Adult Net v. Acacia Begins Court Journey

The first step in what could prove a long legal journey begins Feb. 6, when a so-called Markman hearing – in which a trial judge hears evidence and definitions and then determines asserted patent claims as matters of law – is held in federal court in Santa Ana, Calif., in litigation between Acacia Research Corp. and a group of adult Internet companies challenging Acacia's claim to a group of streaming media patents.

But a Markman hearing isn't the same thing as a full trial of the issues. "This is one step in a long process," said New Destiny/Homegrown Video chieftain Spike Goldberg, approaching the hearing date. "And I don't expect anything to be decided coming out of the hearing, no snap decisions. What I expect is to have a day in court and maybe that's the most important thing of all."

"Everything else has been baby steps," said Golberg's partner, Farrell Timlake. "This is the first leap."

Acacia executive vice president Robert Berman said he would not offer comment until after the hearing. Neither would representatives of Fish and Richardson, the law firm handling the case for several of the adult Internet challengers to the Acacia patents. Attorneys from Hennigan, Bennett, and Dorman representing Acacia in the case did not return a query for comment from AVN.com before this story went to press.

Goldberg said he expected the case to endure for at least a year. "I don't think this will end the case tomorrow," he said of the Markman hearing. "But I think it's very clear that you can't run from reality. We are anticipating and looking forward to our day in court. We don't think they're valid patents, and I think Acacia's mad that we dared to oppose (them)."

Though the Markman hearing is only a first step, the long-range stakes are seen as huge. Those challenging Acacia's patent claims have said the question is more than just fighting a court battle: it's a question of fighting for the future of streaming video and audio and who gets to reap the major benefits, as well as who might indeed come to own a large portion of the Internet's future as a whole.

In January, Acacia signed its 111th licensing deal for the streaming media patents, which the company calls Digital Media Transmission. That deal was with NXTV, which provides digital broadband entertainment and Internet services to luxury and upscale hotel chains.

Also in January, adult Webmaster affiliate TopBucks.com, which had been among the original challengers to the Acacia patents, signed a licensing deal with the Newport Beach, Calif. company, saying the cost of continuing their part in the challenge was too prohibitive to let them continue doing business otherwise.

Two weeks later, HotMovies.com joined the challengers, with Hot Movies co-owner Richard Cohen saying the company agonized for months before deciding to join, saying patents "are designed to reward inventors, not those who purchase patents invented by others."

Charges and countercharges have floated about since the case began. Last July, for example, Acacia was angered enough by adult Internet chat board comments opposing the DMT patent claims that they sought additional charges that all but added up to conspiracy against a group of adult Net companies – spearheaded by New Destiny/Homegrown and VideoSecrets – which banded together to challenge together. U.S. District Judge Alicemarie Stotler ruled in favor of that claim in September.

But the group of companies, forming an interest group called the Internet Media Protective Association, filed a countersuit charging Acacia with unfair trade practices and abuse of the judicial system.

Last October, three of the biggest names in adult entertainment – Hustler, Vivid Video, and Wicked Pictures – signed DMT licensing deals with Acacia. Other adult Net licensees include SmutBucks.com, PrimeCash.com, FalconDollars.com, CECash.com, TrafficCashGold.com, AdultMegacash.com, and PlatinumBucks.com.

By November, the case was reassigned from Stotler to U.S. District Judge Joseph Ware, who is reputed to be highly experienced in patent law cases.

In late December, Acacia began seeking class-action assignment for litigation involving two defendants in order to "more efficiently" reach all adult entertainment companies using their claimed streaming media patents without a license. They named Global Media Resources (the parent of Python Video) and Cybernet Ventures (which includes Adult Check) as the companies they wanted to have represent the class, if class action is assigned.