Random Thoughts 46

469

March 29, 2002

E-Data Corporation

E-Data Corporation is claiming they own a business method patent that allows them to
collect a royalty for anyone using a JPEG format to deliver images to their customers
over the internet or on CD.

Their patent, known as the "Freeny" patent (US Patent Number 4,528,643) was filed in
July 1985 and covers a "System for reproducing information in material objects at a
point of sale location. It included a system for the transmission and copying of movies,
books, videos, greeting cards, clip art, tickets, and other products digitally
distributed through the Internet.

E-Data is contacting companies that it believes are in violation of its patent and
encouraging them to purchase a license that will allow them to continue doing what they
are doing. It seems clear that the company's sole business is to sue to enforce this
patent.
On their web site at www.e-data.com they encourage potential violators not to use an
attorney and to respond to them immediately. PACA attorney Nancy E. Wolff encourages
PACA members not to have any contact with E-Data without first seeing the advice of a
patent attorney who is familiar with business method patents.

Information on a well publicized suit involving this patent can be found at
www.patents.com/ige.htm. E-Data sued Compuserve, Borderbund, Waldenbooks, Ziff Davis
Publishing and others in the Southern District of New York. The case did not test the
validity of the patent. A district court judge dismissed the lawsuit against all the
defendants, but on appeal the case was reversed. It appears that many of the defendants
settled with E-Data.

In addition to the NY case, E-Data filed a lawsuit in 1996 in Connecticut against
another large group of defendants that included PNI (PictureQuest), West Stock,
Photodisc and Index Stock. According to Nancy Wolff who has reviewed the docket sheet
available on-line, it appears that Photodisc won a motion to dismiss the action in 1998.

It appears that this patent is very broad and may not be enforceable. However, E-Data
seems to hope that companies will pay them a license fee, rather than going to the
trouble of trying to fight a patent lawsuit. Business methods patents are ideas for
systems, often issued before the potential is fully understood. They are not patents for
nuts and bolts inventions. An example of another business method patent is Amazon's
"One-click" shopping method.

Proceed with caution in having any dealings with this company.

Some Book Publishers Paying More

In Story 466
we reported that instead of licensing rights to use a picture in a single
book with a specified press run, publishers are often asking for extensive rights beyond
a single printing. In addition these publishers expect to get these rights for little
more than they would pay for one-time use. We also discovered that some agents are
licensing these broad multiple uses for very low fees.

After publishing this story we heard from several people who agreed that it was a major
problem and they needed to more carefully examine the practices of their organizations.

We also heard from some photographers who deal with publishers directly, instead of
through an agent, that are receiving significantly better fees for the use of their
images.

One photographer reported that he was regularly able to get fees in the $600 to $650
range for publication of a single title with circulations under 100,000 copies and
including some additional web use.

Another photographer reported a specific example where he negotiated a $320 fee for
one-time, non-exclusive, English language use for a 1/2 page photo with a print run up
to 40,000.

A few months later the publisher returned and wanted several additional rights for the
project. These additional rights included the rights to publish some copies in Spanish
(but all to be sold in North America) and to raise the press run to 60,000. The
publisher also wanted to include the image on a Student & Teacher CD-ROM with a print
run of up to 5,000 copies, and a six year license to publish the same material on an
internet/extranet password protected website. Finally, they wanted rights to make
revisions of less than 10% in the overall content of the project without it being
considered a new edition.

The photographer got an additional fee of $1288 for these additional rights. Clearly,
some publishers are willing to pay reasonable fees if you only ask.

Interestingly, this same publisher told the photographer a year ago that they didn't
want to deal with the intricacies of different rates for different sizes. They asked if
the photographer could provide a single rate for any size up to full page North American
use under 40,000 copies. The photographer said, "Sure, how about $320?" (At the time
this was the up-to-40,000 full-page rate listed in the 4th edition of Negotiating Stock
Photo Prices. Since then the 5th edition of NSPP has come out and the current full-page
rate is $438.)

Since that quote the photographer has been getting $320 for spots, 1/4 page, 1/2 page
uses from this publisher. Now it appears that in at least a few cases the publisher
needs even broader rights and they are willing to pay a reasonable fee for those
additional uses. This publisher is not griping when the quote goes over $1,000 for
inside textbook use.

Reasonable fees are possible for those who hold the line.

Getty Press Division Sales

Getty Images has told investment analysts that sales of their Press Division represent
"less than 12%" of the company's total sales. In a recent panel discussion at the
International Center for Photography in New York, Mike Sargent, Vice President of
Getty's Press Division, said that 11% of Getty's total sales come from the Press
Division.

This number indicates significant growth depending on the exact period of time that the
percentage is calculated on. The Press Division is made up of the AllSport and Getty
Images News Service brands. Getty Images News Service includes the former brands of
Liaison, Newsmakers and Online USA.

In 2000 Selling Stock estimated that sales of Getty's Press Division were between $36
and $40 million annually. This would have been around 8% of the company's total 2000
sales of $484.8 million. Eleven percent of 2001 sales of $451 million would have been
about $49.6 million, a huge jump from sales of a year earlier and during a time when
sales for the company overall were falling.

The Press Division had about 80 photographers on staff and under contract at the end of
2001. The goal of the news service is not to duplicate the volume of photos distributed
by the major wire services, but to concentrate on the five best stories at any given
time.

The Press Division has certainly benefited from sales connected with 911 and the
military buildup afterwords. AllSport would also have had a jump in sales in connection
with the 2001 Olympics. Another important factor in relation to profits is that Getty
wholly owns a large percentage of these images. Thus their "gross margin" for Press
Division sales is much higher than it would be for their Commercial/Advertising rights
protected brands.

ImageState Completes Move To New York

ImageState will have completed its move of picture files from Seattle to New York by
April 6th.

According to George Sinclair, Managing Director for North America, they are working
their way through an edit of the files that were in Seattle. Some of the images that
were selected are already in New York and being integrated into the main file. Images
that ImageState has made a decision not to keep have been shipped back to the
photographers.

There are a substantial number of images that the editors have still not had time to go
through and they are being shipped to New York. Once they are in New York the editing
will proceed and the images will either be integrated in the main file -- and in some
cases scanned -- or they will be returned to the photographers.

There have been rumors that unselected images would be put in storage and not returned
to the photographers, but that is incorrect.

The Seattle office remain open as a sales office, but all other operations will be in
New York. It is undetermined at this time how many sales people will staff the Seattle
office. Rick Groman and Mark Karas, former owners of WestStock, have retired and will no
longer be connected with the company.

All creative activity for North America will be handled out of New York. The company is
looking to hire a new Director of Photography and new editors in New York. There will
also be a creative department in London so that "European eyes" will be selecting images
for marketing in Europe.

The www.weststock.com site will be retained and will focus on supplying smaller sized
files for power point and SOHO users. User that need a larger file size will be upgraded
to the www.imagestate.com site.

Defining "Crappy" Photography

Many of us have a tendency to belittle a lot of the new style imagery that tends to be
out-of-focus, off-color, weird angles, solarized, etc.

Recently Gary Gladstone made a very astute observation on PhotoPro, part of the Photo
News Network at www.photonews.net. There is a very interesting discussion there under
the title "Re: State of Stock Photo Industry".

Gary observed that its funny how many people tend to define "crappy photography" as
anything that differs from their own style of work.

He thinks it is a mistake to characterize any trend as 'crap,' and said, "I keep
thinking about the parents all shaking their heads at the Beatles in the '60's."

He continued "Photography reflects a culture in motion. Classics are always abundant but
the trendy stuff, like a jazz improvisation, will yield amazingly good moments and open
us all up to new ideas. It's worth living with. Allow it visiting rights to your
psyche."

For myself, I've often criticized a lot of the "edgy" work of the last few years because
I thought it wouldn't generate significant long term sales to the stock photo buyers.
Recently I have become aware of data that indicates some of these images are selling
very well, and over a long period of time. So far, the data available is too minimal to
make broad judgements, but I am trying to be more tolerant in my judgements of some of
the new looks and trends.

One test of any good stock image should be, "Does it communicate a message that more
than a handful of people can easily understand." If it doesn't, and it seems that the
photographer is using a technique with little thought as to what he or she is trying to
communicate, then the image may have little value despite the fact that it meets the
qualifications of being "edgy".

Alaska Stock Upgrades Website

Alaska Stock has upgraded their website with a cleaner interface and simplified site
navigation to better service their customers.
The new design resulted from things Alaska Stock has learned about their customers after
more than six years of using the web to sell pictures.

Customers can enter a keyword, select from a drop down category menu, or input an image
number from an Alaska Stock catalog or CD. In addition, when the first page of search
returns comes up customers also see the "Image Thesaurus," a tool that shows related
keywords and synonyms. By clicking on words or phrases within the Thesaurus, the user
can quickly continue his/her search in a more relevant direction.

The agency's Lightbox feature has been greatly enhanced and is now easier to use than
the previous version. Lightboxes can be sent to multiple addresses.

There is also a pricing module for both Rights Protected and Royalty Free images.
Customers may also purchase and download high-res RP or RF pictures using a credit card
or an approved Alaska Stock account number. For less conventional uses the customers can
e-mail a request for a price quote, or call to negotiate.

The search engine was designed by 20/20 Software. More information about their services
can be found at www.twensoft.com.