Analysis: Acacia's Win Over Yahoo!

NEWPORT BEACH, Calif. – Last week's win for Acacia Research Corp. over Yahoo! in a lawsuit yielded a settlement of $6.6 million and had many in Web businesses - both mainstream and adult - buzzing over the implications.

As reported by Business Week, Newport, Calif.-based Acacia, which buys and licenses patents, accused Yahoo! Inc. of infringement over one of its online ad patents.

A federal jury in Texas ruled that Yahoo!'s messenger program with IMVironments did infringe on the Acacia patent for background ad insertions in emails and Web posts.

In a statement, Yahoo! said: "Although we are disappointed with the verdict, we firmly believe in the merits of our case, and we are considering our options going forward, including whether to appeal."

Detroit-based adult industry attorney Corey D. Silverstein, however, told he believes the case is far from over and may not impact adult business and patents at all.

"While I’m sure that Acacia Research Corp. is celebrating, I suspect that the celebration will be short lived.  Unlike most Internet companies, Yahoo has both the motivation and the resources to appeal the District Court decision.  Damage awards of this magnitude are frequently challenged and Yahoo will exhaust their resources even if it requires taking the matter to the Supreme Court," Silverstein said.

"Interestingly enough, $6.6 million dollars to Yahoo! really isn’t much as evidenced by the recent severance package paid to outgoing CFO Blake Jorgensen, totaling $1.8 million dollars cash and plenty of liquidity," he added. "While money isn’t the motivator in a case like this, sending a message to anyone else ever thinking of suing Yahoo! for a similar patent infringement, certainly is.

Silverstein notes that a federal jury trial of this magnitude was surely complex, filled with confusing evidence, witnesses, counter-witnesses, expert witnesses, counter-expert witnesses and more, so the appeals process is likely to be even more complex, and time consuming. 

"Yahoo bears the burden of establishing that the trial court somehow erred.  Chances are if Yahoo were able to win any appeal, the matter would be sent back to the trial court for a re-trial or further proceedings" Silverstein told

"Proving that the trial Court erred is difficult and ultimately could take years for a decision. I wouldn’t be surprised if Acacia and Yahoo! end up resolving their issues in a very confidential settlement during the appeals process for an amount far less than $6.6 million dollars," Silverstein said. " I suspect that Acacia would be more concerned with getting as much money as possible now as opposed to some unknown amount in what could be years from now. Additionally, a confidential settlement would assist in Yahoo’s privacy concerns."

Silverstein is skeptical regarding Acacia's business tactics and was forthright with his opinion.

"Acacia has a very long history of acquiring patents and forcing businesses and individuals alike all over the world to pay large royalty fees and sign complex agreements to utilize 'patented technologies,'" Silverstein observed.  "The online industry particularly has been targeted by Acacia and Acacia has become very rich by simply collecting royalty checks."

Silverstein explained patent cases are especially complex because the plaintiff/patent holder must prove that the accused infringer practices all of the requirements of at least one of the claims of the patent, and in many jurisdictions, the scope of the patent may not be limited to what is literally stated in the claims. This could be due to the "doctrine of equivalents."

"For many years many throughout the online world have taken issue with Acacia’s patents, specifically alleging that Acacia had been patenting technologies that were already available and/or exploiting existing technology by making a small modification and then filing the patent," Silverstein said. "While I have not reviewed the specific pleadings, opinions, or transcripts of the Yahoo case, I suspect that news of this verdict will bring attention to Acacia’s alleged methods and tactics again."

Silverstein points out that throughout history, documented as early as 1938, patents have frequently been criticized as being extraordinarily complex, easy to exploit, and a detriment to innovation and competition.

"Equally noteworthy is the extreme complexities of current patent law and the amount of federal resources necessary to attend to patent files," he said. "Many articles have been written and public figures have spoken out against patents in order to prevent the compression of the general economy and innovation alike.  I suspect that many in the online industry will join in these criticisms as evidenced by this Yahoo verdict."

"As for the average online entrepreneur, I suspect that he or she will pay much more attention to any correspondence from Acacia and additionally may think twice before pushing his or her technology. In my belief, to the detriment of fair completion and the expansion of the online industry," Silverstein said.