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Acacia purchase creates Net patent powerhouse

After aggressive push for streaming media royalties, firm buys patents in P2P, Web ads, dozens of other technologies.

In the streaming media business, a letter from Acacia Research usually means one thing: the threat of a patent lawsuit.

Now, the little-known but litigious company is expanding its horizons with a move that promises to substantially increase its profit potential while bringing new patent headaches to the high-tech industry at large.

On Thursday, the company agreed to buy Global Patent Holdings, an umbrella company whose various divisions, including TechSearch, have sued or struck patent licenses with Intel, Sony, Samsung and a myriad of smaller technology companies.

The deal would create a patent powerhouse that would own small pieces of dozens of different technologies, many of which are fundamental components of everyday Internet and personal technology businesses. The company said more acquisitions are likely.

"We will continue to acquire additional portfolios, as Acacia moves towards its goal of becoming the leading technology licensing company."
--Paul Ryan, CEO, Acacia

"We will continue to acquire additional portfolios, as Acacia moves towards its goal of becoming the leading technology licensing company," Paul Ryan, Acacia's chief executive officer, said in a statement.

Acacia's intellectual property division produces no products and runs no services, although an associated company does create biotechnology and genomics products. But it has largely become famous in streaming-media circles for its litigiousness, cutting a swath through the online porn industry and even taking on cable giant Comcast in pursuit of licensing fees over technology it says covers the basic method of delivering video bits over the Net.

Those efforts have been largely successful. Although many of the lawsuits remain outstanding, it has settled with more than 227 companies, including Disney.

Patent experts said the company's actions are part of an evolution in the technology world, where large, diverse patent portfolios are being consolidated into new licensing-focused businesses whose sole purpose is to extract fees from other going concerns.

Former Microsoft Chief Technology Officer Nathan Myhrvold has founded a secretive Seattle-based company called Intellectual Ventures that, according to Newsweek, has raised $350 million to pursue a similar strategy. It has already accrued close to 1,000 patents.

The last few years have seen an upswing in patent lawsuits brought on the basis of basic Internet technologies, ranging from buying music using a computer to Acacia's own assertion of rights to Web streaming technology.

Most of these have been launched singly, by independent companies with just one or a few individual patents. While potentially quite profitable, these lawsuits are expensive to pursue, and companies such as Acacia and TechSearch may be seeing efficiencies in consolidation.

"This is becoming a business in the sense of products, markets, and supply and demand," said Greg Aharonian, a patent consultant who is a frequent critic of overreaching patent demands. "It will attract new entrants, with consolidation, and winners and losers like any business."

TechSearch has been a persistent figure in intellectual property circles at least since suing Intel on the basis of an obscure chip patent in 1998. It has won licenses from electronics giant Sony and others for products that play MP3 CDs.

Early this year, it sued the New York Times, ESPN and other Web publishers, asserting rights to some types of "interstitial" advertising including pop-up and pop-under Web ads.

According to Acacia, the transaction also will give it patents relating to peer-to-peer communications, spreadsheet software, image resolution or enhancement, interactive simulation systems and dozens of other technologies. Eleven of the patent portfolios being acquired have been at least partially used in licenses and have generated more than $40 million in revenue, the company said.

Acacia is paying $5 million in cash and 3.9 million shares for Global Patent Holdings. The deal is expected to close early next year.

Earlier in the year, Acacia purchased rights to the process of redirecting Internet log-ons, as is commonly done at Wi-Fi hot spots in hotels and coffee shops.