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BY PAUL MALONEY
Firms in Internet radio and other industries that make use of audio or video delivery over the Internet may soon need to secure new licenses for that technology. Newport Beach, CA-based Acacia Media Technologies says it owns patents on several popular systems used in Net radio and other fields, and is aiming to enter license agreements in which webcasters would pay to use their Digital Media Transmission, or "DMT" technology.
Top-rated webcaster radioio has made public a January 28th letter from Acacia (a subsidiary of Acacia Research Corporation), which informs the webcaster that after an analysis conducted by its engineers, Acacia has determined that radioio services "are covered by DMT patents," and would be subject to a licensing agreement.
Included with the letter is a proposed contract which sets the royalty term at three-quarters of one-percent (0.75%) of a licensee's "music related" revenue.
According to Acacia, DMT technology covers "the transmission and receipt of digital audio and digital video content, commonly known as audio on-demand, video on-demand, and audio/video streaming, and is supported by 5 U.S. and 17 international patents. "
Mike Roe, president of ioMedia Partners, owner of radioio, thinks Acacia's assertions and demands are ridiculous. Roe accuses Acacia of selectively enforcing its patent rights, targeting the "low-hanging fruit" of small businesses like his that don't have the resources for protracted legal battles, while ignoring more formidable foes like Microsoft and AOL.
"They know that the fee that they wish to impose is insignificant compared to the expenses that I would incur in a legal battle. It's extortion," Roe (pictured at right) commented in a press statement released this morning.
Senior Vice President General Counsel at Acacia Rob Berman told RAIN that while a deal struck in December with Radio Free Virgin for the company's DMT technology is in fact the only successfully-secured license with a webcaster so far, it won't be the last.
In response to Roe, Berman insisted his company is not targeting anyone.
"Being a public company, we won't comment on specific companies we're in negotiations with," Berman told RAIN early this afternoon, "we have indeed contacted small, medium, and large companies in the Internet radio field, as well as in other industries."
Acacia announced today that they have licensed the DMT tech to a Mexican company called Grupo Pegaso.
"We are a technology licensing company -- this is what we do," Berman explained. "Our engineers analyze a company's media delivery systems, and if we think the service uses technology for which we hold the patents, we contact the company, and show them exactly why we think that. We'll show you how you're infringing, we'll give you -- for free -- a document you need to show you what we're saying. We give you everything you need to make a smart business decision on whether to enter into a license agreement with us or not.
He added, "It's unfortunate that Mr. Roe thought it was better to send out a press release than to spend the time conducting the due diligence necessary for a smart business decision."
(The visual below is an engineering drawing taken from Acacia Media Technology's site, displaying a web site streaming to a PC as a communication system for which Acacia owns patents.)
At the end of 2001, Acacia bought out a company called Greenwich Information Technologies, of which it had already owned a share. It was while working for this company that technologists Paul Yurt and Lee Brown devised the systems for which Acacia now owns the patents in question. By mid-2002, after a period of research and preparation, Acacia began approaching companies in the adult entertainment industry for licensing.
According to an ExtremeTech report from December 20 (here), the company had sued at least 25 adult entertainment companies in later part of last year.
Other webcasters, fearing they may be targeted next by Acacia, have suggested that the company has no claims against Internet radio operators, who enter licensing deals for their transmission technology with companies like Real Networks and Microsoft for its Windows Media tech. A "Frequently Asked Questions" document included with the Acacia contract, however, says that these agreements do not mean "certain uses of the products" won't infringe the patent rights of others.
"It's the user of tech that is liable under patent law," added Berman. "There are several large companies that actually cite our patents in their patent documentation, like Real."
Acacia Research itself was once a player in the Internet radio field. It invested nearly $10 million into the now-defunct Soundbreak.com. The webcaster closed in February, 2001.
The Acacia letter to radioio and the enclosed contract are available in Adobe Acrobat (.pdf) format on radioio's website here.
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The lesson here is: consult a good patent lawyer. Companies like Radio Free Virgin and some of the adult entertainment groups might just find it easier to pay what amounts to a pretty small toll (0.75% of revenue, which means if you're not making money, you don't pay!!) than to bother with it in court.
On the other hand, these patents seem awfully vague and general. Look at the engineering diagram in the body of the story: it looks like it could represent any sort of digital transmission of compressed audio or video. Are they saying they have a patent on the entire idea? Isn't that kind of like Bill Gates patenting "ones" and "zeroes" (from The Onion, here)?
On the third hand, I'm not going to pretend for a moment that I'm intimately familiar with Acacia's claims, and I'm hardly an expert on patent law. Berman supported the validity of the claims by stressing that not only does the company have the five US patents, but 17 other countries deemed the idea which Acacia now owns worthy of patent protection. -- PM
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