They Claim The Workings of The Web

There’s a new Internet business model on the rise: Buy a patent, hold onto it until the technology it covers has penetrated the market, then assert your rights. These “submarine patents” are making waves throughout the industry.

Today, Acacia Technologies Group said it signed a license agreement for its digital media transmission technology with the Disney Enterprises Inc. unit of Walt Disney Corp. for its digital transmission technology. Acacia claims it holds key patents that apply to anyone using streaming media, including Web sites, advertisers, and Internet radio stations. Acacia is still battling in court with a group of adult entertainment companies it brought suit against last summer.

Those companies complained that they were easy targets without the resources to fight fishy infringement claims. The Disney license, the most high profile to date, burkes that argument.

The Disney deal makes 116 licenses of Acacia Technologies’ DMT technology, to companies including LodgeNet Entertainment, a provider of video-on-demand services for hotels; Spanish wireless company Grupo Pegaso; digital broadcaster Radio Free Virgin and adult entertainment companies Interactive Gallery, Vivid Entertainment and Wicked Pictures. According to Acacia, all the agreements provide for recurring payments, and it expects to collect between $1.1 million and $1.5 million a year from the licenses. Acacia also enforced a U.S. District Court injunction against the Web hosting service used by another adult company, Go Entertainment.

If Acacia owns streaming media, maybe Unicast owns the delivery of rich media advertising. In 2003, Unicast, creator of the Superstitial ad format, began asserting a patent it said covers all forms of rich media ad delivery. Unicast used its patent on the process of placing a tag on a Web page that communicates with remote ad servers to demand license fees from rivals. Unicast executives refused to be interviewed for this story, but when the patent was awarded, CEO Richard Hopple boasted to news media that the patent covers the method used to serve all rich media and Flash-based content.

Such gotchas are inherent in the U.S. patent system, said Douglas Kline, chair of the Patent and Intellectual Property Practice Group at the Boston law firm Testa, Hurwitz & Thibeault, because a claimant doesn’t need to prove intent to infringe. “I can have a patent that nobody knows about, and if I want to wait five years from now, there’s nothing to stop me from enforcing it [then].”

That can be especially unfair when the patents cover what have become de facto standards. Kline said there’s a trend of companies laying back and letting industries develop before they assert their rights. It would be easy enough to engineer around a lot of patents, he said. “What makes it difficult is widespread adoption.” Kline thinks the last five years have seen a rise in submarine patent suits. “We’re seeing more litigation brought by an individual or company who is simply trying to collect a toll on an entire industry.”

In some situations, patents can have a destructive effect on commerce, according to William Abrams, co-chair of the intellectual property group of the law firm Pillsbury Winthrop. “We have a system that doesn’t have the resources to adequately keep up with the volume of processing and the substantive analysis,” he said. “Meanwhile, “People will continue to seek these kinds of patents and try to enforce them.”

Editor’s note: This is the first of a three-part series that will continue tomorrow.

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