Unisys held the patent covering the LZW compression technique used in GIF. The company inherited the rights after Sperry Corporation, the original assignee, merged with Burroughs Corporation in 1986 to form Unisys.
Terry Welch developed the fast LZW variant in the early 1980s, building on earlier work by Abraham Lempel and Jacob Ziv. Welch filed a U.S. patent application in 1983, and the resulting patent was granted in December 1985. CompuServe later used LZW in GIF, which it introduced in 1987.
The patent became controversial when Unisys pursued licensing agreements for commercial software that created or processed GIF files. In 1994, the dispute helped motivate development of PNG, an open alternative designed to avoid the LZW patent issue. The controversy concerned licensing the patented algorithm, not ownership of every GIF image.
The U.S. LZW patent expired on 20 June 2003, with corresponding foreign patents expiring by 2004. LZW and GIF can therefore be used freely today, although GIF remains limited to palette-based, relatively low-color imagery.