Hong-kong firm eats 12% of Apple

A Hong-Kong based company wants 12 percent of all profits from iTunes and iPod sales, claiming it holds the patents to the DRM technology that governs the use of downloads through Apple Computer's online music service.

According to a post on the Pat-rights company Web site, the patent governs the verification of a single user before permitting the user to download tracks.

iTunes' "computer registration involves a process of identity verification in which a user is required to key into the computer the correct Apple ID and password he used to purchase the song....This is certainly a patentable technology. If iTunes does not patent it, there must be a very good reason for them not to do so--someone else has patented this," the post says.

Though Apple declined to comment, the company has been in negotiations with Pat-rights for some time, according to Joseph J. Zito, the patent lawyer representing Pat-rights.

"We expect to be successful in licensing negotiations with Apple. They're a good company that understands intellectual-property rights, and we think they'll be reasonable," he said. "My client was first in touch with Apple during the months of December and January, so Apple has been aware of the issue for a couple of months."

Zito declined to comment on whether the patent is a working implementation or purely a design. "That's going to be an important issue in this case, as it is in all such cases. This case will hinge on a lot of things, so I'd rather not comment on what our plan is," he said.

Zito said that the patent may be applicable to a variety of DRM schemes but said he isn't aware of any plans to take action against other companies.

Currently, Pat-rights is gunning for 12 percent of Apple iPod and iTunes profits, but if the matter comes to court, the payoff could be equally lucrative for the patent holder. If Apple is found to have willfully infringed the patent, damages could be tripled.

If the issue is not settled by March 21 March, Pat-rights intends to file suit.
Apple is currently involved in another patent battle, with Advanced Audio Devices, which claims iTunes violates its patent, filed in 2003, on a "music jukebox which is configured for storing a music library therein."

source:cnet.com