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Reprint revolution

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Aggressive moves to take advantage of the Internet have led one company into a protracted court battle with a vendor

BY SEAN CALLAHAN

Reprints are not exactly sexy. "It's a low growth business," acknowledged Corey Johnson, president of Valeo Intellectual Property, a reprint company formerly known as RSiCopyright that is attempting to expand beyond its core business and into the electronic realm.

Valeo is not alone. A number of reprint companies have quietly been attempting to adapt their businesses to the Internet age. In 2003, Reprint Management Services, for instance, acquired NXTBook Media, a company that makes software for digital replicas of print magazines. The reprint unit of RMS uses the technology to offer electronic reprints to publishers.

Foster Reprints is also offering digital technology. Its "managed eprints" provide software that, for instance, can limit the number of times a newsletter in PDF form can be opened or forwarded.

Valeo, which is a unit of Taylor Corp., a $1.4 billion company, is especially ambitious in its online plans. But currently those plans are ensnared in a legal battle with DataDepth, a software vendor that supplies iCopyright technology. This software allows publishers to "tag" online content to enable automatic clearance and sale of copyrighted material.

Some industry observers believe that this kind of business has the potential to be big. RMS, among others, is skeptical. It entered an agreement with iCopyright in 2001 but ended the alliance when the technology failed to produce the anticipated revenue.

Industry observers say online acceptance has advanced since then. "There's a lot of upside in a developing market that will continue to grow for years," said John Blossom, president of Shore Communications.

"It's potentially a very scalable business," agreed Chuck Richard, VP-lead analyst at Outsell, an information industry research company.

In any case, the conflict between Valeo and DataDepth is complex and one that likely will be sorted out by the courts. It revolves around Valeo's plans to bolster its reprint business with online revenues.

Valeo contracted for an exclusive license from DataDepth to use iCopyright technology in the reprint industry. It sold the technology to publishers, which used it to receive payment for use of their online content. Clients include Forbes.com, VNU and the Associated Press.

The iCopyright technology enables readers who want to license the content to handle all the necessary procedures and payments automatically.

The biggest potential of this business appears to be not in selling the technology to publishers but rather in selling a modified version of it to corporations, which would use it to ensure that they are in compliance with copyright laws.

Valeo and DataDepth were working toward a modification of the iCopyright software that would be placed on desktops at large corporations. The software would provide licensing and payment tools that would enable company employees to download and forward copyrighted material legally.

When Mike O'Donnell, president of DataDepth, tried to increase royalty payments from Valeo for modifying the software to meet the needs of corporations, Valeo balked. Valeo said it could make its own software-a "toolbar" connected to the original iCopyright technology-and proceeded to do so.

In response, DataDepth threatened last year to terminate Valeo's iCopyright license. Valeo responded in November by suing DataDepth, which, in turn, filed a counterclaim against Valeo alleging "theft" of its intellectual property. "They're flat out stealing the toolbar technology," O'Donnell said.

Corey Johnson, Valeo's president, said DataDepth has no legal claim and that O'Donnell is just looking for more money from the companies' relationship. "The short version is this: He wants to redo the deal, but we got a great deal on the front side," Johnson said.

DataDepth also alleges that Valeo has replaced the iCopyright trademark with the Valeo trademark on the Web pages created by the iCopyright software. O'Donnell claims the legal battle is not a tempest in the reprint teapot, but a fight over an industry segment that could one day be a big business.

O'Donnell compares online copyright protection and indemnification to the Copyright Clearance Center, an organization that charges corporations to indemnify them from copyright infringement lawsuits and then distributes the proceeds to publishers and other content generators. The CCC is reportedly a $100 million business. O'Donnell said the same sort of opportunity is available online.

Outsell contends that businesses today are more aware of such compliance and more willing to pay copyright fees. Legg Mason serves as a cautionary tale; the company lost a $19.7 million judgment in 2003 for systematically copying a financial industry newsletter over several years.

But for all of the large intellectual property and copyright issues potentially involved in the dispute between Valeo and DataDepth, some industry observers believe it's essentially a contract issue that will be decided by the courts. "We all know a contract case can turn on a comma or a short phrase," said one observer who declined to comment on the record. M

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