NEWPORT BEACH, CA – Investors reacted Thursday to the news that the District Court for the Northern District of California found three terms indefinite in Acacia Research Corp’s legal battle with adult entertainment companies over streaming media on the internet. Shares in Acacia stock dropped by as much as 12.5 percent at midday trading, while Acacia’s general counsel and COO tried to spin the news as just a small setback in an ongoing process.”We’re in the second inning of a nine inning game, and it could go to extra innings,” Robert Berman, Acacia’s general counsel and chief operating officer, said Thursday. “We’re certainly still bullish about our DMT portfolio, as well as our other 33 patent portfolios.”

Despite Berman’s response, investors were less optimistic. Over the last year, Acacia shares have traded in the range of $4.24 to $7.83, and were in recent months on a climbing trend. At midday trading, shares stood at $.6.85, down 98 cents from the previous day’s close of $7.83.

Acacia claims that its DMT portfolio covers a variety of digital media transmission technologies, including streaming video or audio over the internet. In 2002, the company started sending “packets” to online adult entertainment companies, claiming that streaming media from websites violates the company’s patents. Acacia demanded that the contacted sites either license the technology at a price – often a percentage of the website’s profits – or prepare to defend themselves in court. Some adult industry companies settled with Acacia and came to terms on a licensing deal, while others formed an Industry Defense Group to challenge Acacia’s patent claims. Acacia filed suit in February of 2003, at that time naming internet companies exclusively as defendants, but later adding cable and satellite companies to the suit. Acacia has also demanded licensing fees from colleges and universities that offer online courses to their students.

The District Court ruling found thee of the twenty-two terms from Acacia Media Technology Corp. were indefinite. The company admitted that the ruling could invalidate one of its five patents that make up its DMT portfolio.

The news was well received by representatives from the adult entertainment industry. Spike Goldberg, whose company Homegrown Video is one of the leading defendants in the Defense Group, said the news was a positive turn in the case.

“It’s just another strike against Acacia and another vindication for people who are fighting them,” Goldberg told YNOT. He added, “Indefinite is a very, very bad word for a company trying to assert bogus patents on people.”

Asked how happy he was about this latest ruling, Goldberg replied, “I’m very happy, this is a great holiday present.” He added, “It’s not the end of the battle, but I think it’s a victory.”

Brandon Shalton, owner of FightThePatent.com, was also pleased with the ruling.

“The 2nd Markman Order is score 2 for the defendants, 0 for Acacia,” said Shalton. “Acacia’s expert witness had his own words used against him to show how some of the terms that Acacia is using are not applicable or definable. This means that the once perfect patent touted by Acacia is being whittled away by the two Markman Orders. Sadly, it means more court time to finish off the rest, but it is definitely proving to all those who have been watching this case that Acacia doesn’t understand patents, but them seem to understand how to convince people on the claimed “validity,” as some companies settled. Cheers to the Defense Group members and the Cable Industry companies for taking a stand. The Defense Group against Acacia is clearly standing up for all adult webmasters.”

Although news about the Acacia lawsuit has been sparse in recent months, Acacia has still been targeting adult entertainment companies for possible licensing deals. One adult entertainment company, who wished to remain anonymous, told YNOT that it had been contacted by Acacia as recently as eight weeks ago. According to the source, the letter demanded licensing fees and suggested that a discounted rate was still available if the company responded quickly. It is unclear however how the latest District Court ruling will affect Acacia’s future strategies with adult entertainment companies.