NetRatings, Jupiter Settle Patent Suit

By Erin Joyce

Internet research firms Jupiter Media Metrix and NetRatings have reached a $15 million settlement regarding a patent infringement lawsuit Jupiter had filed against its onetime acquirer.

The Milpitas, Calif.-based NetRatings has also purchased another chunk of Jupiter, this time its European customer list, for $2 million.

In addition to putting the on-again, off-again nature of the patent litigation to rest, the deal marks the second time in the past month that NetRatings bought assets from the financially ailing Jupiter.

The news came as Jupiter announced a first quarter net loss of $48.4 million, with cash reserves of about $7 million. In another example of the Internet shakeout, Jupiter’s revenues were $10.8 million for the quarter, a 63 percent drop from the $29.6 million it took in during the same time a year ago.

Jupiter filed the infringement lawsuit in March of 2001, charging that NetRatings violated its patent for tracking online Web usage.

But in October, NetRatings agreed to purchase Jupiter for $71.2 million in cash and stock, which left the lawsuit in question. When federal regulators raised anti-trust objections about the two measurement firms’ merger plans, they called off the wedding, which put the lawsuit back on track.

Under the terms of the litigation settlement, NetRatings is to pay $15 million to Jupiter to dismiss Jupiter’s patent infringement claims against it “with prejudice.”

The settlement also gave NetRatings control of Jupiter Media Metrix’s patents for computer use tracking (United States Patent Nos. 6,115,680 and 5,675,510). It also grants Jupiter Media Metrix “a non-exclusive, assignable license to use the patented technology in its domestic Internet audience measurement business until June 30, 2005.”

The companies said Jupiter would pay NetRatings $750,000 in license fees for the use of the tracking system through the end of the year. For 2003, the fees would be $1.5 million, then $1.75 million in 2004 and $1 million for half of 2005.

As part of the settlement, Jupiter also threw in a royalty-free license on proprietary software that works with the tracking technology in the patents.

In a statement, Robert Becker, CEO of Jupiter Media Metrix, said “we are pleased to put this matter behind us so that we may continue to focus our resources on our core Jupiter analyst research and domestic Media Metrix audience measurement businesses.” Jupiter recently retained investment firm Robertson Stephens to help it sell assets or find a buyer.

William Pulver, president and CEO of NetRatings, said “although we were confident about the strength of our legal position, we are pleased to bring distracting and potentially costly litigation to a successful close while ensuring that we end any question of the patent’s impact on our ongoing business.”

Although the Federal Trade Commission objected to the financing of the firms’ onetime merger (NetRatings had agreed to provide Jupiter with a loan as part of the arrangement) NetRatings is instead acquiring chunks of Jupiter’s assets.

Just last month, NetRatings shelled out $8.5 million in cash to acquire Jupiter’s AdRelevance group. The Seattle-based unit tracks online advertising campaigns as well as ad sales on sites and advertisers’ spending. In a related development, NetRatings also said it acquired ACNielsen eRatings.com, a Web audience measurement business operating outside the U.S., in a $9.6 million stock deal.

Not counting amortization and other charges, Jupiter’s net loss for the first quarter of 2002 was $11 million, or 31 cents per share. During the same time last year, using the same yardstick, it lost $10.8 million, or 30 cents per share.

Net loss for the first quarter, including amortization and the cumulative effect of FAS 142, was $48.4 million or $1.35 per share, compared to a loss of $54.2 million or $1.53 per share for the first quarter in 2001.

Jupiter also said it worked out a deal with its landlord that eliminated $67.6 million worth of lease obligations at its Astor Place facility in New York. In connection with the termination, the company handed over its security deposit to the landlord, and made a one-time rent payment of $1.5 million to cover its stay until Aug. 15th. Jupiter had roughly $100 million worth of lease obligations prior to the announcement. Shares of Jupiter were unchanged at 13 cents before the announcements. NetRatings closed down about 1 percent at $11.80.