Acacia: Pay Now or Get Sued Later

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New York— Using a patent issued about a decade before most cable operators began offering video on demand, Acacia Research Corp. is pressing distributors to pay it up to $1.75 per subscriber annually to license its technology or risk being sued.

Top executives from the company — which has sued cable operators ranging in size from Comcast Corp. to tiny Boulder Ridge Cable TV in Colorado — met with reporters at a hotel here last week to lay out their case.

NOT BEING CUTE

“As a licensing company with a lot of portfolios, the last thing we want to do is alienate industries. What we want to do is be a bridge — level the playing field and do fair, open reasonable licenses for paying for the use of technologies,” said CEO Paul Ryan.

“We have no interest in being cute and trying to go to litigation and hope we can get a jury trial and take 10% of the revenues of the cable business. That’s just not our mind-set.”

Instead, Acacia is offering cable operators an “introductory rate” of up to $1.75 per year to license its digital-media transport technology, which it owns through a broad patent that includes the transmission of VOD programming or any digital content that is stored on a server, Ryan said.

Acacia’s rate card for cable operators is 50 cents per year per subscriber, if the customer is an analog subscriber; plus a 25-cent-per-year surcharge if the subscriber is VOD-enabled. If the subscriber is on a system that uses digital ad-insertion technology, another 50 cents per year is tacked on.

The most a cable operator would pay under the introductory offer is $1.75 per year.

The DMT patent expires in 2011.

Acacia, whose executive ranks include several former Gemstar-TV Guide International Inc. executives, has built a business by acquiring patents from inventors that don’t have the resources to collect license fees from powerful corporations.

Inventors Paul Yurt and Lee Browne filed for the DMT patent in 1991, and three years later, the former Bell Atlantic Corp. licensed the technology for field trials of a video-delivery system in Virginia.

Acacia acquired the patent from Yurt and Browne in 1995, after the Bell Atlantic money ran out. The company now shares 15% of the net proceeds generated from the patent with the inventors.

While Acacia has sued several Internet porn companies for using its technology, Ryan said Acacia doesn’t plan to target cable programmers or VOD vendors such as SeaChange International Inc.

“We’re going after the distributor who distributes the media and collects the money. If you’re Disney and you’ve got a movie and you give it to Comcast, and they sell it, we aren’t going after the content guy. We’re going after the guy that uses our technology, who uses that system to distribute the media,” Ryan said.

Acacia executives said the firm has sued cable operators after negotiations failed to yield licensing agreements.

RECENT VICTIMS

Its most recent suits were filed on April 28 against Time Warner Cable, Cablevision Systems Corp., Insight Communications Co., Cebridge Connections and Bresnan Communications.

Officials at Cablevision, Cebridge, Time Warner Cable and Insight declined to comment on the Acacia lawsuit. A representative from Bresnan didn’t return a phone call.

The U.S. District Court for the Northern District of California is expected to assign the schedule for the case on June 17.

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