Attempting a turnaround, Avistar Communications Corp. (DEMO 08) is trying to carve out an identity in the video conferencing world for a new marketing concept it calls "unified communications," while fending off hostile actions by Microsoft Corp., which is challenging Avistar's lifeblood - its patents.
To bring in much-needed revenues and boost its stock price, the small San Mateo, CA public company needs to license technology that's covered by its 83 patents worldwide. Its new management team was in conversations in February with Microsoft when the giant without warning changed course and challenged all 29 of Avistar's U.S. patents.
Defending its turf, Avistar for the past two months has announced a steady stream of patent decisions in Europe and the U.S., reseller deals, and today another new patent.
Microsoft's unexpected challenge "has caused absolute havoc for us," said Simon Moss, who joined Avistar as CEO last January. "Some of the challenges have absolutely nothing to do with Microsoft technology." Beyond that, Moss sites a mutual confidentiality agreement that the two companies signed, which prevents them from discussing specifics of the challenge. Meanwhile, "we're continuing our dialog," Moss said.
Some small companies have purchased patents - not so they can make products - but to license technology to larger companies or sue companies that allegedly are infringing on some aspect of a patent. The practice is called "trolling."
Meanwhile, Avistar spent millions on research and development - $7.7 million last year alone - nearly bankrupting itself, and has products, not just patents, to sell. Regardless, its key patents got challenged. The U.S. Patent and Trademark Office has so far rejected 19 of Microsoft's 29 requests. The re-examination of Avistar's another 10 U.S. patents is underway.
Small companies, including some suspected of trolling, and large companies that license technology today battle in courtrooms, the U.S. Patent Office, and in Congress over patents and the "rights" of entrepreneurs. A major patent bill has been stalled in the U.S. Senate since April over a provision that links infringement costs to a patent's economic value, known as apportionment. At stake is billions in licensing fees and legal damages.
Avistar announced Sept. 2 that it has been granted an additional U.S. patent (No. 7,421,470) covering how people could change which device they are using when participating in computer-based video conferencing - mobile and desktop computers, mobile telephones, or personal digital assistants. This new patent, which covers "dynamically changeable associations," and two other Voice over IP (VoIP) patents issued during the past two months, expands Avistar's intellectual property in login-based, real-time VoIP, and text-based instant messaging, Moss said.
The European decision is "significant because the EPO has far more stringent date requirements, and more aggressive interpretations of prior art (than the U.S.), which make patenting more challenging," he said. Avistar plans on nationalizing the European grant in the U.K., Germany, France, the Netherlands, and Sweden - all big markets for VoIP, instant messaging, and videoconferencing. (Prior art is public knowledge relevant to an invention's novelty or obviousness.)
While the patent battle ensues, Avistar is attempting to change its ways from a company that "over-focused on R&D and had no strong go to market strategy" to one that changes how customers think about video conferencing, Moss said.
Avistar boasts of patented technology that can maintain high-quality video streams no matter how long a meeting lasts while other video conferences degrade in appearance over time. And Avistar's C3 product combines video, email, and instant messaging as "unified communications" that work on all sorts of digital devices.
After cutting its workforce in half to 50 people and signing up more than 15 distributors in the U.S. and Europe, Avistar has seen its stock move from 30 cents a share in January to $1.35 a share at Tuesday's close. Last week, NASDAQ notified Avistar that it had re-gained full compliance and will continue to be listed as a trading stock.
Revenue for the second quarter ended June 30 reached nearly $1.8 million, compared with $5.9 million for the same quarter a year ago. Avistar lost $1.6 million, or 5 cents a share, in Q2 compared with earning a profit of $388,000, or 1 cent a share, a year ago.
”The fact that large brands as well as mid-size resellers are committing to Avistar is good news for the industry,” said Melanie Turek, principal analyst for Frost & Sullivan. “We’re seeing increasing interest in desktop and mobile videoconferencing, as companies and their employees struggle to cut costs during a tight economy, as well as embrace a greener way of doing business. Many of these companies want the option of purchasing video solutions through VARs and other technology partners, especially as they attempt to mix and match best-of-breed products to fit their needs and business objectives.”
While it faces the risks of a highly competitive market and patent challenges, and has lost money and cut jobs, Moss said in the past six months Avistar has gained operational stability and a go-to-market strategy it was missing.
"We're looking a damn sight better than we were a year ago," Moss said.
RELATED STORY:
Avistar expects new patents to topple Microsoft's patent challenge
