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RealTime IT News

Streaming Media Dispute Closer to Trial

A key ruling in a patent infringement suit involving porn sites could bring a court closer to deciding whether research outfit Acacia can dominate streaming media through use of patents.

Judge James Ware of the U.S. District Court for the Central District of California issued a Markman Order involving the case, which defines some of the terms used in a portfolio of patents owned by Acacia Technologies. The Markman process, known as claims construction, interprets the simple meaning of a patent's often-obfuscatory language. The judge defined some terms and asked to hear from expert witnesses to help him understand others.

Newport Beach, Calif.-based Acacia owns many patents, among them five that together define what it calls digital media transmission, or DMT. The company claims that its patents cover a wide variety of streaming media techniques, including audio and video on demand, over cable, satellite and the Internet. Acacia acquired the patents, issued in 1992, from the inventors.

In July 2003, it kicked off a licensing campaign by going after operators of porn sites that offer streaming media. While many of the larger companies, including Vivid Entertainment, paid to license the technology, a group of holdouts refused. The resulting lawsuit has been working its way through the court process.

The latest court order is an attempt to define the terms at issue. For example, the DMT patents cover transmission of digital data from "a remote location." The defendants deny that the term covers a Web server or transmission over the Internet.

In a conference call with investors held on Tuesday, CEO Paul Ryan said, "The court's ruling in our judgment makes it clear the scope of the patent does cover transmission of digital content over the Internet.

"Based on terms the judge defined," Ryan said, "we believe at least six claims are being infringed by the defendants."

The way the judge interpreted the patent in this suit bodes well for a similar suit Acacia said it plans to file against nine cable and satellite companies.

When Acacia surfaced with its claims of owning key patents on streaming media, the industry reacted with consternation and, initially, disbelief. Such "submarine" patents, as they are often called, are becoming commonplace in the industry, as are applications that were filed with the U.S. Patent & Trademark Office before use of the Internet became widespread with the dawn of the World Wide Web.

Critics complain that the patents are too broad and were awarded for obvious ideas. Acacia's DMT patent portfolio is a target of the Electronic Frontier Foundation's Patent Busting Project, and is named by the group as one of "the worst Internet and software-related patents in the U.S."

The EFF complains that the patents' owners are "threatening and filing suits against small businesses, individuals and nonprofits, not to mention the threats to free expression and innovation that each of them pose."

Also on the EFF's "ten most wanted" list are Amazon.com's one-click shopping patent and a 2001 patent awarded for the concept of paying with a credit card online.

The EFF said it plans to gather prior art, known in patent law parlance as earlier implementations of the idea or process under patent. Patents are supposed to be awarded to the first person who invented something, not to the first to apply for a patent. So, if a third party can show prior art, the USPTO will reexamine the patent and perhaps revoke it, a process that may ultimately go to federal appeals courts.

But finding "killer" prior art is not so easy, said Daniel Ravicher, executive director of the Public Patent Foundation, another non-profit that's pushing for change in the U.S. patent system. He believes that open calls for prior art seldom turn up anything useful.

"Identifying and determining the scope of a patent is such a convoluted process that most non-lawyers can't get a grasp on it. It's not as easy as reading the abstract," he said. And besides, "any kind of third-party prior art will usually be arguable."

The Acacia case's Markman Order -- and the suit itself -- are part of a high-stakes game of chicken playing out between Acacia and the streaming media industry. Acacia has warned that its license fees will keep rising as companies delay in signing licensing deals. Their targets must decide whether to take a chance on the court cases going against Acacia. The company claims it's inked 145 DMT licenses so far.

"[The suit] is giving some companies who've gotten letters the ability to realize they have a couple options, so they should sit this out and see what happens in the Markman hearings and other litigation," said Dan Rayburn, executive vice president of Streaming Media Inc., a media company focused on the sector. "I've spoken to quite a number of companies that were thinking of paying, but now they're not going to. They're going to wait and see what happens."