Milestone VMS Lawsuit

Author: John Honovich, Published on Sep 16, 2012

The biggest brand in Video Management Software, Milestone Systems, has been sued by rival VMS developer JDS for patent infringement. The patents cover fundamental aspects of video management that might apply to many VMS developers. In this report, we dig into the issues involved.

The Case

JDS filed a lawsuit against Milestone this May. The following key legal documents provide background:

The case is currently making its way through the legal system and has not been decided.

The Patents in Question

Two patents are involved in this case:

The patents describe fundamental means of connecting IP cameras to software, displaying them and identifying them by MAC addresses.

The patents overall date back to March 2000. The first patent continues from an application in 2000 and the second patent continues from the first. The origin date is key because the US is a 'First to Invent' country requiring patenters to prove that no prior art exists more than a year before the date of first filing.

The Background

Both JDS and Milestone were early VMS developers. JDS reports that they have developed VMS software since 1999. Additionally, Milestone says that they shipped their first VMS version called "Surveillance PRO" in 1999. It supported 5 cameras maximum, licensed by unit (camera/encoder), used MAC addresses and included motion detection.

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This may all sound familiar to those tracking Object Video's ongoing litigation campaign for video analytic patents. While both companies (JDS and OV) are claiming to have fundamental patents to their respective domains, important differences exist.

On the one hand, OV is far more aggressive:

  • OV has a war chest of millions (perhaps tens of millions) to spend on suits; JDS does not
  • OV has sued 4 companies so far and issued a ridiculous 60 day ultimatum.
  • OV is pushing for all companies to sign patent licensing agreements; JDS is open to that but has not unleashed any campaign

However, the stakes are much higher for the VMS market:

  • VMS is mainstream and well accepted by customers
  • Relative to the tiny analytics market, VMS software is far more widely used (We'd estimate ~10x as much)
  • More Money at stake: VMS software total annual revenue is likely ~$500+ million already and will continue to grow significantly more than the overall market

Outcome

With the dysfunctional US patent system, it is hard to guess what will happen. That said, if JDS wins, we do not see this having a significant negative impact on the VMS market overall. Even if a patent license fees needs to be paid, given the value proposition of VMS, it should not significantly impact buying decisions. However, a loss could hurt Milestone itself, and their investors, significantly undermining their already minimal profitability.

A key element will be proving prior art. Many of the claims in JDS patents seem so obvious to us (even for the year 2000), that it is quite feasible that Milestone, other VMS providers or IP video developers may have prior art that could invalidate the patents.

Fairness?

Like Object Video, JDS was very early and had a great opportunity to lead their respective market. Neither capitalized on it and we do not think the 'fault' was others stealing their 'technology'. This underlies one of the most controversial issues in patent litigation - unsuccessful early companies using broad patents as tools to punish rivals who outexecuted them. All that said, if or until the patent system is reformed, we are stuck dealing with ongoing litigation across the industry.

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