Patent Suit Hits Major Satellite, Cable Firms

A Newport Beach company that claims to own key patents on digital video and audio distribution has sued the nation’s largest cable- and satellite-TV operators for royalties that could total more than $100 million a year.

Acacia Media Technologies Corp. said Tuesday that it filed the patent-infringement lawsuit against Charter Communications Inc., Comcast Corp., Cox Communications Inc., DirecTV Group Inc. and EchoStar Communications Corp.

Acacia Chairman Paul Ryan said the patents at issue “cover the transmission and receiving of digital media in cable, satellite, Internet and wireless.” The five patents were granted in 1992 to Greenwich Information Technologies, which Acacia bought in 2001.

The 21-employee Acacia has built a business around suing companies it claims have violated its patents on so-called streaming media. Many companies settle by negotiating licensing agreements with Acacia. Last year, for example, Acacia sued 39 pornography websites; 30 settled.

Acacia has signed up 123 companies as licensees. The largest is Walt Disney Co.. Others include Playboy Enterprises Inc. and the two largest providers of pay movies to hotel rooms, On Command Corp. and LodgeNet Entertainment Corp.

The companies named as defendants in the suit filed Monday in federal court in San Francisco may not settle so quickly.

Comcast, which has more than 21 million cable subscribers, and Cox, with 6.4 million cable subscribers, denied the allegations and vowed to fight them in court. Other defendants declined to comment or could not be reached.

The Electronic Frontier Foundation has been critical of Acacia’s actions and tactics.

“They claim to own every single method of streaming audio and video over the Internet and now also satellite and cable,” said Jason Schultz, an attorney with the San Francisco-based foundation. “We have become concerned, because the transmission of audio and video are a fundamental part of free expression.”

Acacia’s patents cover the commonly used practice of breaking video or audio files into small blocks that can be transmitted quickly over the Internet, digital cable or satellite. Those blocks are then reassembled for viewing or listening.

Even if companies use software from Microsoft Corp., RealNetworks Inc. or Apple Computer Inc. to compress their video and audio files, Acacia claims to own the patent on the underlying processes.

Ryan said Acacia had been in discussion with the cable and satellite defendants for about six months without results. The filing of the suit, he said, “is just turning up the process to hopefully get to a decision point.”

“It’s just part of the process, and with some companies you need to go through this to get to the deal point,” Ryan said.

No penalties are specified in the suit, but Ryan said the company would generally collect $1 to $1.25 per digital cable or satellite customer a year.

Acacia shares fell 5 cents to $6.05 on Nasdaq.