As anyone writing about patents quickly discovers, Acacia Research Corporation is a big name in a controversial business. Acacia makes money by getting companies to pay for licenses to its patents; those that won't pay often meet Acacia in court.
The Newport Beach-based patent-holding firm has filed dozens of patent infringement lawsuits against more than 100
defendant companies. But until last week, none of those lawsuits had been tested in a jury trial.
A Beaumont, Texas jury took only two hours Thursday to decide that Acacia’s lawsuit against Microsoft didn’t hold water, and tossed out Acacia’s patent to boot. The company’s stock has since lost more than a third of its value, dropping from $17.90 to just about $10.00 on Monday afternoon. Before closing arguments, an Acacia expert said Microsoft should be forced to pay $2.50 per copy of Windows XP, which various reports have pegged at between $600 million and $900 million.
Acacia's detractors say the company is a prime example of a "patent troll," using the threat of litigation based on overly broad patents to make money off others’ hard work. Critics put the Newport Beach, Calif.-based company at the heart of a new industry they say abuses the patent system. Others have labeled their model "patent holdup" or even "patent terrorism."
The company does not share that view. Acacia officials say they defend innovation by helping small inventors and
companies to outsource the difficult and costly business of licensing their patents.
"We’re the only really pure licensing company in
the country that small technology companies can partner with," Acacia
CEO Paul Ryan told me yesterday. "We have the expertise and experience—500
licenses including every major company in the country."
That gives the
little guy leverage against big corporations that would otherwise blow off
valid patents, said Ryan. Acacia's point of view is well articulated in this February 2007 profile, and in this 2006 interview with CNET.
Last week's verdict also leaves seven other East Texas lawsuits that Acacia filed last month in limbo, since they are based on the same patent asserted in the Microsoft case, 5,933,630. Ryan told me the company hasn’t decided whether or not to appeal the Microsoft verdict—which it would have to do to keep the other lawsuits alive.
The full story is in today’s Daily Journal, complete with some colorful quotes from Weil Gotshal & Manges partner Matt Powers, a Silicon Valley patent litigator who went toe to toe with a “dream team” of Texas plaintiffs’ lawyers to defend Microsoft. ("Defendant Microsoft Wins Big Patent Suit in Plaintiffs' Haven", 11/20/07) Marketwatch also has well-reported coverage of the lawsuit.
Computer Acceleration Corp. v. Microsoft Corp., 06-cv-00140, ED Tex.
Lawyers expecting the Eastern District of Texas to lose its pro-plaintiff luster shouldn't hold their breath. The day after its big win, Microsoft lost a round in the patent wars when the Federal Circuit upheld a $142 million ED Tex verdict against it for infringing a patent held by z4 Technologies.
A final note for blog readers--
The Battle in Beaumont was ultimately a dispute between two Washington State companies. The '630 patent originally belonged to eAcceleration, a software company located about 40 miles away from Microsoft headquarters in Redmond. eAcceleration CEO Clinton L. Ballard, who did not testify at the trial, is named as one of two inventors on the patent. Ballard's company was public but terminated its registration with the SEC on July 12, 2006, just six days after Microsoft was sued.