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PhoneFree.com Inc. to pay royalties on the MultiTech DSVD patent portfolio

Multi-TechSystems, Inc., an international data communications technology company, today announced that it has settled its patent infringement case against PhoneFree.com Inc. The settlement includes a non-exclusive license under Multi-Tech's Digital Simultaneous Voice and Data (DSVD) patent portfolio. PhoneFree has agreed to make future annual payments to Multi-Tech and in addition, pay an annual royalty to Multi-Tech if PhoneFree meets certain revenue thresholds. PhoneFree's obligation to pay royalties on the Multi-Tech DSVD patent portfolio extends for the duration of the agreement.

As part of the settlement PhoneFree also agreed to acknowledge the validity and enforceability of the Multi-Tech patents. The case against PhoneFree was filed in February 2000 along with cases against several other Internet Telephony service companies, including Net2Phone, Inc., Vocaltec Communications, Ltd., Vocaltec Communications, Inc., ZeroPlus.com, Inc., Really Easy Internet, Inc., and Dialpad.com, Inc. The suit was filed in United States Federal District Court in Minneapolis, Minnesota.

Multi-Tech has also asserted some of its DSVD patents against Microsoft and the three largest domestic PC manufacturers -- Compaq, Dell and Gateway. The lawsuits against Microsoft and the PC manufacturers are pending in the same court as the suit against the Internet Telephony service companies. Multi-Tech is represented by Ronald J. Schutz of the national litigation firm Robins, Kaplan, Miller & Ciresi L.L.P. (http://www.rkmc.com).

Multi-Tech claims that the Internet Telephony service providers, as well as Microsoft and the three computer giants, are in violation of patented technology involving the simultaneous transmission of voice, data and/or video over a communications line. Multi-Tech's patents pioneered the data-voice-video convergence technologies being used today. In particular, the patents cover systems and methods of digitising and packetising voice, data and/or video over communications lines including telephone lines.

"Multi-Tech's patent infringement suits are designed to capitalise on the company's substantial investment in research and development and its patent portfolio," said Schutz. "Many large companies receive substantial revenues from their patent portfolios and Multi-Tech is following that model."

IBM, for example, is reported to receive more than $1 billion per year from its patent licensing activities. "Today's settlement is further recognition of the value of Multi-Tech's DSVD patent portfolio," said Schutz. "We intend to vigorously pursue other companies that are using Multi-Tech's pioneering technology."

Attorney Ronald J. Schutz and Robins, Kaplan, Miller & Ciresi L.L.P. are no strangers to high-stakes patent litigation. The firm's significant victories in patent litigation include: Fonar Corp. v. General Electric in which Schutz was trial counsel on behalf of Fonar Corporation and won a jury verdict of $110 million against General Electric; Honeywell v. Minolta in which the firm won a $96 million jury verdict on behalf of Honeywell; and Unocal v. Arco, et al. in which the firm won a jury verdict of $69 million against the six largest oil producers in California.

About MultiTech Systems

A global manufacturer of award-winning Internet, remote access, and telephony products, Multi-Tech (www.multitech.com), provides end-to-end solutions for small to medium businesses. Multi-Tech's products are available through a worldwide network of business partners (distributors, resellers, system integrators, ISPs, and ISVs), or embedded in solutions from OEMs. Multi-Tech owns over 50 U.S. patents, including many dealing with multiplexing voice, data, and video packets over a communications network used in technologies such as Internet Telephony, PC telephony, voice over IP, frame relay, and DSVD modems



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