updated 11/2/2006 4:37:19 PM ET 2006-11-02T21:37:19

A company that generates most of its revenue from patent licensing and litigation has reached an $8 million settlement with some of the technology industry’s biggest players over the use of a patent covering the ubiquitous JPEG digital image format.

U.S. Patent No. 4,698,672 had been a mainstay for Austin-based Forgent Networks Inc., bringing in more than $110 million in settlements and licensing fees over the past three years.

But Wednesday, Forgent said it had reached a deal with several technology companies — among them Dell Inc., Hewlett-Packard Co., IBM Corp., Microsoft Corp. and Sun Microsystems Inc. — in U.S. District Court in San Francisco.

(MSNBC.com is a joint venture of Microsoft and NBC Universal News.)

The patent was issued in 1987 and obtained by Forgent a decade later when the company acquired Compression Labs Inc., which created and owned the so-called 672 patent.

Though used in countless electronic gadgets and software programs since the 1980s, it wasn’t until two years ago that Forgent sued 44 companies, accusing them of using a patented compression technique covered in the 672 without paying a licensing fee.

Fifteen companies had already settled before Wednesday’s agreement, including Yahoo Inc.

Though Forgent had its sights set on even more litigation, the court in June ruled that the 672 patent applied only to video, severely limiting the scope of its claims.

As a result, Forgent said its ability to garner additional licensing revenues was “substantially concluded.” The patent expired in October, but Forgent could have pursued claims retroactively.

“We are satisfied with the resolution of this matter,” Richard Snyder, Forgent’s chairman and CEO, said in a news release.

Dan Ravicher, executive director of the New York-based Public Patent Foundation Inc., said Forgent was putting a positive spin on a big blow to the company. The patent accounted for 81 percent of Forgent’s revenue in the 2006 fiscal year that ended in July, when it reported a loss of $3.6 million, according to the company’s earnings report.

“They’ve acknowledged this patent does not cover the JPEG standard and they’re getting out of it,” Ravicher said. “It’s a face-saving maneuver to bow out.”

Forgent and companies with similar strategies have often been panned as “patent trolls” that amass intellectual property portfolios, then sue other businesses for patent infringement.

Forgent still has dozens of other patents in its portfolio, and also has a side business making and selling scheduling software for companies.

The company, with a staff of 37 employees and a large team of law firms, said it is moving ahead with its next potential profit generator: U.S. Patent No. 6,285,746, which relates to how digital video recorders allow playback during recording.

Forgent has sued 12 companies, including Comcast Corp., Direct TV Inc., EchoStar Communications Corp. and Time Warner Cable Inc., for allegedly using the patent in their equipment without permission.

A federal judge has set a tentative jury trial for next May in U.S. District Court in Marshall, Texas. Meanwhile, the U.S. Patent and Trademark Office is conducting a review of the 746 patent’s validity.

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