Two Press Releases from Destiny Media

Destiny Media Technologies (OTC BB: DSNY.OB) issued two press releases within the last several hours.

The first relates to the company's dispute with Yangaroo (TSX Venture: YOO.V), "Destiny Media Responds to Press Release From Canadian Competitor". Excerpt:

VANCOUVER, British Columbia, May 6 /PRNewswire-FirstCall/ -- Destiny Media Technologies, Inc. (OTC Bulletin Board: DSNY - News), the industry's leading secure digital media distribution company, is pleased to respond to a press release issued this afternoon by Yangaroo Inc. (TSX: YOO, Pink Sheets: YOOIF). Yangaroo offers a web based product that competes with Destiny's Play MPE® system in Canada.

According to their release, Yangaroo states that a claim for patent infringement against Destiny was filed in Wisconsin today for a patent issued yesterday. Destiny has not yet been served with this claim but is familiar with this patent and Destiny's management is confident that the claims are without merit. Destiny previously filed a $25 million slander and defamation suit against Yangaroo, for misleading Destiny's customers regarding the limits of Yangaroo intellectual property rights.

Destiny first began offering the MPE® system in 1999 and has its own patent for a Digital Media Distribution Method and System (USPTO 7466823) with foreign priority dating to March 2000. Yangaroo applied for their US patent May 8th 2003, four years after MPE® launched. Yangaroo listed Destiny's MPE® patent as prior art in their own application, clearly admitting that the MPE® system predated their application.

Yangaroo's original patent application was unsuccessful and they received a final rejection on December 15, 2008, forcing them to abandon all 109 of their original claims. They wrote and submitted a new single claim in January 2009 and this single claim patent was granted yesterday. Their new claim describes a method of distributing music that takes a different approach than that used by MPE®.

According to Destiny CEO, Steve Vestergaard, the suit is frivolous and only intended to create confusion in the marketplace. "They say imitation is the best form of flattery, but intellectual property law protects the invention that comes first, so their claims that we might infringe on a claim they only wrote a few months ago are ridiculous. Play MPE® is well on the way to becoming the global standard as over one thousand labels, including all the majors have chosen our system to send their new music to radio and we will protect our customer's ability to use the system they prefer."

The second press release announces a new deal in Australia, "Destiny Media Announces Partnership Between Play MPE(R) and Australian Independent Record Labels Association". Excerpt:

VANCOUVER, British Columbia, May 7 /PRNewswire-FirstCall/ -- Destiny Media Technologies, Inc. (OTC Bulletin Board: DSNY - News), the industry's leading secure digital media distribution company, is pleased to announce that Australian partner, The Shooting Star Picture Company has established a partnership with the Australian Independent Record Labels Association (AIR) to provide media distribution services for Australia's 300+ indie record companies through the Play MPE® music delivery software.

Destiny Media's CFO on the Company's Dispute with Yangaroo

In the comment thread of a previous post ("A Conversation with the CFO of Destiny Media"), a commenter raised questions about the company's dispute with Yangaroo (TSX Venture: YOO.V). I had asked Fred Vandenberg, Destiny Media's CFO, for an updated statement on the dispute, and today he e-mailed me one. Here it is:

On the Patent Dispute:

David:

The uncertainty and doubt you bring up regarding Yangaroo's Canadian patent and US patent application is a nuisance and it is unfortunate that we have to invest any resources at all in this matter. We are, however, very confident in a successful outcome of the Canadian litigation we initiated. We have gone through extensive legal reviews which appear to support this belief. We believe that our system existed first (this being the most salient reason we could not infringe) but we also believe, and consistent with our counsel’s advice, that we simply do not have the essential features in their patent. Further, to accommodate our global expansion, the Play MPE system expands and evolves over time and while we believe there would be no infringement at any point in time, we believe it would be exceedingly (and more) difficult to find infringement over the breadth of time.

If you come across anything from Yangaroo directly which states, or suggests, that we do infringe, or on what possible basis we do infringe, I would be interested in seeing this.

The MPE system was developed by Destiny in 1999 and we received a US patent granted with a priority date of March 2000. This is also filed with WIPO (world intellectual property organization). This is also cited as prior art in Yangaroo's US patent application. Presumably, the examiner reviewing their application has differentiated our patent from their patent.

Per the points posted on your blog:

a) The patent has not kept us from operating the Play MPE system on a commercial basis in Canada.

b) It appears that Yangaroo may shortly receive a patent in the US. Yangaroo has made our US customers, most notably EMI and Warner (see press release February http://www.wmg.com/news/year/2009/sortBy/desc/newspage/4), aware of this pending US patent. Thus both EMI and Warner Music Group undertook internal and external legal reviews. Destiny had extensive discussions with both counsels. Both, subsequent to their respective legal reviews, chose to sign agreements with Play MPE and both continue to use our system on a commercial basis. We believe they would only do so if they were comfortable that there is no infringement. This is in addition to our agreement with Universal Music Group. http://new.umusic.com/News.aspx?Year=2008 (see June 6, 2008 press release by Universal).

[Below] are some links for further information: We had initiated the lawsuit in Canada to establish through the courts that we do not infringe as a direct consequence to threats made by Yangaroo's management to potential customers that were interested in using our MPE system. Yangaroo had threatened certain labels with lawsuits and going so far as to say it was "illegal" to use our system.

[statement of claim: http://dsny.com/news/releases/Statement_of_Claim_March8_06web.pdf]
http://dsny.com/invalidity/Aug2005-opinion.pdf
http://dsny.com/invalidity/comfort-dec2005.rtf

Fred Vandenberg also added this in a separate e-mail:

On CEO/CFO Purchases:

David

You had mentioned that you had noticed Destiny’s CEO and CFO have been buying shares so I checked and over the course of the last two years we (Steve [Vestergaard, Destiny's CEO] at over 330,000 and myself at 130,000) have purchased more than 460,000 shares which represents approximately $290,000 (Cdn currency) in addition to our existing holdings. This is more than a full year’s compensation for the combination of us. In the same time period, Cliff Hunt and John Heaven, Yangaroo’s CFO and CEO respectively, have purchased less than $20,000 (Cdn) of Yangaroo shares representing approximately 5% of their annual salaries.