February 14, 2003 11:37 AM PST

Streaming patent claims go to court

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Patent scare hits streaming industry

February 6, 2003
Acacia Media Technologies, a company owning broad patents that could affect virtually all companies streaming audio or video online, is going to court for the first time to test its claims.

The company, which has been seeking licensing revenue from several dozen Internet-based adult entertainment companies for months, said Friday that it filed patent infringement suits against 39 of those companies in federal court.

Several of those suits were filed several weeks ago, but the adult entertainment companies had not yet been served with the court documents, Acacia general counsel Robert Berman said. The remainder are new suits against companies that have refused to discuss licensing terms or ignored Acacia altogether.

"We wrote to them in July, we wrote to them in September and again in November," Berman said. "By filing the lawsuit we're sending a message that we're not going to go away."

Acacia's licensing drive is one of the most ambitious Internet patent claims to arise in recent years, even as claims to own rights to basic Web technologies such as frames, hyperlinks and e-commerce shopping baskets have become common.

Over the past several years, the company acquired a series of patents its attorneys believe cover virtually all on-demand transmissions of compressed audio and video over the Internet, cable TV lines, satellite and wireless services. The company's parent, Acacia Research, has previously made tens of millions of dollars in patent royalties on the V-Chip technology included in most television sets.

Acacia began its license-seeking process last summer, approaching companies in the adult entertainment business. Since that time it has begun approaching mainstream Webcasters as well, asking for license revenue that ranges between 0.75 percent and 2 percent of companies' revenue related to the streaming business.

Radio Free Virgin, the online music division of the Virgin Megastores, signed a deal with Acacia last December. Many such patent claims had been raised in the past, but Acacia's was the first that was solid enough to take seriously, Virgin executives said.

Acacia is in discussions with other unnamed large Webcasters, and the company is preparing to approach cable TV operators who run video-on-demand services, Berman said.

Analysts have said that Acacia could be trying to win a court ruling in its favor by fighting the adult companies before moving on to the larger, well-capitalized technology companies such as America Online or Microsoft.

Berman said that he's happy to settle with the companies Acacia has sued, however, and encourages the 39 defendants to come to the table.

"It's not in our best interest to litigate to the end," Berman said. "Most of these companies will spend far more on legal fees in their first year than it would take to pay us."


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