Acacia. That six-letter word conjures up emotions ranging from dread and uncertainty to outright anger and frustration (and worse!) for adult Webmasters everywhere. It has become an unwelcome household name for many in just a few short months.Acacia. That six-letter word conjures up emotions ranging from dread and uncertainty to outright anger and frustration (and worse!) for adult Webmasters everywhere. It has become an unwelcome household name for many in just a few short months. While there has been no short supply of “Acacia bashing” on industry chat boards, YNOT NEWS wanted to provide an open opportunity for Acacia to present its side of the story this week In The Spotlight…

YNOT NEWS: Greetings Rob, and thank you very much for agreeing to do this interview with us. Hopefully, given all that has been going on in the adult Internet industry as of late, we will be able to clear up some misunderstandings, and set the record straight as to what is going on with Acacia and several adult online business owners. Before we get into it here, can you please give everyone a description of what Acacia is, and the services you provide.

Rob Berman: Acacia is a company that develops and acquires intellectual property for licensing. We have a biotech group, CombiMatrix, which invented a proprietary process for putting DNA on computer chips, and has licensing arrangements with Roche, NASA, and several other major licensees. Our other group, Acacia Technologies, focuses on non-biotech technologies and has entered into licenses with Philips, Thomson, Matsushita, Sanyo, and several other large consumer electronics manufacturers. We are currently licensing our Digital Media Transmission or “DMT” technology to online music, movie, sports, news and adult entertainment companies, as well as cable, hotel in-room entertainment, and e-learning companies. We have licensed many adult entertainment companies as well as non-adult companies such as LodgeNet, CinemaNow, Virgin, and Grupo Pegaso.

YNOT NEWS: Whom are you trying to license and to which parties does a license apply?

Rob Berman: In the adult entertainment space we are licensing content providers, Webmasters, affiliate programs, and adult verification services (AVS).

YNOT NEWS: Can you give us a breakdown of how a license covers each entity you just mentioned?

Rob Berman: Our content provider license covers teaser clips on the content provider’s Web site and the one time ftp transfer of content files. These are the infringing acts covered by the content provider license. If a content provider does not engage in either of those activities, a license is not necessary. Our content provider royalty is based upon sales of audio / video content by the content provider.

Our Webmaster license covers audio / video content that is accessed by the end user customer via the Webmaster’s site, regardless of where the content is hosted. So content that is hosted by a content provider and is accessed by the customer via a link on the Webmaster site is covered by the Webmaster license. Just because the Webmaster has someone else host and stream the content on the Webmaster’s behalf, does not absolve the Webmaster from liability for patent infringement. All sites owned or operated by the Webmaster are covered by one license and the Webmaster can add additional sites to the license at any time. Our Webmaster royalty is based upon subscription revenue.

Affiliate programs provide access to sites that are most often owned by the affiliate, and in some cases, third parties. The affiliate company is either a direct infringer of our DMT patents (if they own the affiliate site) or an inducing infringer (if the affiliate site is owned by a third party). In either case, the liability for patent infringement is the same. Our affiliate license covers sites that are part of the affiliate program and the royalty is based upon subscription revenue for those sites.

AVS services sell memberships and provide access to sites that participate in their program, most of which provide access to digital audio / video content using our DMT technology. The patent law allows us to license companies that manufacture, use, offer for sale or sell access to digital media that is transmitted and received using our patented technology. Our AVS license covers the AVS site itself, and also covers the sites that are participating in the AVS program. The royalty is based upon subscription revenue.

YNOT NEWS: What are the pros and cons of licensing with Acacia versus not, and is it mandatory? What are the risks and rewards either way?

Rob Berman: The patent law allows us to seek royalties for the past six years. For companies that step forward and enter into licenses with us, we are offering waivers for past infringement as well as a guaranteed low royalty rate for the life of the patents (U.S. – 2011; Foreign – 2012). This offer will only last through the next few months and after that, companies will have to pay fees for past infringement. Our agreements provide that if at any time the patents are held to be invalid or unenforceable, royalty payments immediately stop.

Companies that choose not to license us are taking a significant risk. In addition to incurring expensive legal fees, if we are successful in court we will seek royalties for the past six years. We will also seek treble or three times damages for intentional infringement of our patents for infringement occurring after notice of infringement. In addition, we have no obligation to license companies on a go forward basis, so we will be able to choose who gets a license and who does not. If we choose not to license you, you will no longer be permitted to provide access to digital audio / video content on your site. This is an important decision with big dollars at stake for those companies that elect not to take a license.

We are taking steps in our current litigation to include all adult entertainment companies that are using our technology without a license. In many cases, the cost of a license will be less than the legal fees alone. But it is up to each company to make their own decision. All we can do is provide information so that companies can make an informed decision.

YNOT NEWS: Acacia has been criticized by some in the adult space as missing the boat on cashing in on the adult Internet and adult PPV in hotels, etc. and is now looking to reclaim “lost” earnings by going through loopholes to cash in. In fact many adult Webmasters are very angry and have been aggressive towards Acacia as a result for the past few months… specifically in adult Webmaster forums. What is your response to all of those allegations?

Rob Berman: People are angry because we are now asking them to pay for something that they have been using for free. We understand that. To be fair, that is why we are currently willing to waive royalties for past infringement, even though the law says we can collect for the past six years. That offer is about to expire.

Just because someone may have used our DMT technology for free in the past, doesn’t mean that they can legally continue to use it. For example, if someone stole content from your site a few years ago, it doesn’t mean that they can legally continue to use it today. It is no different for our patented technology.

Although Acacia was an early investor in the company that developed the DMT patents, we didn’t purchase majority control of the company until the end of 2001. Before licensing the patents, we spent an enormous amount of time and money doing due diligence on the patents. Three prominent law firms that specialize in intellectual property reviewed the patents. We hired professional search firms to perform prior art and literature searches in the U.S., Europe and Asia. We consulted with experts in the field including college professors and PhDs. We even hired patent buster groups who specialize in invalidating patents. All of the conclusions were that our DMT patents are valid and enforceable.

Am I guaranteeing that we will prevail in the litigation? No, litigation is always risky. But we have done our homework and are very confident.

YNOT NEWS: As many people aren’t familiar with patents and how they work, please explain the process and why Acacia is entitled to what you are asking for.

Rob Berman: A patent is the equivalent of a legal monopoly provided for in Article I Section 8 of the Constitution. It gives the inventor the exclusive right to the invention for a period of time in exchange for disclosing the invention to the public. Our DMT technology is supported by five U.S. patents and 17 international patents. This is important because several foreign patent offices also reviewed our technology and determined that it was worthy of a patent.

The claims of a patent describe the invention. Our U.S. DMT patents have 137 issued claims, and we have approximately 500 additional claims pending at the patent office. Because of what is called an open continuation, our new claims will also get the benefit of the 1991 date.

YNOT NEWS: Please explain what it means for a patent to be invalid.

Rob Berman: In order for something to be “patentable,” it must be new or novel. This means that the exact invention must not have been previously publicly disclosed. Prior art is evidence of prior public disclosure and generally comes in two forms, other patents, and published literature. Patent offices, such as the USPTO, generally search for prior patents, and may or may not search for published literature.

Once a patent is issued it is presumed to be valid. The burden is on the alleged infringer to prove that the patent is not valid. This is a very difficult task. Even if prior art is uncovered, it would need to invalidate each of the applicable patent claims in order to absolve the defendant from patent infringement liability. In addition, many patent decisions invalidating patents at the trial level are overturned on appeal.

Acacia has taken extreme steps to search for prior art as described above. Everything that we have found has been submitted and approved by the U.S. Patent Office. Other companies that we are in discussions with have also searched for prior art. So far, we have seen nothing that would invalidate any of the claims of our DMT patents.

YNOT NEWS: How are you handling your very public fight with IMPA and the most recent lawsuit that Cybererotica has filed against Acacia? What would a win mean for Acacia? How about a loss?

Rob Berman: I really wouldn’t describe it as a fight. I have never met the IMPA guys and our feelings are certainly not personal.

When we first attempted to license the adult entertainment companies, several people chose to incite fear and cause panic, instead of trying to understand what our patents cover and the licensing terms we were offering. In fact, one company that got caught up in the frenzy recently came to us and spent $35,000 in legal fees before realizing that they don’t even need a license.

Several of the IMPA “leaders” went to the chat boards and told Webmasters not to talk to Acacia if we contacted them. In addition to being really bad advice, it is also illegal.

Subsequent to that, IMPA’s representatives have continued to make misleading and irresponsible comments about Acacia that are being relied upon by thousands of people that IMPA supposedly represents. For example, the IMPA folks continually state that our DMT patents are invalid. It would be more responsible if they said something like “our lawyers believe we have a X% chance of invalidating the Acacia patents. Here is the evidence that we have – it will cost $Y in legal fees if we win, and if we lose it will cost $Y in legal fees, you might have to pay $Z in back royalties, and you may not get a license for the future”. Litigation is never a sure thing and as I explained above, it is very difficult to invalidate patents in court. It is wrong for IMPA to make it sound like the case is a slam-dunk. The bottom line is that people shouldn’t get legal advice from chat boards and shouldn’t license or not license our patents because Edward Goldberg or Greg Clayman say so. If IMPA wants to help the industry, it should give people the accurate and complete information that they need to make their own decisions.

Trade News Corporation (owners of the CE Cash and Cybererotica sites) was one of the first major adult entertainment companies that we licensed. We told them prior to signing the agreement that we would be announcing the deal. They apparently got hammered on the chat boards after the deal was announced, and as a result, alleged that we breached the confidentiality provision of the agreement. So far, two judges have agreed with Acacia that there was no breach. The fact is that we are in the process of finalizing licensing deals with several major adult companies that all hired experienced patent counsel to review our DMT patents. We are confident that licensing Acacia’s patents will soon be the norm for the industry, as opposed to the exception. The industry has far bigger problems to deal with than Acacia (e.g. credit card companies, shaving, etc.) and the relatively minor royalties we are seeking. We hope that the industry does well because if they don’t make money, there won’t be any royalties to collect.

We are reasonable business people and are not the villains that some have made us out to be on the chat boards. If anybody has questions or special circumstances that apply to them, they are welcome to call (949-480-8300) or email us at rberman@Acaciares.com. Time is running out on our current licensing offer and people need to decide what they want to do.

YNOT NEWS: Thank you very much for taking the time out this week and presenting your side of the story Rob.

For more information please visit www.Acaciaresearch.com.

Do you know a Webmaster or company with a great story to tell? Someone innovative, unique or perhaps even entertaining? Tell us about this them for future consideration to be “In The Spotlight” here at YNOTNews!