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The $15m On Demand Book Ruling: Exclusive WTT Analysis

Monday, March 08, 2004

Press release from the issuing company

March 8, 2004 -- (WhatTheyThink.com) -- As we roll into the On Demand Conference and Exposition in New York this week, this story raised a few eyebrows on Friday. A federal jury ordered Lightning Source, Inc., of La Vergne, TN, the nation's leading provider of on-demand book printing to pay $15 million for patent infringement to the company that claims to have created the concept. Also named as defendants in the case brought on behalf of Harvey Ross and On Demand Machine Corp. were Seattle-based Amazon.com and Lightning Source’s parent company, Ingram Industries, also of Nashville TN. The patent in question is Patent No. 5,465,213, issued to Harvey Ross on November 7, 1995, and entitled System and method of manufacturing a single book copy. The Abstract of the Patent reads as follows: "A computer based book manufacturing, distributing and retailing system for the high speed reproduction of a single copy of a book is disclosed. The system is especially adapted for direct consumer sales since the manufacture of a selected book can take place at the point of sale. A master module includes a computer having a database of books to be selected, the books preferably being stored in a digital book-description format. Upon selection of a particular book from the database, a single copy of the book (including the text and a color cover) is printed by means of high speed raster printing engines. The system includes a binder for binding the text pages and the cover into a book." WhatTheyThink was told by an insider who declined to be named that the patent is the only remaining asset of On Demand Machine Corp. We contacted Keel Hunt, Lightning Source spokesman, who indicated that the press coverage has given rise to questions relative to whether Lightning Source would be closing its doors. Hunt said, “We are continuing to service our customers and business partners; there is no doubt about that. In terms of the verdict, we are disappointed and we certainly disagree with it. We will be appealing this, of course. We think we have a strong basis for an appeal and we expect to prevail. The important thing to know now is that there is a legal process and it is not over.” Hunt also indicated that the company had no intention of raising prices to its publisher customers to cover any potential royalty costs that may be required at some future time, should the appeal not be successful. The verdict was also discussed in a daily electronic newsletter published by Publisher’s Weekly, which stated, “Despite some experts' belief—including former B&N POD guru Ken Brooks—that the patent applied to a type of in-store machine, the jury interpreted it broadly to include a storage system, including those used by Lightning and, by extension, clients like Amazon. (Brooks was an Ingram witness and described himself as ‘very surprised’ by the ruling. Many in publishing were surprised too.)” According to the Publishers Weekly analysis, even with the jury's verdict, a judge must find the ruling willful before any damages are required. Lightning Source has printed over ten million books on demand since it opened its doors in 1997 as Lightning Print, Inc. The company also produces in excess of 35,000 e-books per month. Lightning Source, while perhaps the largest producer of on demand books, is certainly not the only producer of on demand books. Other notable players include R. R. Donnelley, the $8 billion behemoth printing company who has an on demand book manufacturing operation in Harrisonburg VA, and Quebecor World who operates a facility in Martinsburg, WVA. As evidenced by the volume produced by Lightning Source and operations established by two of the world’s largest printers, publishers are beginning to take notice of the benefits of producing books on demand and the positive revenue implications an on demand publishing component can bring to their business. Harvey Ross, who died in January 2002, has also had a contentious relationship with Xerox over the years. Industry watchers will be aware that Xerox has a significant sales effort around Books On Demand, and has developed a series of equipment configurations designed to support that application, with a number of successful installs including Pearson Education and Perseus Books Group. By Cary Sherburne, Senior Editor, WhatTheyThink.com Offer your feed back - cary@sherburneassociates.com




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