Today, millions of people listen to online podcasts from their favorite comedians. Podcasts have been around since 2004, initially to supply non-music programming for iPods. Apple later started offering podcasts through downloads via iTunes in 2005. As the popularity of smartphones and tablets has eliminated the need for downloads, sites like SoundCloud now offer instant listening on the Web and via smartphone apps. But, it turns out that podcasts could be in peril, due to a newly emerging patent lawsuit.
The basic patent troll business model consists of getting a patent, suing a business that can’t afford to pay for legal defense, and then negotiate nuisance settlements. It’s easy and lucrative. The problem for company PersonalAudio is that it sued Adam Carolla, of “Loveline” and “The Man Show” fame – an outspoken celebrity.
James Logan, founder of PersonalAudio, claims he has never made a podcast, but has helped create the medium of podcasting in 1996 – and he has the patents to prove it. According to USA Today, in a legal battle, PersonalAudio is suing comedian Carolla’s ACE Broadcasting, two other podcasters and networks Fox, CBS and NBC, claiming they are infringing on his intellectual property. According to The Economist, PersonalAudio once owned a patent on customized cassette tapes with current news. It updated that patent in 2009 to cover any serialized podcast that can be downloaded from a specific URL.
Before the trial begins in September, Carolla is raising money for legal fees against patent trolls. According to Carolla, he needs $1.5 million to face PersonalAudio in an East Texas courtroom that has been favored by patent litigants. So far, Carolla has pulled in just over $370,000 on the Fundanything.com, including a $20,000 donation from e-commerce giant Amazon.
“The first thing they (PersonalAudio) said was ‘Give us $3 million,’” said Carolla, whose show is listed in the Guiness Book of World Records as the most downloaded podcaster ever. “Obviously, $3 million is out of the question. But even if they said tomorrow, ‘Give us $100,000, and this will all go away’ — $100,000 for what?”
The trials — six separate suits between PersonalAudio and Carolla, Discovery Networks, podcaster Togi Entertainment and the broadcast networks — will take place in Marshall, Texas with 24,000 residents. As of late, Marshall has become the “patent trial capital,” a popular place to get a trial in a city whose docket isn’t filled with other cases waiting to get a hearing.
Logan’s 1996 concept was downloadable entertainment via the Internet to a new kind of MP3 player he was trying to market. The product fizzled, so he switched gears to subscription of cassette tapes. He was granted several patents, which included the notion of having downloaded playlists. In 2009, PersonalAudio amended the patent to include podcasting. Then, PersonalAudio sued Apple over the issue of playlists, which it popularized with the iPad, and won an $8 million settlement in 2011.
Many say the patent system has gone out of control. Big companies such as Apple, Samsung and Google regularly battle one another in court over patents, but many small firms have complained about getting letters from firms like PersonalAudio that don’t pertain to their business but cause them to settle, since patent litigation is very expensive.
“So many entrepreneurs are doing good things; it puts a damper on the entrepreneurial work they’re doing,” said Charlene Li, an analyst with the Altimeter Group. “The patent office is trying to fix this.”
There are several bills in Congress that are aiming to tighten up patent laws, but with gridlock in Washington, they aren’t expected to pass this year.
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