Patent Law

Kelly Teal writing February 29, 2008 for xchange states, in part:

The content delivery network (CDN) arena isn?t just growing, it?s exploding. Demand for online video and gaming is so intense that, last year alone, CDN revenue totaled more than $990 million, according to a January 2008 report by Tier 1 Research. Meanwhile, Frost & Sullivan predicts the CDN field will rake in $2.5 billion by 2013.

Demand and forecasts for CDNs are creating an overcrowded marketplace, which is likely to result in consolidation. It?s also leading to lawsuits over intellectual property, given so much money is at stake. And some believe potential CDN consolidation and litigation may be closely intertwined.

Litigation

"I can virtually guarantee that we will continue to see an uptick in cross-licensing and patent litigation among and between service providers, as well as others in the telecommunications space," says William Wilhelm Jr., a partner at Bingham McCutchen LLP. Over the past year, he says, he worked with more investors, manufacturers, software developers and service providers than ever as unified messaging, peering, hosted VoIP and, yes, CDN, all became mainstays.

VoIP lawsuits took the spotlight in 2007, and they aren?t disappearing in 2008. But CDN is the next big battleground when it comes to telecom-industry patent infringement charges. Much of that is because new arrivals like AT&T Inc. and Level 3 Communications Inc. as well as smaller outfits are upending the CDN sector?s dynamics. Original CDN players such as Akamai Technologies, Limelight Networks Inc. and Mirror Image Internet Inc. appear ready to file lawsuits at the slightest whiff of infringement.

Love and War

Beyond just attempting to settle a patent issue, however, Akamai?s litigation against Limelight could signal an attempt by the former to sidle up to the latter, various sources speculate. Indeed, it wouldn?t be the first time Akamai has sued, then bought, a rival. In 2002, Akamai sued Speedera Networks, which it purchased in 2005.

"If the end game is actually to purchase a company, to gain the upper hand in the M&A negotiations by first getting them on the run through patent infringement, you might be able to buy them under much more favorable commercial terms," says Douglas Roth, senior manager of advisory firm ipCapital Group Inc.

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