Written by

Brandon Shalton

21-April-2004

The Dos Towers: ACTG Q1 Conference Call

Much like the epic book and the movie of the L-rd of the R-ngs (I don't want to attract fans of the movie and the book to my website when they do a google search), there is a battle going on for the licensing of patents in Middle Internet.

Acacia Research has clearly demonstrated their business model in acquiring or partnering with patent holders to attempt to "solicit" and "market" companies to pay-up on patent infringements.

For those following this saga, Acacia's interpretations of the DMT patent is just as imaginative as T-lkien's writings.

Acacia targeted the Internet Tower first, more specifically Adult Entertainment websites, as being the "low hanging fruit"** to be able to "dip their beaks"**.

Out of the 120 licenses that they are proud about, 100 are from Adult Entertainment websites. The following non-porn companies have been revealed in press releases (CinemaNow, Disney, General Dynamics Interactive, Grupo Pegaso, LodgeNet, NXTV, Oral Roberts University, T. Rowe Price, 24/7 University and Virgin Radio) which leaves ten others not released.

Out of 47 Adult Entertainment companies targeted, eleven are in court, defending their companies and the Internet from the M-rdor of Patent licensing companies.

The second Markman Hearing brought more debate and discussion over the words and definitions that Acacia is using from the patent. Several more Markman Hearings are scheduled with some outcome by late summer.

It is believed by the current defendants and myself that the judge will rule that the DMT patent does not apply to the Internet. This would mean an eventual non-infringing verdict for the defendants, but not invalidating the patent.

This now means that cable and satellite companies would be the only areas to go after, and admittedly, are really the "low hanging fruit" because they are so heavy and plump in financial sweetness.

Evidence of this push towards cable is observec by three attorney firms who had contacted me for information concerning prior art and the Acacia Saga as they are being "solicited" and "marketed" to license the DMT patent.

A shareholder on the conference call asked about the possibilities of litigation with cable companies. Paul Ryan responded that there is the possibility of litigation and that they would hope to have some licensees in the cable industry that might impact other cable companies decision to just settle. While laymen like me call that "Sweetheart deals", in the patent licensing world, it's called "most favored nations clause/status".

While the good guys had defeated the first Tower and marched onward to the Second tower in the movie, in this modern day saga, it is the story of a band of lawyers with patent infringement weapons that now target the Cable Tower.

Will the cable industry band together and fight against what an EFF attorney said was an "absurd patent", or will a large cable company be offered the sweetheart deal that helps to deliver the rest of the cable industry?

Who will be the first to sell-out or settle, finding it cheaper to license than to fight? Who will make it a business decision to rollover, rather than band with other targeted companies?

In the conference call, the V-Chip patent was brought up. Acacia had derived over $25M in licensing before Sony went to court and proved that TV manufacturers were not infringing on the patent. In seeing history repeat itself, it's easy to see how smaller cable companies can be picked apart to license, until the Sony of the cable industry steps in to squash it. By then, Acacia will have filled up its coffers with money extracted from companies.

V-Chip patent was round one. DMT Patent is round two. There will be additional rounds that could make this Saga run longer than the six episodes of St-r W-rs (that is unless the FTC or SEC has something to say about it).

While the Farce lies within this website and in these articles, it illuminates the growing problems that business and innovators face and will face when confronted with broad patent interprations that seek to add a patent tax onto the cost of doing business.

The two paradoxes in this particular case is this:

1) How can a patent that has 160 other patents that referenced the DMT patent, be able to broadly apply itself? Case in point: InterVu has patents on client-server streaming technology that references the DMT patent. A company that uses InterVu's patented technology could find themselves infringing on a broader patent (DMT patent).

2) How can USA Video's inventor have a patent that has overlaping claims as the DMT patent? Both patents were granted within a year of each other, which leads one to wonder about the obviousness issue.

If only the whole season were but a dream.

** phrases attributed to Robert Berman, General Counsel of Acacia Research