Acacia Adds Charges

The latest development in the Acacia Media Research lawsuit against members of the adult entertainment industry that use video streaming technology took a surprising turn this week.

Acacia Media Research, seen recently in headline news throughout the adult industry for a slew of streaming media patent infringement lawsuits, won a significant motion this week in the U.S. District Court.

Judge Alicemarie H. Stotler ruled that Acacia's motion to include other claims in its complaint against certain members of the adult industry is permissible.

Newport Beach-based Acacia is a subsidiary of Acacia Media Technologies Corp. and lays claim to 22 patents based on streaming media technology that the company filed in 1991. The patents cover the transmission and receipt of digital audio and video content over the Internet.

Acacia Media, which since July of this year has taken specific aim at the adult industry, currently holds five patents in the U.S. and 17 internationally. Those patents are set to expire in 2011, and 2012 for patents filed outside of the U.S.

Many members of the adult entertainment industry feel that Acacia's patent infringement suit is a bold attempt to cripple many adult websites by pulling the technology rug right out from under their feet.

Acacia's pursuit of adult entertainment companies began in July 2002, when the patent holder of licenses for DMT technology began writing letters to hundreds of adult entertainment companies notifying them that they were infringing on its patents for downloading and streaming technology.

Robert Berman, senior vice president of business development for Acacia Media Research, told that all of their letters went ignored, so the company sent out another flurry of missives. Still no response, according to Berman. Acacia then took steps to have an outside attorney prepare formal complaints, which were also ignored, Berman told XBiz.

"So at that point, we had no choice," said Berman, and patent infringement complaints were filed in District Court for the Central District of California against 39 adult entertainment companies.

According to Berman, of the original 39 companies filed against, there are currently only 16 remaining who have not settled with Acacia and conceded to licensing agreements, which according to critics of the lawsuit include a percentage of the gross audio and video income from content providers.

Among the remaining 16 defendants, nine are accused by Acacia of engaging in additional illegal acts. The remaining seven defendants are being sued solely for patent infringement.

Acacia recently took steps to amend the original infringement complaint against those nine defendants based on the suggestion of unfair trade practices, tortuous interference, and trade libel claims. Those claims are based on the suspicion that certain members of the industry attempted to stifle Acacia's patent licensing business by encouraging other members of the adult entertainment industry via chat message boards and industry gatherings to avoid doing business with the patent holder.

The newly-filed amendment was challenged by those nine defendants via their legal representation, intellectual property experts Fish & Richardson. Both sides were allowed to submit briefs to the judge and present their legal arguments either in favor or opposition to the amendment.

However, the District Court ruled this week that Acacia's additional claims against those nine defendants will be allowed. According to Berman, Judge Stotler's ruling could bring damages into the "very large numbers," if the case is won.

Counter claim to Acacia's multi-tiered patent infringement suit, several adult entertainment companies have challenged Acacia's ownership of its "broadly written patent claims" that cover any type of image, audio, video, and text content that is digitized with some kind of compression, then stored on a server and allowed playback on a personal computer.

According to Brandon of "Acacia's 'invention' was based on the idea that back then, it would take too long to have to wait for a video tape of some footage to be received via mail or by picking it up. They looked into their crystal ball and saw the future. They believed that the digital means of distributing video footage would be novel and allow people in remote locations to view previously recorded material on a personal computer."

But it wasn’t until 2002 that Acacia decided to emerge as the patent holder of this enabling technology and claim licensing fees from the adult entertainment industry.

"The principal way to successfully defeat a patent claim is to find "prior art." "Prior Art" in laymen's terms means evidence that a patented idea had already been publicized or used prior to the date that the patent was filed," added Brandon.

In their own defense, those companies that were served papers by Acacia formed an organization called The Internet Media Protective Association, a non-profit interest group founded by Spike Goldberg of New Destiny Media/Homegrown Video that seeks to lend support to the "maturing needs" of the adult industry and stand up against Acacia's patent claims.

"My personal feeling is that Acacia is using the patent and legal system to extort money from the adult industry," Goldberg was quoted as saying to Webmaster Vault. "They hoped by suing us with a team of lawyers in a conservative court they would be able to get us all to settle. I find that to be unacceptable. I liken it to a bully with a bat saying give me your lunch money so that you're protected while at school."

When asked why Acacia appears to be seeking legal reprisal specifically from adult entertainment companies, Berman responded by saying: "Because that is the only industry that ignored us."

"It's difficult for me to speculate on why people in the adult entertainment industry do a lot of what they do," said Berman. "We are offering people a very favorable licensing rate, but by not licensing our technology, they run the risk of significant damages and the risk of not being able to access audio/video technology through 2011," said Berman. "The time has come for people to make a decision."

A trial date for Acacia versus those nine members of the adult entertainment industry affected by this week's ruling has not yet been set.