Click-to-navigate is the key to CD-ROM. Compton’s New Media claims it invented the technology. Does that make its Carlsbad team a band of multimedia bullies or the : MOTHERS OF INVENTION?
The patent, engraved on a gold plate mounted on polished wood, hangs on the wall at the headquarters of Compton’s New Media, an unapologetically displayed as trophy from one of the young multimedia industry’s most tumultuous--and still unresolved--episodes.
The firm has not yet tried to enforce this virtual license to print money. And, with a chastened U.S. Patent Office threatening to overturn the patent, the specter of Compton’s as a wicked monopolist stifling innovation among multimedia fledglings may ultimately prove overblown.
But the story of how the small company that created the first interactive encyclopedia came to be viewed as an industry villain has already become part of multimedia lore, providing insight into the growing pains of the much-celebrated medium.
What Compton’s does next, as it ponders whether to appeal last month’s initial reversal of the patent, may change the balance of power in an industry where no one has yet gained a fixed ascendance.
“Luke has prevailed, and the force was initially with us,” says Philip Dodds, executive director of the Annapolis, Md.-based Interactive Multimedia Assn. “The question is, will the empire strike back?”
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A small army of companies is hoping to strike it rich--or richer--in the burgeoning business of multimedia, the catch-all term for interactive computer software, video games and various pieces of the information superhighway that may eventually ferry digital news, entertainment, education and shopping opportunities to television sets across America.
So when Compton’s announced last fall that it had won the right to charge license fees for the use of a search-and-retrieve technology, which serves as the foundation of nearly all such products, a lot of people were pretty upset.
Some of them proposed a public burning of the CD-ROM discs that Compton’s publishes and distributes. Others simply vowed to take the firm to court. Norman Bastin, Compton’s free-wheeling executive vice president--who bleaches his hair and likes to sing on stage at the firm’s frequent trade show parties--received hate mail and threats of physical violence.
At the core of the dispute is a feeling among other pioneers in the field that Compton’s was trying to steal the credit for, as the firm’s promotional video boasts, “creating multimedia”--and of doing it with technology that competitors compare to a book publisher trying to claim patents on ink and paper.
“It’s an emotional issue,” says Peter Black, a Los Angeles-based CD-ROM developer whose products Compton’s has distributed. “Very few people in this industry are making money. The only thing you can walk home with at night is the assertion that you’re one of the founders, that you’re a part of history.”
Bastin, who helped found the firm’s new-media division and is named as one of the inventors on the patent, is alternately defensive and defiant.
“I never wanted to be a toll road on the information highway, like everybody said,” he insists. “All I wanted was to be an AM-PM Mini-Mart off an exit somewhere.”
Yet, to the taunt that Compton’s is striving to become the Microsoft of multimedia--the ultimate insult in the software industry, where Microsoft is viewed as a bully--he says with a shrug, “Microsoft is a very profitable company.”
CD-ROM software, the medium on which Compton’s so far has sold nearly 3 million copies of its electronic encyclopedia, comes on shiny, five-inch discs that are played on a drive hooked up to a personal computer or a machine connected to a television set. Like music compact discs, they cannot be recorded over (hence the ROM, for “read-only memory”). In addition to sound, they hold pictures, video and text--about 400 times the data that can fit on a typical floppy disk.
When Compton’s first managed to squeeze the 26 volumes of its encyclopedia onto a CD-ROM in 1989, it was considered a remarkable feat. ABC’s “Good Morning America,” Compton’s Chicago-based CEO Stanley Frank likes to remember that did a live feed on the product’s introduction. The three years and $8.5 million that went into it suddenly seemed worthwhile.
Then owned by Encyclopaedia Britannica--which gave away the paper version of Compton’s as a bonus for the kids to families who invested in the higher-brow Britannica--Compton’s went on to break new ground in distribution of CD-ROMs, supplying capital to help other developers finish their products and persuading retail outlets to carry them.
Compton’s now boasts the largest market share in the fast-growing industry. With sales doubling to more than $60 million last year, it has published more than 40 titles of its own and distributes 150 other programs from 22 publishers. To keep its maze of offices in Carlsbad from bursting at the seams, the firm just leased 30,000 square feet of space next-door.
Even its most vocal critics give Compton’s credit for helping nurture multimedia in the early days. But the patent remains a sticking point.
Patent No. 5,241,671 covers a commonly used way of storing and retrieving text linked to images on a CD-ROM. For example, when you click on the entry “Kennedy, John F.” in the multimedia menu of the encyclopedia, the 35th U.S. President’s image appears in a window on your computer screen. “Ask not what your country can do for you . . . “ he begins, in a recording of his 1961 inaugural address.
Another click brings up the text of an article chronicling Kennedy’s life. A click on the camera icon next to the heading “Weds Long Island Beauty” conjures up Jacqueline Kennedy in a bouffant hairdo, with John Jr. and Caroline on her lap. Choose the highlighted “See also Cuba” at the end of a passage on 1962 events and you are transported to the Cuba heading and the start of a similar set of permutations.
The ease with which one can browse through related topics--and the vivid animation and images that could not be found in a stack of books--have propelled annual sales of Compton’s and its main electronic encyclopedia competitors, Grolier’s and Microsoft’s Encarta, far beyond those of the paper variety.
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Over the last year, the technology has led to a 54% explosion--to 8,100--in the number of CD-ROM titles published, from children’s games to mail-order catalogues to interactive pornography. A sampling of titles: “Dinosaur Adventure,” “Multimedia Mozart” and the Bible.
It’s a complex process to compress the video, come up with interesting content and make it all work together. But, says Tom Lopez, who heads the CD-ROM publishing firm Mammoth Micro Productions in Seattle, the part of the process Compton’s has patented is “not rocket science.”
“You click on a horse, you have a description of the horse. Or you click the word horse and you get a picture,” Lopez says. “That’s what I would consider to be pretty obvious.”
In the wake of Compton’s announcement of the patent award, Lopez and dozens of others in the multimedia industry claimed to know about tons of “prior art”--products that used the patented technology before Compton’s did. The Patent Office was attacked as being stuck in the past, incapable of assessing high-tech patent cases.
Yet no one came forward to submit any prior art to the agency after its new commissioner, Bruce Lehman, took the unusual step of ordering the claim re-examined. When the office tentatively reversed its decision last month, issuing a preliminary rejection of the patent’s 41 claims, the reversal was based on a textbook description of the well-known computer program Hypercard, which the examiner said predated Compton’s “SmarTrieve” system.
“I certainly didn’t see a lot of letters coming across my desk saying, ‘Here, Commissioner, here’s a bunch of stuff I know.’ I think our customers could help us out a little more than they do,” Lehman says.
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The issue is a structural one, he says. Software patent disputes often end up in court, and inventors would rather save their best shots for the judge. To encourage third-party participation, Lehman has drafted legislation to make the patent application process public, without the strict secrecy in which it now takes place.
Whether the ruling invalidating Compton’s patent will be appealed is up to Tribune Co., the Chicago media conglomerate that bought the firm from Britannica last summer for $57 million--a price some analysts believe was inflated by the assumed value of the patent.
The plan was to use the patent to encourage publishers to sign distribution agreements with Compton’s. Those who didn’t sign would pay a 3% royalty on sales of their products. Those that did sign would get a better deal.
Tribune spokesman Robert Carr says no decision on an appeal has been made. “Heads are getting together, but there has been no consensus,” he says.
Patent attorneys and industry observers expect Compton’s to appeal at least some of the claims. While it’s no fun to be perceived as the industry bully, it hasn’t generally been known to hurt business.
Tony Bove, who is developing a CD-ROM of his own on San Francisco’s Haight-Ashbury district and says he may approach Compton’s about distributing it, takes a pragmatic outlook.
“They’re a company to reckon with, whether you like what they did or not,” Bove says. “I think they were foolish for trying to have an overly broad patent, but as for their bad-boy image--there are a helluva lot of people in this industry who play hardball.”
Some industry observers say the outpouring of wrath against Compton’s had more to do with resentment over the power it wields in distribution channels than the prospect of paying a small royalty fee. And even Compton’s harshest detractors consider the firm one of their own compared to the media and software giants that have recently begun to crash their turf.
Facing stiff competition from the real “Microsoft of multimedia”--Microsoft itself--and others, Bastin is trying to move beyond the patent dispute and focus on the task of taking Compton’s from its reference-book roots into the area of interactive entertainment.
To that end, Compton’s recently announced a joint venture with Warner Bros., producing a CD-ROM on the life of John Lennon. (Bastin says Lennon’s son, Sean, convinced Yoko Ono it was a good idea.) A prototype includes a video clip of Lennon playing “Imagine” at his home in New York and another of the Beatles performing “Shake It Up” for Queen Elizabeth II. It also allows the user to click through a gallery of photographs.
A new line of audio CD-ROMs, which play music in a compact disc player and images on a computer, is planned. The firm recently hired William Perrault, former vice president of marketing for Columbia TriStar Home Video, to head its entertainment marketing efforts. And last week, Bastin threw a party at the New Media Expo conference in Los Angeles to introduce a CD-ROM about the band Heart. The group showed up in person to play a set.
To help himself look forward, Bastin has vowed not to mention the word patent . Yet he can’t help stumbling over claiming another “first” as he describes the company’s plans to produce a coffee table book from digital images in a CD-ROM, based on the television show “Babylon 5.”
Rephrasing, he says with a sigh, “Let’s just say I don’t know of any other book that’s been done like this before.”
Multimedia Market Leader
Compton’s New Media, one of the pioneers in interactive multimedia, is now the industry’s largest company. But the Carlsbad firm’s claim to have patented the key to creating multimedia software has not won it many firends in the fledgling field.
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1993 market share by revenue:
Compton’s: 18%
Software Toolworks: 16%
Interplay: 9%
Microsoft: 8%
Broderbund: 6%
Others: 43%
Source: Dataquest Inc.
