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Patenting The Process

Who owns the methods of E-commerce? Many companies say they do and that they have the patents to prove it.

"Obviously, if all video on the Web infringes on their patent, you'd think they'd go after the big guys, but they seem to be going after little content providers who can't afford to fight them in court. I can't help but feel like I'm being shaken down by the hi-tech version of Tony Soprano. ..."

Strong words, even for a message board on the Internet. Mitigated, perhaps, by the poster's nom de Web: Spooky Suicide. And when you find out Mr. Suicide operates a (self-described) "slightly naughty" Web site known as "Suicide Girls," you may begin to suspect there's more than a little pot-versus-kettle syndrome at work here.

But this post is only one of many that have popped up over the last several weeks, mostly in chat rooms and on message boards frequented by operators of adult Web sites, in reaction to a company called Acacia Media Technologies. Acacia has contacted the companies to advise them that they're violating Acacia's patents for accessing or downloading digital video and/or audio over the Internet, and they must license the technology. Included in the communications are explanations of the patents and a royalty schedule for payments. Acacia has filed lawsuits alleging patent infringement against 27 adult-entertainment companies, though none of the suits has yet been served.

Acacia's solicitations are an example of what to some observers is a troubling trend: the aggressive enforcement of Internet-related patents for various aspects of E-commerce. Patents are meant to be enforced, and many companies generate significant--and legitimate--revenue licensing their patented technologies. But Acacia's proactive stance, and that of others, may mean the trend, in terms of E-commerce, is only just beginning.

There are literally thousands of patents relating to the Internet, many covering methods for conducting E-commerce. As consumers become more comfortable with the tools of E-commerce--catalogs, shopping carts, auctions--they determine which of those methods work and which don't, and therefore which patents are valuable and which aren't. In the process, the successful methods become standard operating procedure for anyone interested in doing business on the Web.

The implications are "staggering" for companies involved in E-commerce, says Jonathan Hangartner, an attorney with Sheppard, Mullin, Richter & Hampton LLP who represents a group of small-business defendants involved in E-commerce-patent litigation with a company called PanIP LLC (see "Patent Troubles Pending," Oct. 21, p. 20; informationweek .com/911/patent.htm). Hangartner says the ubiquity of the Internet and the plethora of E-commerce patents, many only now surfacing, represent a below-the-radar threat of which E-commerce practitioners are mostly ignorant. "You can be sued by multiple patent holders, and the costs can be very significant," he says.

Acacia isn't targeting only mom-and-pop porno sites for enforcement of its patents, says Robert Berman, senior VP and general counsel of Acacia Research Corp. The company is in negotiations with several large adult-entertainment companies, as well as companies that provide entertainment to hotels and others that deliver music and video over the Internet.

Acacia Media Technologies is a division of Acacia Research, which owns the patent on the V-chip technology for blocking objectionable TV programming, the licensing of which earned the company $25 million last year, Berman says. When Acacia acquired ownership of Greenwich Information Technologies last year, it acquired Greenwich's patent portfolio, which included patents on what Acacia terms Digital Media Transmission technology. These patents, Nos. 5,132,992 and 6,144,702, involve "the transmission and receipt of digital audio and/or video content," according to the company's Web site.

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