Thursday, May 27, 2004

For-Profit College's Deal With Company Claiming Patents on Online Media May Set a Precedent By SCOTT CARLSON Printer friendly E-mail article Subscribe Order reprints HEADLINES   No heads will roll in U. of Colorado football-recruiting scandal, newspaper reports U. of Georgia breaks ties to its fund-raising arm, a split unprecedented in academe Advocacy group criticizes colleges for permitting too many students to drop out For-profit college's deal with company claiming patents on online media may set a precedent Commencement speakers are announced by 14 colleges  A major for-profit distance-education company has signed a licensing deal with the Acacia Research Corporation, which claims to own patents that cover all online audio- and video-streaming technologies. The terms of the deal were not disclosed. Acacia has been sending notices of patent infringement to hundreds of colleges and distance-education companies, asking them to pay Acacia 2 percent of the gross revenue derived from their use of online media. Capella University, in Minneapolis, is the second distance-learning institution to sign a licensing deal with Acacia. The small for-profit 24/7 University, in Dallas, signed an agreement last year. Acacia initially sent its infringement letters to online-pornography companies, then it set its sights on colleges and mainstream corporations. A small group of pornography companies is actively fighting Acacia in court, but many major companies in the adult-entertainment industry, like Playboy Enterprises, readily signed patent licenses. Recently, mainstream companies such as T. Rowe Price and Disney Enterprises have signed deals as well. Most colleges want to avoid signing such license agreements. General-counsel offices at various colleges -- including the Johns Hopkins University, the University of Pennsylvania, and the University of Virginia -- have discussed mounting a collective defense. Some see Capella's licensing agreement as setting a bad precedent for higher education. Sally M. Johnstone, director of the Western Cooperative for Educational Telecommunications, said that Capella had "basically validated Acacia's claim." "It sounds to me that just as the porn industry was not willing to fight, the higher-education industry is unwilling to fight," she said. She worried that administrators at traditional institutions would now feel more pressure to strike a deal with Acacia. Officials at Capella and at Acacia did not respond to calls from The Chronicle on Wednesday. Setting a Precedent Signing a licensing agreement is almost always cheaper than fighting a patent case in court, said Dan Rayburn, executive vice president of StreamingMedia.com, a Web site that tracks the industry. "Usually it comes down to a business decision," he said. "It might be a smart business decision for that company to sign a licensing agreement. Is it good for the group? Probably not, because it sets a precedent." (At a recent conference, StreamingMedia.com played host to a discussion about Acacia, a video of which is available online.) The deal between Capella and Acacia followed shortly after an announcement by eCollege, a company that sells distance-learning software to institutions, that it had negotiated "favorable" terms for its clients, should they decide to sign up with Acacia. Some professors use eCollege's software to deliver streaming video clips. Oakleigh Thorne, chairman and chief executive of eCollege, said that his company would not profit from arranging deals between colleges and Acacia. He said that the negotiations were merely a service eCollege was providing to its customers. "We don't think anything the schools are doing are infringing Acacia's patent," Mr. Thorne said, adding that he thought Acacia's claims were "ludicrous." Mr. Thorne said that eCollege had hired a patent lawyer to review Acacia's claims, and that the lawyer had determined that eCollege was not infringing. Mr. Thorne said that some colleges had contacted eCollege and asked the company to help fight Acacia in court. "We do not believe we have that obligation at all," he said. Closely watched hearings in the court case between a dozen pornography companies and Acacia wrapped up last week. Judge Joseph Ware of the U.S. District Court in Santa Ana, Calif., will issue tentative rulings, interpreting the patent claims on the basis of arguments and briefs presented by both sides, by July. Motions for summary judgment often follow such rulings. Background articles from The Chronicle: Company Claims to Own Online Testing (3/26/2004) Colleges That Transmit Sound and Video Online Reluctantly Discuss Strategy for Answering Patent Claim (2/6/2004) A Patent Claim That May Cost Millions (11/7/2003) Company Tells Colleges That Its Patents Cover Video and Audio for Online Courses (10/17/2003)