With Acacia Media Technologies suing a number of Internet operators over Digital Media Transmission patents, 15 adult companies have formed a group aimed at looking out for the best interests of the adult Internet.
The group calls itself the Internet Media Protective Association. And while they're pondering the full spectrum of issues they will address, one of their primary goals is to develop and, as best they can, enforce a kind of code of conduct for the adult Internet, the better to keep the hounds of government from nipping at their seats to force one on them – one that might, conceivably, mean the end of the adult Internet.
So said Homegrown Video chief executive officer Spike Goldberg, in a conference call with AVNonline.com joined by his fellow Homegrown executive Farrell Timlake and VideoSecrets chief Greg Clayman. Goldberg was named the new group's chairman of the board, while Timlake was named one of two vice chairmen and Clayman was named secretary.
"It's bad enough that people label us demons, so why make it worse?" Goldberg said. "Part of the problem is no rules laid out, the government hasn't made a law about it. But don’t think they won't try it." Clayman said the government is already trying it, "but if we're on the inside, which we are, and we can try to put together regulations ourselves, we'd much rather have that than a third party coming in."
The IMPA may have been spurred to formation by the Acacia litigation, but Goldberg, Clayman, and Timlake said the group doesn’t exist strictly to counter Acacia, even with all 15 of its charter member companies on the Acacia hit parade. For one thing, even if the group had mandated itself as an Acacia counter-attacker, it would mean refusal of their nonprofit status.
Acacia in late 2002 began sending letters to numerous adult Internet companies demanding they license the streaming video Acacia calls Digital Media Transmission, on whose patents (issued between 1991 and 2000) Acacia claims ownership through 2011. Some of the companies settled with Acacia before December 2002. Acacia then sued 39 adult Internet companies in early 2003, with eight settling before it went to court.
Acacia senior vice president and general counsel Rob Berman said they now have 21 new DMT licensees as of May 2, only some of whom were involved in the current DMT litigation and most of whom were adult Internet players whom he would not identify.
"We're continuing to talk to some of the major companies in the litigation regarding settlement," Berman said. "They might not admit on the record that they're talking to us, but we're talking to a lot of companies and, although we're still talking about settlements, the more time that passes, the less favorable the settlement terms will be for the parties that settle."
In mid-April, Homegrown filed a formal answer to Acacia's lawsuit asking the judge to remove the language of adult entertainment from the formal filings and the case, for fear of prejudicing the court. But the IMPA will live by anything but Acacia alone, Goldberg, Clayman, and Timlake said. "I think our grand vision for it is something along the lines of a combination (model on) the (Motion Picture Association of America) and the Better Business Bureau," Timlake said. "We wanted to form our own self-regulating group, that also endorses a level of conduct that we can protect our own industry with, by sort of crossing that bridge with people and making sure their sites have levels of compliance, and we're leading the pack as far as an ethical code goes."
Timlake said the adult Internet needed at last to come "to a sort of maturity" in its business.
"We've done it in house but now we want to do it in a broader sense for the industry," he said. "In Homegrown's case, we wanted to get to a certain level of respect among our peers in the industry, before we could take this out and have it taken seriously."
This kind of association is not exactly a new idea, the three men said, but Timlake emphasized that among the reasons earlier attempts failed was too much weight given to companies' self interest and not enough big-picture commitment. "They weren't trying to do anything but create a way to just make a sort of false front of goodness, without any real intent," he said.
Clayman said that, in the past, the adult Internet had to forge its paths all but spontaneously, because its youth did not include any solidified guidelines or rules of play – either for themselves or for those who might challenge them in any way. "There's a lot of variables," he said, "and there's no book you can go out and buy on how to run, say, a Homegrown or a VideoSecrets, and most people were able to deal with problems and get them aside and move on. But whether its banking problems, or e-mailing problems, or bandwidth problems, now we're becoming what I consider, well, not a mature industry but the industry is maturing. And we're dealing with much more prevalent and much more serious problems that you can't make go away."
Problems, Clayman, Timlake, and Goldberg said, that include the Acacia litigation. Taken to court as New Destiny Internet Group, Homegrown's April 15 answer filing also argued that Acacia, essentially, is trying to enforce a patent that can't be enforced. The technology in question had existed, was in use long enough before the patents in question were applied for, and those claiming to have created the elements of those patents knew it but didn't acknowledge it in their applications, Homegrown's answer argued.
Fish and Richardson attorney Christopher S. Marchese wrote in the response that Acacia "decided not to go after industry giants like RealNetworks and Apple Computers, but instead (tried) to extract licensing royalties from an industry it perceives to be litigation adverse" and to use the very content of the adult Internet – and the likelihood that a potential jury would sooner judge the content than the specific issues at hand – to try to swing what Marchese called a weak case.
"… Whether (Acacia) should be permitted to litigate 'content' will permeate every aspect of this case from discovery to trial, and should be resolved at the outset," Marchese continued in the response brief, accusing Acacia of "intending to parade" in court "the most salacious, explicit sexual material it can cull from the archives…solely to inflame passions and prejudice and thereby divert attention from the dubious merits of its case."
"They're trying to prejudice the court into thinking one way or another," Goldberg said. "In our mind, Acacia called everybody up and said they've got the patent and this and that, and our counter is, 'Why are you saying ‘adult,’ what does that have to do with your great (patent)?' This is the point I would be posing to Acacia. What does what we do have anything to do with your technology? They're using it to exploit the legal system, but hopefully we'll prevail. They're very smart people, but they have no concept of the Internet industry or anything beyond the business model they've come up with."
Berman all but dismisses that argument. "(It contains) the usual laundry list of defenses to a patent infringement case," he said of the answer filing. "We certainly didn't see anything that we didn't expect or anything that we won't be able to overcome." He said Acacia has similar DMT patent coverage in 17 other countries, "and it's highly unlikely that the other patent offices would have made the same mistake…. This adage, this concept, that 'Gee, the patent office made a mistake,' is unlikely in our scenario, because so many patent offices looked at the information and they gave the patent."
Homegrown and VideoSecrets led a group of 10 to fight Acacia off directly, and they brought in the two-century old Fish and Richardson, a firm with a patent law that traces back to Thomas Edison. Clayman admitted the firm was a little skeptical about partnering up with a group of adult entertainment companies until they saw "our professionalism" in approach and conduct, and took the case as a purely patent-defense issue. "Our counsel sees it as a patent issue, and not a content issue," he said.
Berman, however, sees a case impossible to resolve without the content issue, even if the content wasn't the reason for the litigation. But if Acacia sued for patent infringement having nothing to do with the content of the companies in question, why even discuss the content? "You need to show evidence of infringement," Berman said. "In addition, by the names of the companies that they work for, I think it'll become evident to the court what business they're in. We're confident that we will win the case whether or not the nature of the content comes out (of the filings). However, I don't see from a practical perspective how they'll be able to hide what it is that they do."
Acacia has referred to adult entertainment as "low-hanging fruit," with Berman saying in an early published report on the case, "When you say 'low-hanging fruit,' yes, it makes business sense for us to pursue an industry that's making money." The term both amused and annoyed Golberg, Timlake, and Clayman, especially considering Acacia seeks, among other remedies if they prevail, what amounts to active partnerships in the adult companies who settle with them or whom they defeat in court. Acacia has called, among other things, for damages to include a percentage of a losing company's gross.
"The fact that they consider us to be low-hanging fruit, but yet they want to be partners with us, it is kind of condescending and insulting," Clayman said, "but they want to be partners. I agree with Spike, I don't think that they have a real grasp on how our business structure works. Asking for 3 percent of gross revenue, (when) anybody who makes a living in this business knows that, all the way around, asking for 3 percent gross payout you might as well be working for Acacia."
Meanwhile, the IMPA is concerned mostly with jelling and moving forward responsibly to take on industry conduct, content protection, and self-regulation questions likely to be their early and prime focuses. "We're not here to be players," Goldberg said. "We're not here to be political. We're in it to be successful and to stay in business in the long run."
Acacia, meanwhile, is plugging ahead, too. Berman said there are "many" businesses out there, adult and otherwise, that Acacia has not yet sued over DMT, but who are taking what he called a wait-and-see stance on the question. And Acacia isn't budging on its stance, or its determination to make those companies sign up or pony up.
"(T)hat might not be the smart business decision for them to make because we're only offering waivers for past infringement for a limited period of time, so there will be considerable downside risk, if those companies decide to wait until the outcome of the litigation in which they're not involved," he said. "From a business perspective, the relatively small amounts they would have to pay us for a license would act as an insurance policy, and at least take care of their past infringement. But everybody has to review the facts and make their own decision."
