"The fact that most work on dictionary-based compression has been done over the last 10 or 15 years has a potentially dangerous side effect. Till the early 1980s, it was generally not possible to patent software. But during the past ten years, increasingly large numbers of patents were awarded for what are clearly algorithms.

One of the first data-compression patents was granted to Sperry Corp. (now Unisys) for the improvement to LZ78 developed by Terry Welch at the Sperry Research Center. In fact, this patent became a point of contention during the standardization process for the V.42bis data-communications standard. Since V.42bis is based on the LZW algorithm, Unisys claimed the right to collect royalties on implementations which use V.42bis. There was some concern in the CCITT about the effect of basing a standard on a patented technique. Unisys dampened concern while protecting its patent rights by publicly offering to license the algorithm to any modem manufacturer for a onetime $25,000 fee.

As research in dictionary-based compression continues, patents are being filed at a relatively rapid pace. Since patent filings are not a matter of public record, it it not possible to know if and when certain technologiies will be freely available. At present, the most prudent course for potential data-compression users would be to conduct a patent search and to contact the inventors of any techniques they intend to use.

Fortunately, manufacturers can generally come to terms on patent royalties for relatively modest terms. The danger comes when the owner of the patent is competing for the same market as a potential licensee. Unisys was only too happy to license the LZW algorithm to modem manufacturers, for example, but it may have adopted an entirely different strategy if the market being discussed was the of mid-sized minicomputers."

(Mark Nelson, The Data Compression Book, p. 230)