GIF's compression is based on the LZW compression algorithm, on which both Unisys and IBM have worldwide patents. It is not known exactly when the last of these patents expires; the latest known expiration date "seems to be Friday 11 August 2006" . As long as there are any active patents, programmers who develop software to create GIF files risk being sued (by Unisys, IBM, or both) unless they have obtained the necessary licenses to use the LZW algorithm.
As an image format, GIF's strength is in storing smaller images with a limited number of colors, and thus became very popular on the world wide web. Due in part to the patent issues, however, an alternative open format, PNG, was developed, which generally produces smaller files than GIF and also supports non-palette based color and varying transparency (a.k.a. alpha channel transparency).