• by Kate Kaye , July 27, 2004

Since February, streaming media mavens have awaited with bated breath the outcome of a patent suit filed in the California District Court by members of the pornography industry against Acacia Technologies Group. A mixed ruling July 12 provided Acacia foes with fodder for further prognostication on the final outcome. It also preceded decisions by nine additional firms to bite the bullet and sign licensing agreements with the patent development, acquisition and licensing company. And now, Acacia is set to pursue licensing agreements with WiFi distributors and outlets under a newly acquired patent.

Acacia claims that its Digital Media Transmission (DMT) technology patents give it the right to charge licensing fees to stream virtually anything via the Internet, or even TV. At the July 12 Markman hearing, intended to clarify terminology, scope, and validity of the patents in question, the judge sided with Acacia regarding seven of the 19 disputed terms, and for five with the defendants, New Destiny/Homegrown Video and its co-respondents. Three were left up to further scrutiny from experts and four defined by the court.

"It's rare to see a judge comment on the quality of the patent," contended Jason Schultz, staff attorney at Electronic Frontier Foundation (EFF), a nonprofit group that works to protect digital rights. "This judge did," he added in the belief that this implied the judge was "extremely skeptical" of Acacia's DMT patent claims. The EFF has listed Acacia as number one on its Top 10 list of patent owners that have overstepped their patent rights, claiming Acacia is unfairly targeting small audio- and video-streaming sites.

Since the recent hearing, Acacia has signed on nine new licensees including one Cable TV firm as well as educational institutions and corporate Web sites. This brings Acacia's total roster to 160 licensees which include T. Rowe Price, Wachovia Corporation, Virgin Radio, B&C Cablevision, Central Valley Cable TV LLC, Cinema Now Inc., Disney Enterprises Inc., Grupo Pagaso, NXTV Inc., Oral Roberts University, and 24/7 University.

Acacia's pursuit of licensing fees is akin to "black mail," said Dan Rayburn, executive vice president of industry resource StreamingMedia.com. Since an initial February hearing on Acacia's DMT patent claims, Rayburn receives 10-15 phone calls a day regarding the issue, many from companies he says "want to fight" Acacia's patent fee demands.

Acacia filed suit in June in the California District Court against nine cable companies including Comcast Corporation, The DirectTV Group and Cox Communications Inc. Also in June, interactive lodging entertainment provider On Command Corporation agreed to license Acacia's DMT technology, putting an end to a patent infringement lawsuit filed by Acacia, and On Command's countersuit. Acacia has also added hotel entertainment provider LodgeNet Entertainment Corporation to its growing list of licensees.

"Overall, people just don't like to pay for things," observed Robert Berman, executive vice president business development and general counsel for Acacia. In response to claims that Acacia's patents are too broad, and its licensing fees only do a disservice to the streaming media industry, Berman argues that not paying licensing fees "would be doing more of a disservice to the inventors who invented this technology," stressing that the inventors of patents acquired by the firm "receive a significant portion of the licensing proceeds." Although Berman declined to elaborate on the percentage of proceeds Acacia pays to inventors, he noted that there is no time limit on the payments.

Whether they like it or not, companies are coughing up the licensing cash. According to Acacia's earnings report released July 22, the company's DMT quarter two 2004 license fee revenues totaled $666,000 compared to $19,000 during quarter two 2003. Acacia purchased the DMT patent three years ago, according to Berman.

Acacia won't stop at DMT licensing. The firm last week announced it had acquired a patent from its DMT technology licensee, LodgeNet, which covers technologies and methods for redirecting users to a login page when accessing the Net. Acacia plans on launching a licensing and enforcement program for the patent during this third quarter, pursuing companies like coffee purveyors or hotels that sell WiFi Internet service direct to the consumer, as well as WiFi distribution firms.

EFF's Schultz sees the new redirect patent as "too broad" and therefore difficult to defend, adding, "The next killer application is mobile computing. Acacia sees that as a big cash cow."