Adult Faces Uphill Battle to Nullify ‘Broad’ Patents

Rhett Pardon
NEWPORT BEACH, Calif. — Despite the adult industry’s hurrahs after U.S. District Court Judge James Ware sided with the Internet companies against Acacia Technology Group in his “Markman” decisions, they still face an uphill battle.

The fact is only 614 of the nearly 7 million existing patents have been revoked, and 3,927 patents have been narrowed since the U.S. Patent and Trademark Office began conducting re-examinations in 1981.

In his “Markman” order, Ware specifically was bothered by the term “identification encoding means,” which he said is not definable and thus would invalidate some claims on one of Acacia’s patents.

A Markman order allows the judge overseeing a patent dispute to clarify some of the terms used to define the scope of a patent.

Ware called into question some of the company's video-streaming patents that the defendants, New Destiny Internet Group, has called “overly broad.”

Ware invited the defendants to seek a final decision that could invalidate some of Acacia's patent claims, which the company says cover the distribution of digital content through the Internet, cable, satellite and wireless systems.

As a result, Acacia’s stock has suffered severely, despite an impromptu conference call to investors on Tuesday to explain the situation.

Immediately following Monday’s Markman order, shares of Acacia Technologies Group plunged Tuesday, falling as much as 37 percent, with a volume of trading that was 17 times more than its daily average.

At the close of Thursday’s Nasdaq session, Acacia's stock gained slightly at $3.88 — cut almost in half from October’s per share price at $8.58 — and had a volume of more than four times its daily average.

Acacia's streaming-media patents, granted to the founders of Greenwich Information Technologies in the 1990s, weren't enforced until the Newport Beach, Calif., company bought them in 2001.

It has since secured dozens of licensing deals with some adult companies and sued the cable and satellite providers for patent infringement last month.

While a scheduled conference call among the parties next month may help determine the following legal step, more tech companies are shouting to regulators for an overhaul.

In an October report, the Federal Trade Commission recommended that changes in the patent system need to be made, including improvements for challenging patents.

Under the auspices of the U.S. Department of Commerce, the patent office has taken steps to improve the process but acknowledges the system's shortcomings, including budget constraints — nearly 3,500 trained professionals examine 200,000 patent applications every year.