Acacia Research has filed suit against many of the largest U.S. cable and satellite companies, asking them to pay it royalties to license its digital multimedia patents.
The suit, filed Tuesday by the patent-holding company in a U.S. district court in San Francisco, names as defendants Comcast Corp., Charter Communications Inc., The DirectTV Group Inc., Echostar Communiucations Corp,. Boulder Ridge Cable TV, Central Valley Cable TV, Seren Innovations Inc., Cox Communications Inc. and Hospitality Network, a division of Cox.
Representatives at Comcast, based in Philadelphia, and Cox, based in Atlanta, declined to comment on the suit.
The pending litigation against the cable and satellite companies represents Acacia Research Corp.s highest-profile lawsuits to date and will potentially bring the company a windfall in licensing revenue. Company executives tipped off their plans last year, however.
Acacia claims that it owns five fundamental patents on digital multimedia content transmission (DMT) over the Internet and other media, and it has already filed similar suits against several companies in the adult-entertainment industry.
Meanwhile, Acacia has quietly signed license deals with 123 companies, including LodgeNet Entertainment Corp., T. Rowe Price Associates Inc., Virgin Radio and the licensing division of The Walt Disney Co.
If the defendants agree to Acacias licensing terms, each company would be required to pay Acacia several million dollars in royalties per year, a substantial increase from the royalties Acacia currently charges its licensees.
Acacia had previously charged adult content providers royalties based on the licensees annual income. Now, it will charge broadcasters at least 50 cents per subscriber per year, with additional fees for on-demand and digital services.
Rob Berman, executive vice president of business development and general counsel at Acacia, said the company had been in contact with many of the defendants before the suits were filed.
“Some companies prefer that litigation be initiated before licensing agreements [can be signed], perhaps so theyre not seen as an easy mark,” he said. “This is not something out of the ordinary. They knew we were coming.”
Acacia filed its latest round of suits after it settled with and licensed On Command Corp., a video-on-demand (VOD) service for hotels whose market is shared with LodgeNet, another Acacia licensee. With the two licenses, Acacia has now licensed the VOD providers of at least 90 percent of the hotel rooms in the country, Berman said.
The additional royalties could result in a windfall for Acacias DMT licensing department, which reported just $599,000 in licensing revenue for the first quarter. Acacias terms include a fixed rate for “voluntary” royalty payments; that rate will increase for companies that fight Acacia in court, Berman said.
The royalty rates charged to the cable and satellite industry are modeled on the per-room fees Acacia assessed the on-demand industry. Acacia will charge the cable and satellite companies 50 cents per each analog subscriber, $1 for each digital subscriber and $1.50 for each subscriber who uses on-demand services, Berman said.
The numbers could add up quickly: Comcast alone reported about 20.9 million basic-cable subscribers in the first quarter, of which 19 million had access to high-definition digital cable and 17 million had access to on-demand services.
Cox Communications, another large regional ISP, ended the first quarter with 6.4 million basic customers and 2.2 million digital subscribers.
Although Acacia has caused an uproar in the adult entertainment and streaming industries, the company has flown under the radar of codec companies such as Microsoft Corp., Apple Computer Inc. and even Sony.
Companies such as Acacia are building a war chest of royalty payments from smaller companies before they can challenge larger players, Mark Kaufman, an IP attorney with Nixon Peabody LLP in New York, said in a panel discussion streamed from Streaming Media East by StreamingMedia.com.
“Patents licensed on an industrywide basis are less susceptible to a claim of being obvious,” Kaufman said.
Meanwhile, Acacias lawsuits against a collection of online adult-entertainment companies continue to proceed in Southern California. On July 7, a judge will hear Acacias motion to bring those disparate suits together in a class, to be heard in the Central District, Berman said.
The suits against the cable and satellite companies were filed in a separate district court to eliminate the possibility that the porn companies could use the new suit as a delaying tactic, Berman said.
An initial ruling in a pretrial Markman hearing–defining the terms of the contested patents for trial purposes–will be issued this summer, Berman said.
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