A firm that says it holds the rights on technology needed to power video-on-demand services and streaming video over the Internet sued major cable and satellite TV companies Tuesday, alleging patent infringement.
Acacia Media Technology Corp., a division of Newport Beach, Calif.-based Acacia Research Corp., alleges that nine companies are violating five of its patents, some of which date back to 1992, that describe a method of transmitting audio/visual content.
The defendants include cable giants Comcast Corp., Cox Communications Inc. and Charter Communications Inc., as well as satellite providers DirecTV Group Inc. and Echostar Communications Corp. and some smaller companies. The complaint was filed Tuesday in federal court in San Francisco.
Charter spokesman David Anderson said the company had yet to see the lawsuit but added, "We do not believe that Charter's services infringe any intellectual property rights that Acacia may have."
Comcast spokeswoman Jenni Moyer said the company "vigorously disputes" the allegations.
Other defendants said they couldn't comment because they hadn't seen the complaint or do not discuss pending litigation.
The patents cover a method of transmitting content, such as movies or video clips, that is stored in a library, as opposed to images of live events.
The patents describe a method of breaking the content up into blocks, placing time codes on them, compressing the size of the files, storing the chunks of data and then transmitting and receiving them.
"The way most digital content is transmitted these days involves these steps," said Rob Berman, executive vice president of business development and general counsel at Acacia.
On the Internet, most content providers compress their video files using software from Microsoft Corp., RealNetworks Inc. or Apple Computer Inc. In the cable world and in hotels, compression is achieved using MPEG-2 software, Berman claimed.
"Both methods achieve what we believe is covered by the patent," Berman said.
Acacia is seeking licensing fees of $1.25 per home per year for cable subscribers to video-on-demand services; $1 per home per year for digital cable subscribers and 50 cents per home per year for analog cable subscribers.
Analysts estimate the fees could bring in at least $100 million a year.
"It's a very sound business model," said Paul Sethi, a fund analyst at Iroquois Capital investment fund, which holds shares of Acacia.
"Initially they have gone after the low hanging fruit which was easy to capture and at little expense to the company," he said, referring to previous licensing deals by Acacia. "Now they're looking to go after the major cable guys."
Acacia acquired full interest in the company that held the patents in 2001 and last year filed complaints against 39 adult entertainment companies that were streaming content over the Internet. Acacia reached licensing agreements with several of the companies; the complaint is still pending against 17 others.
This year, Acacia announced license agreements with The Walt Disney Co., Playboy Enterprises Inc. and On Command Corp., which provides in-room services to hotel companies.
Acacia has also collected millions in licensing fees from a patent held by a subsidiary, Soundview Technologies, on the software that powers the V-chip, a device used to block certain objectionable television programs. The V-chip patent expired in 2003.