple to use Burst’s DVR patents. Possible upgrade to AppleTV in the works?

[quote author=“willrob”]Some of the news stories about the settlement say it also enables Apple to use Burst’s DVR patents. Possible upgrade to AppleTV in the works?

I assume that this means there is NO round 2?

[quote author=“rattyuk”]I assume that this means there is NO round 2?

I’m waiting for the next shoe to drop.

. . . . but that’s just me.

[quote author=“rattyuk”]I assume that this means there is NO round 2?

Round 1-  Apple got most of the suit thrown out
Round 2 - Burst decided they better get what they can and run
Round 3 - Apple gets Burst to throw in a bunch more IP or else get tied up in courts for years, get nothing and possibly be held liable for costs.

Round 4 - Burst looks for new fish to latch on to.

[quote author=“jimlongo”][quote author=“rattyuk”]I assume that this means there is NO round 2?

Round 1-  Apple got most of the suit thrown out
Round 2 - Burst decided they better get what they can and run
Round 3 - Apple gets Burst to throw in a bunch more IP or else get tied up in courts for years, get nothing and possibly be held liable for costs.

Round 4 - Burst looks for new fish to latch on to.

Apple appear to have come off far better than MS did - I think MS spent around 60 Million settling the same case?

[quote author=“rattyuk”]
Apple appear to have come off far better than MS did - I think MS spent around 60 Million settling the same case?

From the linked PDF:

Burst’s license of its patents to Microsoft is non-
exclusive, and does not include any sublicensing rights. After court costs and the payment of a
35% contingency fee to our litigation attorneys, Burst received a net payment of approximately
$38 million.

FWIW -  BRST vs AAPL The Real Story:

I’ve followed BRST for 2 yrs . After reading a Cringley piece on the company and its IP 2 yrs ago I bought a small speculative stake.  After Apple sued them and the litigation evolved, I took the time to really research the company, it’s IP, it’s history and the people involved (yes Barry Ritholtz is on their board).  I increased my shares -  partly to hedge my AAPL in case of a big settlement but also because as I learned more, I realized they actually had developed and patented some meaningful technology in the late 80s and early 90s .

Burst filed it’s first patents in the late 1980s and they demonstrated their technology (as Explore Technology) at the 1991 CES to critical acclaim .  They went on to sell it to various companies and attract more investment from SBC (later purchased by AT and T) and by the band U2’s investment company. 

They were the real deal - they had a successful company and sold a “Burst” plug in to Windows media player and were in the process of licensing their technology to Apple, Real networks and others. Excite@home (remember them?) did testing of their technology comparing it to other methods of streaming media at the time and were impressed - as documented in this email

Some of Microsofts internal emails the time are telling.  This internal MSFT email discusses trying to acquire Burst and ends with “Acquisition risks are ... possible bidding war with Apple. Real could get into game too.”

All that changed when MSFT came out with a new version of Windows media player that suddenly didn’t work with the Burst plug in. MSFT deviously had incorporated the BRST IP into WMP.  Deleted internal MSFT emails uncovered at the MSFT trial document this (and led MSFT to settle) 

Some may remember how early versions of WMP, Real Player and Quicktime “streamed” video that was jerky with constant pauses - until one day - in the around the year 2000 - that no longer was a problem. That was due to Burst’s technology.  And the way this was achieved was Not Obvious to the streaming media experts at the time.

So BRST suddenly had no business. Microsoft was using their technology for free - so Apple and Real did the same.

So - Burst’s stock tanked (mid tech bubble burst) and the company had little resources. They had to pay for attorneys to pursue their case with Microsoft and “settled” for only 60 million to avoid a lengthy court battle against a company with unlimited resources - hoping to use that money to pursue other infringers.

Meanwhile the technology they developed went on to be the underpinning of the internet video revolution, the ipod, itunes music store, Apple TV,  etc.

So - after Apple they go -negotiating with Apple until Apple decides they won’t pay the price Burst is asking and so they sue Burst.  Burst replies with top IP law firms working *strictly on a contingency basis*

They win the first round - the important Markman hearing - last May.

BUT meanwhile - the landscape of IP patent law was changing - thanks in part to the Business Software Alliance’s efforts and recent court rulings (KSR, Ebay etc). “

Patent trolls” not withstanding - big business only likes patents when they own them and they’re managing to undermine protections for small inovative companies.

And then something drastically changed in Judge Patel as seen in her recent rulings.  What was it?  Speculations abound - I don’t know - but something outside of the public filings is likely involved IMO. (in hindsight - I should have realized that The Big Guys always find a way to win)

My guess is the reason they settled is because Bursts law firms did not want to risk going to trial against Apple in this environment and invest more resources - perhaps to get nothing in the end.  I have no doubt Richard Lang - Burst’s CEO would have taken it to trial as I really think he is not in it for the money but instead wants his work recognized.

So bottom line - this $10 million settlement is a major blow to BRST and IMO a real injustice to the little guy.  I say this as someone whose investment in AAPL has always dwarfed my small stake in BRST.  I never considered my BRST shares as anything more than a speculative gamble - like cheap OTM calls on a stock that you never really expect to score big on but are nice to hold and think “what if”.

So BRST will likely putter along - trying to collect small sums from other infringers.  I may see my small investment in BRST break even if I’m lucky.

What bothers me more is that it really is an injustice to Richard Lang,  Bursts CEO, and the one who developed these ideas. By all accounts he really is just a   nice guy trying to get recognition for being ahead of his time.    And we know what happens to nice guys…

Oh well - nothing ventured..

Of course - thankfully,  IMO AAPL dodged a big bullet

[quote author=“willrob”]Some of the news stories about the settlement say it also enables Apple to use Burst’s DVR patents. Possible upgrade to AppleTV in the works?

That’s what I was wondering.

Yes, Lang was a pioneer of digital and network transmission of media. But being a pioneer, and having had a harder task than those who followed, does not mean that you employed novel and un-obvious techniques, whether you’re transmitting video digitally, or climbing Mount Everest.

I suspect Burst were not going to win, and knew it. Apple simply didn’t need to fight it to the end, and in fact, just like Microsoft, are better off leaving the obstacle in place for those who follow.

Unfortunately, what Burst, Microsoft or Apple deserve is not relevant in law or business.

thanks mtdoc for the backgrounder. A very interesting story.