larry
At 12:21 PM 11/4/2003, you wrote:
>More patent schenanigans. I'd heard about this a while back, but this is a
>decent article about it.
>
>-Kevin
>
>_________________________________________________________________
>
>This article is available online at this address:
>
><http://chronicle.com/weekly/v50/i11/11a03501.htm>http://chronicle.com/weekly/v50/i11/11a03501.htm
>
> - The text of the article is below -
>_________________________________________________________________
>
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>
> From the issue dated November 7, 2003
>
> A Patent Claim That May Cost Millions
>
> By SCOTT CARLSON
>
> Few people have heard of Acacia Research Corporation, but
> John H. Payne III has given the company a lot of thought ever
> since it threatened the heart of his courses at the University
> of Virginia.
>
> Acacia has sent Virginia and other colleges a letter making an
> audacious claim: that the company owns long-forgotten patents
> covering the use of sound and video on the Web and is entitled
> to 2 percent of the revenue from courses that use such
> technology. The patents, which expire in 2011, cover the
> concept behind storing and transmitting sound and video, not
> the technical details.
>
> "It's as though they claim they hold the patent on air," says
> Mr. Payne, who runs the university's distance-education
> program. He says online audio and video are integral parts of
> not just distance education but of many classroom-based
> courses.
>
> "Those technologies are being incorporated into libraries and
> general-studies courses on campus," he says. "In
> more-traditional courses, we archive a lot of materials, so if
> a student misses a course, they might be able to see the
> lecture online." If Acacia's 2-percent fee were applied to
> courses and programs all over the university, "that would add
> up to a whole lot," he says. The University of Virginia will
> earn about $240-million in tuition this year, although
> university officials don't know how many courses use online
> audio and video technology.
>
> Risks of Litigation
>
> Acacia's demands, which have also been issued to companies
> that use the technology, have made college officials wonder
> about the future of online video and audio, two Internet
> features that many have taken for granted until now. They say
> that Acacia's licensing demand, backed by the threat of
> lawsuits, would add a huge new expense to colleges' technology
> programs, which are already running under tight budgets. And
> officials say that such costs could force colleges to stop
> adding new media features to course sites, which could hamper
> innovation in higher education.
>
> College lawyers are scrambling to figure out how to respond to
> Acacia, and in the meantime they're saying little. It's
> possible that they will find a silver bullet that will shoot
> down Acacia's claims.
>
> But they don't seem to have found it yet, and more and more
> colleges are getting letters from the company. Some college
> lawyers have hinted that they might fight Acacia's patent in
> court, but doing so could be an expensive and risky process.
> Acacia has already won some battles outside of higher
> education: It persuaded dozens of online pornography
> companies, as well as a popular online radio station and a
> major pay-per-view video company, to sign licensing agreements
> that turn over portions of their revenues.
>
> Ben Rawlins, general counsel for the Oregon University System,
> which received letters from Acacia, says that although the
> licensing claims ask for only 2 percent of gross revenue, a
> seemingly small proportion, that fee would hit colleges hard.
> "When you're talking about your entire distance-ed budget, 2
> percent of that on an annual basis would get up there," he
> says.
>
> Chilling Effect
>
> Acacia, based in Newport Beach, Calif., owns 5 U.S. patents
> and 17 international patents that it says cover the transfer
> of various kinds of media over the Internet, a process often
> called "streaming." Acacia says the patents cover many
> instances in which audio and sound files are digitized,
> compressed, stored on servers, and then streamed to other
> computers for decompression and playback.
>
> Millions of people listen to and watch streamed files every
> day with software like Microsoft's Windows Media Player,
> Apple's QuickTime, and RealNetworks' RealPlayer. Using those
> programs, motion-picture companies show the latest movie
> trailers to filmgoers. Rock bands offer music to fans. Even
> The Chronicle supplements some online articles with, say, a
> snippet of a student film or a sample of a composer's music.
>
> For colleges, online audio and video have brought the
> classroom to the desktop computer. A recent survey by Gartner,
> a technology-research firm, indicates that 40 percent of
> college courses incorporate some sort of online audio or
> video. That figure could grow to more than half of college
> courses by next year.
>
> Sally M. Johnstone, director of the Western Cooperative for
> Educational Telecommunications, which seeks to integrate
> technology into teaching, says that colleges are using online
> audio and video in all areas of teaching.
>
> Acacia's patents might have a chilling effect, she says, not
> just on uses for existing technology, but on how quickly
> colleges adopt new ones. "If there is a whole new set of
> financial demands layered on top of what is already being
> paid, it's going to be really hard for colleges to continue to
> serve students in the way that they are," Ms. Johnstone says.
> "This is going to make people very nervous about what they
> should and shouldn't do."
>
> Jane Zahner, a professor of education at Valdosta State
> University, says that she uses audio clips in her
> distance-education courses to comment on students' papers.
> "Those are such basic tools," she says. "How could a company
> own them?" If administrators ask professors to limit their use
> of online media, she says, professors might still try to find
> a way to use it anyway: "There would be a fair amount of civil
> disobedience going on."
>
> Colleges' use of online audio and video isn't limited to
> education. Many admissions offices offer video tours of their
> institutions on college Web sites. College radio stations
> frequently transmit their signals over the Internet.
>
> And a number of major-college sports teams now offer video
> features. The University of Nebraska at Lincoln Webcasts
> entire games on HuskersNside, which has been up for a year and
> has more than 2,000 subscribers. Jeff Abele, who manages the
> site for the university, will not comment on what Acacia's
> claims might mean for the service, but he says many
> institutions have been eager to offer similar sports features.
>
> A Scent of Money
>
> Robert A. Berman, general counsel and senior vice president
> for business development at Acacia, says there is finally
> money to be made on his company's patents, which were granted
> in 1991 and sat idle through the Internet boom of the 1990s.
>
> "Money wasn't being made using streaming at the time," Mr.
> Berman says. "If you remember, everything on the Internet was
> free, and people were just figuring out how to use the
> technology."
>
> Acacia did not send letters to Apple, Microsoft, or
> RealNetworks, companies that have built businesses on
> developing and licensing online-media programs, for simple
> business reasons, Mr. Berman says.
>
> "It makes more sense from a business perspective for us to
> license the user of the technology that is receiving a
> recurring income stream from its use, rather than trying to
> license a software manufacturer that is giving away the
> software or licensing it for small amounts on a one-time
> sale," he says.
>
> He predicts that online video will become a main component of
> the courses that more and more colleges are selling online.
> "How good would their product be if it couldn't have audio or
> video content in it?" Mr. Berman asks. "In our estimation, it
> wouldn't be nearly as good. So frankly, on that basis, we
> might be entitled to much more of a royalty."
>
> But, he says, Acacia is reasonable and willing to negotiate.
> Colleges that cannot afford to give up 2 percent of their
> revenue or can't track their use of online video or audio
> might sign up for a fixed annual fee. He says Acacia's goal is
> not to put colleges out of business because if colleges don't
> make money from online media, Acacia won't make money.
>
> Making money through licensing has become an important goal
> for the company, which has been in the red over the past
> several years. A recent quarterly report noted that the
> company wants to acquire more technology patents and is
> serious about licensing those it already owns. If it doesn't,
> the report said, "our financial condition may be adversely
> impacted."
>
> So Acacia continues to send out letters to colleges.
> "Ultimately, we will get around to everybody," Mr. Berman
> says. "Our goal is to address these issues outside of court.
> We're not afraid to go to court if we have to."
>
> Last month lawyers from more than a dozen institutions set up
> conference calls to discuss Acacia's notices of infringement
> and how to respond to them. Calls have included lawyers from
> Azusa Pacific University, Georgia Institute of Technology, the
> Johns Hopkins University, the Montana University System, Seton
> Hall University, Stanford University, University of Maryland
> University College, the University of Pennsylvania, the
> University of Virginia, the University of Wyoming, and
> Valdosta State University.
>
> Most of the participants declined to comment on Acacia's
> patent claims. But one college lawyer, who asked not to be
> named, said that Acacia's demand would significantly hurt
> colleges, and that they wouldn't rush to sign the licensing
> deal. "I think our folding is highly unlikely," the lawyer
> said.
>
> The Oregon University System, also a participant in that
> meeting, got three letters -- for infringement at Portland
> State University, Western Oregon University, and the Oregon
> Institute of Technology. Mr. Rawlins, the system's general
> counsel, says a patent lawyer is reviewing the letters.
>
> He is also investigating whether the colleges already license
> streaming software through companies like Microsoft or
> RealNetworks. Depending on what their contracts say, those
> companies might have some responsibility for helping to defend
> the university from a lawsuit. Officials at Apple and
> Microsoft say they know nothing about Acacia's letters.
>
> But Mr. Rawlins says, "When we go back and look at the
> contracts and the threads through them, we could have a lot of
> interesting people on our side."
>
> Acacia has sent its letters to many small and midsized
> institutions. Western Oregon University and the Oregon
> Institute of Technology are the two smallest colleges in the
> Oregon system, Mr. Rawlins says.
>
> "You could also theorize that the smaller ones do not have the
> funds to fight," he says.
>
> In this, Acacia seems to have followed classic tactics for
> winning patent-infringement cases. Lawyers and patent experts
> say that patent holders often send notices of infringement to
> smaller companies first, hoping that such companies would
> rather sign small licensing deals than go through risky and
> expensive litigation.
>
> The risks of going to trial are considerable. One observer who
> requested anonymity suggests that colleges might be playing
> into Acacia's hand by banding together to fight the company.
> If the colleges were to lose in court, the observer says, the
> case would set a strong precedent that the company could use
> in seeking payments from other institutions.
>
> As court battles go, patent fights are among the priciest,
> costing several million dollars on average. A patent dispute
> can involve hiring researchers to invalidate the claims,
> getting experts to testify, and filing and sorting through
> reams of documents. And patent lawyers, who must pass special
> bar exams, are among the most expensive to retain.
>
> Mr. Berman says that Acacia is not using the threat of
> expensive litigation to bully smaller colleges. "There is no
> question that the cost of litigating is a disincentive, but we
> are not using that as a tactical advantage," he says. "We
> think that our patents stand on their own, and that our
> technology greatly enhances their online curricula, and that
> that speaks for itself."
>
> The Search for 'Prior Art'
>
> Patents can be struck down in court if they are deemed too
> broad or if the defendants can show that the patent came after
> closely related research or inventions -- what is called
> "prior art."
>
> Lawyers and experts who have looked at Acacia's patents say
> that because the patents appear to be so broad, they have a
> hunch that prior art exists.
>
> But that does not mean that a college or company could beat
> Acacia in court. The company hired Gregory Aharonian, a
> technology-patents expert, who says: "There could be some
> prior art where you can make a subtle argument, but it just
> gets tricky in a court before a judge. When you get in front
> of a jury with dueling experts, which is what I think this
> would come down to, a lot of patent litigators don't like
> that. You don't know what the outcome is going to be." Many
> companies facing a patent-infringement suit would settle and
> sign up for a licensing deal in such a case, he says.
>
> Ieuan G. Mahony, an intellectual-property lawyer who often
> works with the United States Distance Learning Association,
> says that colleges can unite to share the costs of litigation.
>
> "A patent holder might want to divide and conquer," he says.
> If institutions start signing up for licenses, Acacia can make
> a "lemmings argument" in court against those who hold out.
> "They can say, 'A whole bunch of smart people have paid me to
> license these, so how can you say that these are invalid
> patents?' It's a domino effect," Mr. Mahony explains. "If
> there are weak links in the industry, that buttresses Acacia's
> case as well."
>
> Once a company starts sending out notices of infringement, the
> "juggernaut is rolling," Mr. Mahony says. A defendant might
> stall, betting that the patent holder's claim is not as strong
> as it's billed to be. A patent holder, meanwhile, is betting
> that the defendant would rather negotiate a deal than fight in
> court.
>
> "It's a big, elaborate, expensive game of chicken," Mr. Mahony
> says.
>
> Taking on TV
>
> Acacia has played that game before, although it hasn't always
> won. The company owns a patent for video- and audio-censoring
> technology that Acacia officials say covers the V-chip. A
> standard component of televisions today, the V-chip allows a
> parent to block violent or sexual television programming.
>
> In the past few years, Acacia has been pursuing claims on that
> patent and managed to sign $23-million worth of licensing
> deals with major television manufacturers like Hitachi, JVC,
> Philips Electronics, and Samsung. Acacia took other companies
> to court.
>
> But in September 2002, the U.S. District Court for the
> District of Connecticut granted a summary judgment to the
> Consumer Electronics Manufacturers Association and the
> Consumer Electronics Association, saying that their V-chip
> technology did not violate Acacia's patent. Acacia has
> appealed.
>
> Acacia's video- and audio-streaming patents were originally
> granted to Greenwich Information Technologies, a company whose
> main business was helping inventors secure patents. Before
> Acacia purchased Greenwich's patents two years ago, Mr. Berman
> says, his company hired law firms and researchers in the
> United States, Europe, and Japan to make sure the patents were
> strong enough to withstand a court challenge.
>
> In 2002 Acacia began firing off letters to companies that were
> making money on online video and audio: Internet radio
> stations, hotel pay-per-view companies, and, mainly,
> pornography companies.
>
> "We get a lot of patent-infringement-claim letters, and we
> throw most of them in the garbage," says Zack Zalon, general
> manager of Radio Free Virgin, the Internet arm of Virgin
> Records, which is owned by the flamboyant billionaire Richard
> Branson. But Acacia's letter "stood out," Mr. Zalon says.
>
> Virgin's patent lawyers examined Acacia's claims, talked with
> the company, and decided to strike a deal. "We felt that a
> drawn-out, protracted legal battle would end up in Acacia's
> favor anyway," Mr. Zalon says, "and that at the end of the
> day, we would be offered the same license after the lawsuit as
> before." He says that Acacia was open to negotiation and easy
> to work with. He won't offer details on the deal.
>
> Strange Bedfellows
>
> Acacia's interactions with pornography companies have been
> less amicable. Adult Video News, the pornography industry's
> trade publication, has run many stories over the past year
> quoting indignant members of the industry. Tom Hymes, the
> magazine's editor, asked his readers to "show the world that
> just because you peddle porn on the Net doesn't mean that
> you're going to roll over every time someone points a patent
> at your head."
>
> But without putting up a fight in court, more than 40
> companies have already signed licensing agreements with
> Acacia, including important players in the pornography
> industry like Vivid Entertainment and LFP Inc., the production
> company of Larry Flynt, Hustler magazine's publisher.
>
> E. Michael (Spike) Goldberg, chief executive of
> HomegrownVideo.com, is leading 10 pornography companies in a
> fight against Acacia. He believes Acacia's patents are too
> broadly written and could be knocked down in court. The
> companies have hired Fish & Richardson, a prominent law
> firm that specializes in intellectual property, technology
> law, and patent defense.
>
> Mr. Goldberg says that Acacia thought the porn industry would
> be easy pickings, adding that Mr. Berman once called the
> industry "low-hanging fruit."
>
> "They think we're unsophisticated," he says. "The perception
> is that we're a bunch of guys sitting behind desks with oily
> chests and gold chains, but we're not. We're executives like
> everyone else." Mr. Goldberg says he is taking a calculated
> risk in fighting back, and he has hopes that colleges will
> take the gamble with him.
>
> His company and the companies who have joined him in the suit
> are relatively small -- his own HomegrownVideo grosses less
> than $5-million a year -- and bills from Fish & Richardson
> are a heavy burden. He fears that if he loses his suit, Acacia
> will bump up its licensing fee to between 6 and 10 percent.
>
> But Mr. Goldberg believes that his lawyers have found enough
> prior art to defeat Acacia in court, so he is pressing ahead.
> He has a message for administrators in higher education: "I
> know it's not comfortable to hear this from someone in adult
> entertainment, but join up with us. If we end up signing with
> Acacia, there goes all of the work we've done. It would be a
> shame to see that go to waste."
>
> HOW 'STREAMING' WORKS
>
> Acacia Research Corporation says its patents cover the
> transmission of video and audio files from remote servers--a
> process often called "streaming."
>
> The following summarizes the process described in five patents
> owned by Acacia:
>
> Step 1: A video or audio clip is put into a digital format.
>
> Step 2: The digital file is compressed to make it more easily
> transmitted and stored.
>
> Step 3: The compressed file is stored, perhaps on a server.
>
> Step 4: A request for the file comes in, and it is sent--over
> the Internet or via satellite--to the requesting computer.
>
> Step 5: That computer decom-presses and reads the file, then
> plays it.
>
> SOURCE: U.S. Patent and Trademark Office
>
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>
>_________________________________________________________________
>Copyright 2003 by The Chronicle of Higher Education
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