'Markman' Ruling Issued

Gretchen Gallen
NEWPORT BEACH, Calif. – The long-awaited "Markman" ruling over terms related to the validity of two media transmission patents was issued by U.S. District Court Judge James Ware late Monday evening and the results appear to be mixed for both the defendants, New Destiny Internet Group et al, and the plaintiff, Acacia Media Technologies.

According to the 40-page "Markman" pre-trial order obtained by XBiz, the judge has defined certain terms pertaining to Acacia's 992 and 702 patents and asked for additional evidence and testimony on other terms.

The judge, in his order, questioned the validity of certain claims pertaining to the two patents and their dominion over functions that occur over the Internet.

Ware has invited the defendants to file a motion for summary judgment for one of the patents involving the phrase "identification encoding means," which could render many of Acacia's patent claims invalid.

The judge has also invited Acacia to file a motion for an evidentiary hearing, which means that the Newport Beach, Calif.-based company could present evidence countering motions from the defendants.

According to Ted Rittmaster, an attorney for Los Angeles-based Foley & Lardner, which represents defendant International Web Innovations, the Markman order is a good sign for his client and the other defendants.

"It does look favorable in many ways for the defendants regarding several terms," Rittmaster told XBiz. "The court indicated that several claim terms appear to be indefinite. It is well known in patent law that if a term of a claim cannot be defined, the claim is rendered invalid."

If the judge rules in favor of the defendants, it is likely that Acacia would appeal to the 9th U.S. Circuit Court of Appeals, said Rittmaster.

The ruling comes on the heels of three Markman hearings that took place over the past few months as part of a patent infringement lawsuit filed by Acacia against the defendants a year and a half ago and a subsequent countersuit filed filed by New Destiny et all contesting the validity of two of their five U.S. patents that pertain to the function of streaming audio and video over the Internet.

According to defendants Spike Goldberg, president of Homegrown Video, and Greg Clayman, president of Video Secrets, the Markman order does not bode well for Acacia in the long run and that on several occasions in the documents, the judge invites invalidity of the claims.

"If you talk to a patent attorney, you rarely see that in a Markman," Goldberg told XBiz. "Those claims terms could be destroyed."

Clayman added, "We're still digesting what the judge handed down, but needless to say, we are not unhappy this morning. There's more to come, and I would imagine that Acacia's stock, unlike their spin, is headed into the toilet right now. Certainly Acacia investors will come to their own conclusion at this point."

And while the general buzz on several adult industry message boards Tuesday morning seemed to be celebrating a victory for New Destiny Internet Group, the case is still a long way from conclusion, said a source close to XBiz, and could easily carry over into the late fall before a final decision is issued.

Acacia's Robert Berman told XBiz that his company is not in any way displeased with the decision and based on the judge's definition of "remote locations," the two patents in question clearly apply to the Internet, an issue that has been a central argument during the Markman hearing process, with the defendants arguing that the patents do not apply to the Internet and therefore no infringement took place.

Berman is certain that based on the judge's ruling, a minimum of six claims are being infringed upon between the two patents that Acacia is asserting.

In order to win a patent infringement case, said Berman, there needs to be proof that only one claim was infringed upon.

"We think based on what the judge has ruled on, that there is infringement of multiple claims," Berman told XBiz. "In a Markman decision neither party generally prevails on all of their arguments. We have prevailed on certain issues and the defendants have prevailed on certain issues. Based upon the judge's ruling, we feel that we have a strong case that several patent claims are being infringed. In addition, once the judge hears the expert testimony that he has requested on other claims, we are confident that there will be additional claims that are also being infringed."

Berman added that there are still three other U.S. patents that Acacia has not even begun to enforce, and that when it does, his company feels confident that they will discover the adult industry has been infringing on those patents as well.

"This is only one step in what will be a very long process and we are still confident in our chances of success," Berman added.

Goldberg added that while the outcome of the Markman process might favor the defendants in the case, and even bring them to victory against Acacia, those webmasters and companies that have signed licensing agreements with Acacia prior to the final outcome of the case will still be required to pay licensing fees to Acacia, and that the outcome will only affect the defendants and those companies and webmasters that have not yet settled with the patent holder.

"We're hopeful that Acacia will see the errs of its ways," Rittmaster said. "We feel very strongly that we can defend against Acacia's patents. This order only emphasizes that. It is going to be a very interesting next couple of months."

The next step, following the Markman order from the judge, is a conference call arranged for Aug. 17 at which time the judge will entertain motions by both parties. After that the judge will schedule briefing and oral arguments on those motions, which are likely to take place in the fall, with an additional decision to come in the following months.

Acacia also intends to request that the court proceed with the class-action motion to group the adult industry into one defendant class and sue for infringement.