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December 16, 2004

Tech industry – beware of Acacia Research

Lawsuit-happy Acacia Research Corp has acquired more patents, in the US and abroad, broadening its base of potential licensing and litigation targets beyond the digital video market that it has spent the last couple of years attacking.

By CBR Staff Writer

If you make or use products in broadcast, caching, spreadsheets, credit card processing, data synchronization, datamatrix bar codes, encryption, product activation, pop-up advertising, peer-to-peer, audio and video, you could end up becoming familiar with Acacia.

The company has said that it will pay $5 million in cash and 3.9 million shares for Global Patent Holdings LLC, which owns 11 patent licensing firms. The acquisition would give Acacia control over 121 US technology patents, grouped into 27 portfolios.

Some of these portfolios are just entering initial licensing activity, while some are in fairly advanced stages of litigation, CEO Paul Ryan said in a conference call with analysts. About 11 of the portfolios are in the early stages, he later added.

Acacia currently makes most of its money from licensing its digital media transmission patents to adult web sites and on-demand video companies. At the last count, 277 companies had taken licenses on the DMT patent, including 90% of the hotel in-room video provider market.

The Electronic Frontier Foundation, which has the DMT patent at the top of its most wanted list of patents that need to be busted, calls it a laughably broad patent would cover everything from online distribution of home movies to scanned documents and MP3s.

Getting access to Global Patent Holdings’s assets, which includes subsidiary TechSearch LLC, is not likely to reverse this perception. TechSearch sued Symantec and Electronic Arts two years ago for patent infringement for distributing CDROMs that contain links to websites.

The company also avoided court and secured licenses with Sony, Aiwa, Matsushita, JVC, Samsung, Toshiba and Thomson Multimedia, for making CD players capable of recording and playing CDs containing compressed data in the MP3 format.

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The TechSearch web site lists patents covering: data transmission on the Internet, data transmission over satellite and cable broadcast channels, information distribution and processing systems, computer based distance learning, noise reduction systems for video signals, television de-scrambling smart card, resolution enhancement for printers and other display devices.

Most of Global Patent Holdings licenses to date have been one-off perpetual licenses. Over the last couple of years the firm has secured $40 million in revenue, Acacia said. Acacia will prefer to enter royalty agreements, to grow its own revenues as markets it attacks mature.

Acacia… intends to offer future licensing, where it is appropriate, primarily on the basis of recurring license payments, rather than paid-up licenses, Ryan told analysts.

The EFF notes that Acacia is happy to sue small businesses. Adult webmasters, most of which did not have the resources to defend themselves, were Acacia’s first target for enforcing the DMT patent. Wins there were then leveraged as precedent to extract cash from the cable industry.

Members of the cable industry and the adult industry are involved in litigation with Acacia over DMT. There has not been a resolution to these cases yet. Acacia is attempting to consolidate several lawsuits into a single action, executives said.

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