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Content Networks Spark Legal Fireworks

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News Analysis
Light Reading

Patent infringement suites, counter-suits, and FBI raids: It's just another day in the content networking market.

Content networking technology companies and service providers are battling over ownership of key software patents that help speed the delivery of Web content over the Internet.

Just last week Cable & Wireless (NYSE: CWP) filed its second lawsuit in three weeks against its leading competitor Akamai Technologies Inc. (Nasdaq: AKAM), which has initiated most of the litigation in the sector (see C&W Sues Sockeye, Akamai and C&W Sues Akamai). The two companies have filed complaints and counter-complaints against each other for the past two years.

Cable & Wireless’s latest lawsuit contends that Akamai is infringing on its U.S. Patent No. 6,275,470 which covers the Host-to-Host Adaptive Routing Protocol (HHARP) that detects Internet congestion and determines the best route across the Internet. The company alleges that Akamai and its route optimization spinoff, Sockeye Networks, are using its technology in their services. Sockeye, in which Akamai still holds a minority stake, is also named in the lawsuit (see Sockeye Spawns Service).

Akamai officials say that C&W's latest actions are a way for the company to divert attention away from an injunction Akamai won against the company in July. In December 2001, a jury found that Digital Island, an Internet Service Provider that C&W owns, had violated Akamai’s U.S. Patent No. 6,108,703. Judge Rya Zobel will establish the final wording of the injunction to be granted in the next few weeks, says Jeff Young, an Akamai spokesperson. The court is also expected to hold hearings on damages later this year.

“We are aware of the Cable & Wireless complaints,” says Young. “And we think they are without merit, and we are confident that Akamai doesn’t infringe either of these patents. Cable & Wireless seems to be acting to avert attention away from the recent federal district court ruling in our favor.”

Cable & Wireless was not available for comment on this story, but in a press release issued last week, the company maintained it was doing what was necessary to protect its intellectual property and stated that it expects to actively defend its intellectual property over the next several years.

Akamai has also gone after Speedera Networks Inc., a small startup competitor. In February of this year, Akamai filed a patent infringement lawsuit against the startup. And in June it filed a lawsuit alleging that Speedera's cofounder and chief technology officer, Richard Day, stole customer prospects and other information from a database maintained by a third party, Keynote Systems Inc. Speedera officials have flatly denied these allegations.

On June 24, the FBI raided Speedera’s Santa Clara, Calif., headquarters in response to a sealed affidavit filed by Akamai. In response, Speedera filed a suit against Akamai for unfair competition, false advertising, trade libel, and intentional interference with prospective business advantage.

Some legal experts say the flurry of new litigation by Cable & Wireless looks like an attempt to finally bring Akamai to the bargaining table and put a stop to all the lawsuits.

“It’s common for companies to counter-sue one another,” says Joel Rosenblatt, a private practice patent attorney in Florida. “I’m sure Cable & Wireless is trying to get Akamai to back off.”

While Akamai has won its initial patent case against Cable & Wireless, it’s not certain that the company will prevail in the cases that C&W filed against it this summer. What’s more, launching or defending such cases is not cheap. Each lawsuit costs about $1 million to either litigate or defend, says Rosenblatt. With $300 million in debt and its stock trading around $1 -- off its high of $300 a share in 2000 -- Akamai could be in a weakened position as it tries to pay for all its legal bills.

“I would guess that Akamai doesn’t want to put its competitors out of business but would rather get a large cash award in the way of damages,” says Rosenblatt. “Then they can force their competitors to license their technology and the checks keep on coming whether they have any business or not.”

— Marguerite Reardon, Senior Editor, Light Reading

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