Internet brings patent fight onto Md. college campuses
State investigates claims of tech firm; schools weigh licensing fees vs. legal cost
By Tricia Bishop
Sun Staff
Originally published August 10, 2004
The Maryland attorney general's office is investigating claims by a California technology company that several of the state's colleges and universities have infringed upon its patents by using the Internet to transmit video and audio.
"We're trying to review the situation and make some strategic decisions," Assistant Attorney General Thomas Faulk said yesterday. "We are first trying to determine whether or not we think there's any viability to the claim."
But even if the allegations are false, college officials say they might have no choice but to pay a fee for the technology, fearing the alternative is to go to court, which could cost millions of dollars in legal fees.
A division of Acacia Research Corp., based in Newport Beach, recently sent letters to dozens of higher education institutions across the country. Among them were Washington College in Chestertown, the University of Maryland, College Park and the University of Maryland, Baltimore County.
The company claimed that schools using a form of streaming video or audio for online lectures or to transmit course material over the Internet were violating Acacia's patents on the technology if they weren't paying the company for that privilege.
The letters offered to set up licensing agreements with the schools for a minimum annual fee of $5,000. Otherwise, the company suggested that the schools would be sued.
Attorneys general in Georgia and Virginia are also investigating the claims. The company began contacting colleges last year.
'Very modest' fees
"These license fees that they're looking at are not going to put anybody out of business and they're not going to cause tuition increases. They're very, very modest licensing fees," said Robert Berman, Acacia's executive vice president for business development and general counsel.
"Colleges and universities are some of the biggest developers of technology," Berman said. "It's surprising that they would show less respect for our intellectual property than they require for their own."
Patent fights are common, especially in the area of technology. Yesterday, Google Inc. announced that it had settled a patent lawsuit with rival search engine Yahoo Inc. for more than $300 million in stock. The dispute was a threat to Google's much-publicized stock launch this month.
Last winter, the "MyDoom" virus that infected computers around the world was believed to be aimed at a Utah company that claims to hold rights to the open-source Linux system.
And Microsoft Corp. recently paid more than $62 million to settle a patent infringement lawsuit with another company over Internet conferencing technology.
Bullying tactics alleged
But the Acacia battle has alarmed the world of higher education, where administrators believe they are being targeted as a relatively easy and moneyed mark. Critics of Acacia say the company, which buys patents and makes its money enforcing them, is bullying people into paying for something its patents don't cover.
Acacia's letter to state colleges and university on July 27 came two weeks after a federal judge in Santa Ana, Calif., ruled that that some of the company's patents may be too vague to be enforced against several adult entertainment companies. That ruling sent the company's stock plummeting by half.
It closed down 4 cents to $2.95 on the Nasdaq stock market yesterday. The stock was above $6.50 a month ago.
"If you look at their strategy, they approached what they consider to be vulnerable industries, small porn sites for example, and try to get them to license the material rather than go to court," said Don Spicer, chief information officer for the University System of Maryland, which encompasses all but two of the state's public colleges and universities.
Spicer contacted the state attorney general's office when he received the letter from Acacia and is attempting to organize a united front among area colleges and universities.
No response, no lawsuit
The Johns Hopkins University received a letter from Acacia last year. Wes Blakeslee, an attorney for the university, wrote to the company but received no response - and no lawsuit. Still, Blakeslee recommends that schools take the situation seriously. He's working with the attorney general's office, as well as Baltimore-area schools and several organizations on the matter.
Acacia has filed similar suits of patent infringement against 47 adult entertainment companies and settled with 30 of them. Last month, it filed complaints against nine cable and satellite companies. Acacia has signed more than 160 licensing agreements with various companies, including the Walt Disney Corp.
Potential licensees include "anybody that provides streaming media - meaning audio, video and digital content - that can be looked at over the Internet," Berman said. "The first industry we started with was the adult entertainment industry, but we're also talking to sports, news and information sites, and, of course, colleges."
The company said in its July 27 letter to Washington College that it has already secured e-learning license agreements with "Capella Education Co., Chapman University, Oral Roberts University, Park University and 24/7 University."
Threat to public domain
The Electronic Frontier Foundation, an advocacy group that promotes civil liberties relating to technology, lists Acacia as a company whose patent claims purportedly threaten the public domain. The foundation's list also includes Clear Channel Communications Inc., which holds a patent on creating digital recordings or live performances, and Test Central Inc., which has patented Internet test taking.
Acacia is "claiming to own an entire medium of communication," said Jason Schultz, an attorney for the foundation. "It's one thing to claim ownership over a specific computer program that you wrote or something like that, but when you're impinging on people's free-speech rights, you can't make those kinds of claims."
Some companies that began as technology developers have changed course and now buy up patents like real estate, betting that the technology will appreciate.
"If people can predict what technology will be useful in the future [and] then actually acquire the rights of that technology, then some can do quite well," said Kelly G. Hyndman, a patent attorney in Washington and former software engineer.
One such company, Forgent Networks Inc. in Austin, Texas, says it holds a patent that covers digital images saved in a JPEG format. Forgent's suits against more than 30 companies, including Eastman Kodak Co., International Business Machines Corp., Apple Computer Inc. and Xerox Corp., have helped generate more than $90 million in fees.
"We have been mining that patent for a little over two years now," spokesman Michael Noonan said.
Forgent still develops software but has found the patent business lucrative, announcing recently that it will look into 40 other patents it owns for opportunities, splitting the proceeds 50/50 with its legal partners.
Internet-related patents cover a range of services, including online credit card use, pop-up windows and online shopping carts. Anyone employing the methods can be subject to claims of infringement, as some in higher education are discovering.
"Some of it," said Margaret Cline, chief information officer at Eastern Michigan University, "is just insane."
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