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Few years after inventor Mark Bloomfield founded AudioFax, Inc., in 1986, he faced a dilemma: A Los Angeles company called F-Mail Associates had patented the technology he was selling. Bloomfield could have tried to fly under the radar of F-Mail. He could have cut his losses and walked away from the market, or he could have taken out a license on the patent. Instead, Bloomfield doubled his bet. He bought F-Mail’s patent and began licensing it. The gamble has paid off. Today, AudioFax, which is based in Atlanta, has a successful licensing program that has brought in millions of dollars in revenue. Not bad for a litigation-averse company whose only substantive assets are its patents. Sometimes, as Bloomfield has discovered, being kind and gentle pays dividends. MARRYING TECHNOLOGY The F-Mail patent, plus two others Bloomfield was issued for his own inventions in the mid-nineties, cover various advanced fax services, such as faxing over the Internet. They also cover “unified messaging,” the ability to retrieve voice, fax, or e-mail messages with a single call or log-in. Faxing is a waning technology, but Bloomfield has been able to stay relevant by marrying fax technology with newer forms of communication, like e-mail. In 1995, just as e-mail technology was taking off, AudioFax struck a $2.5 million licensing deal with Los Angeles — based Digital Sound Corporation (now part of Unisys Corporation) to settle a spat over the patents. Bloomfield was happy with the settlement, but not the way it was achieved. The litigation was nasty business, and Bloomfield didn’t like it. He asked William Ragland, Jr., the Atlanta-based Powell, Goldstein, Frazer & Murphy partner who had won the Digital Sound case, if there was a way to convert the value of his patents into cash without going to court. FRIENDLY MARKETING Ragland called in David Kennedy, an IP consultant who was one year away from cofounding InteCap, Inc., an Atlanta-based international consulting firm that specializes in evaluating patents and turning them into revenue streams. InteCap decided that savvy and friendly marketing was the key to helping Bloomfield make the most of his patent portfolio. Instead of threatening potential licensees with litigation, AudioFax would woo them with a sales pitch. In 1996 AudioFax put its friendly licensing program into action. Their approach worked. Today Atlanta-based AudioFax has sold licenses to AT&T Corporation, MCI Communications Corporation, Sprint Corporation, and 3Com Corporation. Since the program has been implemented the company has negotiated 20 licenses — 14 without litigation. The remaining six licenses were arranged after litigation, but before trial. AudioFax won’t say how much it earns in licensing revenue. But six small AudioFax licensees have made lump-sum payments to the company — all exceeding $1 million each — according to financial disclosures. Those companies are Digital Sound, Captaris, Inc., FaxSav, Inc., Premiere Technologies, Inc., SmarTalk Teleservices, Inc., and Boston Technology Inc. Large licensees did not disclose the value of the licenses to the Securities and Exchange Commission, presumably because the amount was immaterial to those companies — but not to Bloomfield. MAKING THE PITCH The friendly AudioFax approach works like this: A small team at InteCap vets potential licensees, contacts them, and delivers a carefully crafted, face-to-face sales pitch complete with PowerPoint slides and pie charts. When the soft-touch approach doesn’t work, lawyers at Powell, Goldstein step in and litigate. AudioFax’s strong patent portfolio doesn’t hurt, either. After two reexaminations within the United States patent office and numerous court challenges, the three patents have held up as valid and enforceable. Not every patent portfolio is able to support the kind of softer sales strategy AudioFax employs, Ragland says. But still, companies shouldn’t always rush toward litigation. “There are friendly ways of handling,” these issues says Bloomfield. Friendly, yes. Royalty-free, no way. Karen Hall is a freelance writer living in Bainbridge Island, Washington. E-mail:

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