Acacia and Adult Webmasters at War

It seems that Webmasters in the adult online industry are in a tumultuous time right now. First, the crush came from Visa with their fees and regulations. Then, there was the blow from PayPal when they announced that they would no longer accept payments for adult content. Webmasters are also waiting on pins and needles to find out what happens with MasterCard. While all of this has been happening, revenues have been slipping, legislation has been passed putting severe restrictions on adult websites, companies have been going out of business, and the industry in general has seen some pretty tough times. To add insult to injury, it seems that there is one more battle that webmasters are going to have to fight, with a company called Acacia.

What is Acacia and how did this war start? A few months back, hundreds of companies in the adult industry received letters from Acacia Media Technologies stating that they owed money to Acacia for patent infringement. Acacia states that they have patents on "a system of distributing video and/or audio information (that) employs digital signal processing to achieve high rates of data compression." Acacia claims that they own five U.S. and seventeen international patents that cover the transmission and receipt of digital video and sound content, otherwise known as streaming media. In their letter, they asked online adult companies to arrange royalty deals with them that would involve paying anywhere from 1% to 2% of their gross revenue. Many companies that have ignored these claims were slapped with lawsuits. There have been approximately fifty online adult companies that have been targeted by lawsuits thus far, and about 20% of these companies have settled with Acacia. 

Let’s examine this issue a little deeper. According to Acacia’s claim, they could go after just about any company that offers any type of streaming media on their website. This means that they could sue companies like Yahoo, CNN, Amazon, to name a few. However, instead of going after the big guns, they have decided to start their slaughter with the online porn world first. Their logic is start small and build their way up to the big guys. If they can beat a few of the small guys in court, then they will have the law behind them to use when they decide to attack the mainstream media players. It’s very clever actually on the part of Acacia. They figure that the smaller companies will not have the financial resources to put up a good attack, and so victory will be easy. Once they have a few victories under their belts, their cases against the companies that do have the financial resources, will be much stronger.

What is the online adult world going to do then to fight this war? At first webmasters ignored the claim stating that it was crazy. When companies started getting slapped by lawsuits, then webmasters started getting scared. They figured it was only a matter of time before they too would have to cough up royalty fees. A few of the targeted companies have joined together and started to put a campaign together to fight Acacia. Spike Goldberg, of Homegrown Video has started IMPA (Internet Media Protective Association) which is a group of companies who are going to challenge the patents. In the meantime, it was announced recently that CECash is going to settle with Acacia and pay the licensing fees, and this has caused much turmoil amongst webmasters.

CECash defends itself by stating that they are only protecting themselves from having to pay huge damages if the patents are held up in court. If Acacia wins this battle they could potentially go back and collect retroactive damages. Rather than forking over millions and millions of dollars in damages, CECash has decided to settle. They still maintain that they support the fight against Acacia and if Acacia ends up losing the battle, then CECash will be relieved of having to pay the royalty fees. So, basically it was a very smart business move by CECash. They are really just covering all of the bases. 

What it boils down to is that every company that Acacia targets has some choices to make. They can either pay the royalty fee which is a percentage of the gross, demonstrate that they are not infringing on the patent, or invalidate the patents in court. All of these options are going to cost money, whichever way you look at it. Webmasters cannot criticize CECash for their decision, because they did what they felt was the right thing for their company. 

When it comes to the battle against Acacia, the most important thing for webmasters to do is to get involved and support the fight. You could be their next target. The IMPA is collecting donations via PayPal. The industry needs to join together and support those that are committed to challenging the patents. Stay tuned for my next article in which I will be interviewing Spike Goldberg, CEO of Homegrown Video. Spike will discuss the charges against Acacia and will tell us how webmasters can get involved.

Reader Comments: (1 posts)

Hollie says:
I really appreictae free, succinct, reliable data like this.
January 14th, 2012
at 10:42pm EST
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