Off the Radar Investor

AOL To Shutter a Slew of Products

Michael,

I always enjoy your commentary and I read your articles regularly. In fact, I have you marked so I see all of your work when published.

In light of your knowledge and coverage of AOL and their continuing struggle to keep pace with a changing online environment, I was wondering if you would mind providing some commentary on another article that appeared here a while back regarding Platform A. Keep up the excellent work!

Why AOL's 'Platform A' May Not Make the Grade

by: John Harris posted at SeekingAlpha.com on: June 18, 2008 | about
stocks:

MDVX.OB / TWX

Back in September, AOL (TWX) today announced a series of changes it was making to position the company as the world's largest and most effective advertising network, building on its industry-leading Advertising.com network and the recent acquisitions of TACODA, Third Screen Media, Lightningcast, Adtech, Quigo and Bebo, collectively purchased for what must be close to $2 billion dollars. The realignment marked the final stage in AOL's transition from an access business to a global, ad-supported Web company.

The new entity, called Platform A, says it is offering advertisers
access to the most sophisticated targeting and measurement tools
available in the marketplace across Platform A's unmatched network
of third-party sites, as well as AOL's owned and operated sites.
Platform A is said to already reach more than 90% of the domestic
online audience, according to comScore Media Metrix. Platform A
builds on the success of Advertising.com, which operates the largest third-party display network, and integrates behavioral targeting leader TACODA, Third Screen Media, which operates the largest mobile media network, market leading video ad serving platform Lightningcast, and ADTECH's global ad serving platform.

In recent weeks, the company announced plans deploy Tacoda's
technology across the whole Platform A network. In an article
written by Fred Aun published at Clickz.com titled "AOL's Platform A
Integrates Tacoda Across Network" Platform A President Lynda
Clarizio, said players in the online ad industry are now insisting
on scale and precision with consumer targeting options. She said the use of Tacoda's BT technology will help Platform A satisfy that
demand.

"We'll replace all of Advertising.com's existing behavioral
technology with Tacoda's behavioral product," said Clarizio. For re-
targeting campaigns, Platform A will continue using Advertising.com
Advertiser Leadback technology and migrate Tacoda Encore clients to the Advertiser Leadback platform, she explained. Clarizio said the
integration gives Tacoda the full benefit of reaching all of
Platform A's 180 million unique visitors, representing 91 percent of
the U.S. Internet audience. She said she considers Tacoda to be the industry's best behavioral targeting technology. I guess that makes sense, they did pay David Morgan and his team $275 million after all for it.

It all sounds great doesn't it? Ah yes, but Ms. Clarizio failed to
mention a potential large problem that could literally prove to be a
show stopper. Tacoda is being sued for patent infringement by a
company who appears to be the rightful owner of the "patented"
technology she herself refers to as "the industry's best behavioral
targeting technology".

That's right! It appears Tacoda, said to be acquired solely for
their technology and not their people, owns not a single issued
patent on the technology they sold to AOL! They must have seen the value in patenting it since it is "patent pending" but you obviously can't obtain a patent for technology someone else patented many years ago. This `already patented" technology is the exact same technology that they intend to make a cornerstone of Platform A, allowing them to monetize AOL's $2 billion dollar plus investment. I know, say it isn't so!

It get's even better, according to Modavox's (MDVX.OB) just released filings, they just sent a Cease and Desist letter to AOL, LLC President & Chief Operating Officer regarding Ms. Clarizio's exact stated plans to utilize Tacoda across all of Platform A.

On May 16, 2008, Modavox served a Cease and Desist letter to the
AOL, LLC President & Chief Operating Officer. We advised of the
possible expansion of our current action against Tacoda to include
AOL, LLC if they intend to utilize the Tacoda Advertising process
throughout the AOL, LLC "Platform A" as described in recent
publications and news releases. We have informed AOL, LLC that a non-exclusive license to the patents-in-suit are available; however in the absence of a license AOL, LLC's published intention to make the Tacoda solution available across the Platform-A Network will in fact infringe upon well identified patents. As of June 1, 2008, the
matter remains unresolved.

So I ask a couple very simple questions of Ms. Clarizio and Mr.
Falco. In light of the importance of Platform A to AOL's future, the
fact that at least a couple billion dollars has likely been spent in
it's formation, the fact there have been suggestions it will be spun
off into it's own publicly traded company, and the fact Platform A
is clearly predicated and reliant on Tacoda's behavioral targeting
technology to monetize your audiences through online advertising,
what if you lose this lawsuit? What if one of your competitors buys
this small company and leverages it against you?

Until this important issue is resolved, it appears AOL's Platform A
may not make the grade.

Is Social Media Rampantly Monetizable?

Brilliant!

I've long said it's garbage in garbage out and advertisers will not embrace the inability to target users with specific interests. It's about niche communities with professionally produced content just as you state.

I think companies like Modavox who owns World Talk Radio and VoiceAmerica, the worlds largest online talk radio networks are the most valuable audiences out there. They have millions of listeners that stay online an average of 15 to 20 minutes and since the shows are specific in their interests, the audience is more targetable making it more monetizable. As you point out, the key is to control your content which these social media sites can't do.

Thanks for saying what many of us in the space know. It's niche communities and those who produce and control the quality of their content that online advertisers are now starting to embrace. To advertise on most of these social networking sites that have fetched in excess of billions of dollars in being acquired is paramount to throwing stuff at the wall to see what sticks.

I think the next wave is a rush to acquire some of the smaller sites that posess these more valuable niche audiences.

Why AOL’s 'Platform A' May Not Make the Grade

I guess AOl could always go back to Advertisng.com's platform if they lose but they must be changing to Tacoda from Advertising.com for some reason? I can't believe they bought the company for its technology and paid that much and they don't even own a patent on it? I guess AOl didn't get into the mess they are in by making good strategic decisions. It's time Falco and company get it right or they will go the way of the dinasour.

Why AOL’s 'Platform A' May Not Make the Grade

Aol acquires a company being sued for stealing someone elses patented technology and pays $275 million for it and then fires all that company's best minds! Just one more dumb mistake in a list of many. AOL can't find it own way out of a paper bag! They are so stupid they are probably going to sit idle till another competitor just buys this company and really cause themselves a major problem! Good lord, imagine if Google gets their hands on these patents!

Why AOL’s 'Platform A' May Not Make the Grade

I generally agree with you but I think the lawsuit is a pretty big concern. I've spent some time looking at this company's patents and they are pretty impressive from my perspective having researched many patents in the past. It looks like Tacoda was actually being sued before AOL bought them and without AOL buying them, Tacoda would have been forced to deal with it with their limited resources. Morgan was saved by the "AOL" bell so to speak. I think the other major behavioral firms could face the same issue with this little companies patents, especially if a larger player acquires them. To date, they obviously haven't had the resources to go after all of them. Blue Lithium acquired by Yahoo is another clear infringer along with what would appear to be many others. It's why I think one of the large guys would be well served to snap up this small company and use their patent portfolio as a weapon against the competition. The licensing opportunities alone are tremendous. Again, I would generally not be concerned about lawsuits in the normal course of business. However, this lawsuit is dealing with the fundamental core technology being deployed across all of platform A, it's absolutely critical as stated in their own words. Clarizio stated they acquired Tacoda for the technology and not their people so it contradicts your thoughts. I tend to agree more with you frankly.

Why AOL’s 'Platform A' May Not Make the Grade

Very very interesting. It will be hard for them to even take it public with such a material lawsuit pending. No underwriter would put their name on the prospectus until it was resolved. It's amazing to me they are dumb enough to role Tacoda across all of Platform A without resolving this issue? You make a great point, what if they lose? then what? None of it surprises me, AOL has not been known for making the best of decisions over recent years.

Searching for the Voice of the Internet

He was right originally and I'll bet he's right now. Being in the industry itself, this company is raising more than a few eyebrows. Good article!

AOL to Launch Up To 30 News Sites by Year End

Duncan,

I always like your commentary and read it religiously.

Regarding AOL and their struggle to keep pace. I still want to know how AOL is going to execute its online strategy icluding their Platform A advertising IPO, with one of their recent acquisitions Tacoda being a cornerstone of the company. They are being sued for patent infringement by Modavox for stealing their patented technology and fetching $275 million for it. David Morgan's, founder of Tacoda, recent departure leaves me wondering if the suit has real teeth in it and serious implications for AOL.

They better prey they don't lose that case and Modavox doesn't get injunctive relief shutting down Tacoda and AOL's use of Modavox's important patented customization of content technology. Just take a look at the current Akamai vs. Limelight case and its recent ruling.

If AOL were really on the ball, they'd scoop this little company up before Google, Yahoo or another competitor figures out that this little company owns the patented technology they all need to effectively monetize their large online audiences through online advertising. This company owns the patented technology that allows for the customization of content or advertising to end users based on behavioral data. You can own the audience, you can have the advertisers, but if you can't custom tailor the message to them, all you have is the old spray and prey method of advertising which yields little to no roi on advertisers online ad spend.

Whoever eventually acquires them, and someone will imo, gains a valuable weapon which could be leveraged against their competitors to gain important market share while securing very valuable licensing royalties.

We'll see how AOL handles this situation as it will determine whether they are focussed on the future and catching the competition, or if they are simply satisfied remaining at the back of the path in fourth place behind Google, Yahoo and Microsoft.

Modavox: The Next Big Internet Patent Licensor?

More Listeners, More Money: Online Radio Growth Continues
 
Internet radio isn't the biggest earner online, but its appeal continues to grow.  Just recently, Accustream iMedia Research pointed to a 26.1 percent increase in total listening hours in 2007 to 4.85 billion.  That is drawing more advertiser interest, though the group credited heavyweights Clear Channel and Citadel Broadcasting for drawing the most advertising visibility.  In total, internet radio billings topped $80 million in 2007, according to the group, almost triple sales of $26.9 million in 2006.
 
Additionally, the internet radio industry is also spinning video-based advertisements, which yielded an additional $12-15 million last year.  AOL-owned Shoutcast grabbed the most attention last year, with 48.4 percent of total listening hours, according to the ranking.  Other top-ranked destinations included Clear Channel Online, Yahoo Music, AOL Radio Networks and Pandora.
 
 

Modavox: The Next Big Internet Patent Licensor?

I think this company has the potential to possibly be a billion dollar company. I see them having similarities to Qualcom in terms of a licensing opportunity.

I think this company has the potential to essentially be like the toll booth taking a fee from all those infringing on their patented technology. I can't believe the current market cap is dramatically undervalued in my opinion. Just look at Facebook and others valuations and they are burning cash like crazy and relying on monetizing their audiences through online advertising. What none of them know but may soon because of your piece and a growing awareness in the market is that none of these companies with their huge online audiences can effectively monetize them without infringing on this company's patented IP.

This tiny little company owns the golden key imo to allowing the actual custimization of content to end users. If Facebook, AOL, Yahoo, Google and tones of other companies can't customize their advertising to the right audience, the whole process of bettering roi on advertisers ad spend is significantly impeded.

The old saying "You can't get their from here comes to mind"

The company's fundamentals appear pretty solid. Based on their growth and huge increase in deferred revenues up from 80k to over 500k, I'd expect the company is actually very profitable going forward, it has no debt, a million in cash, good management and already has investment bankers on their team. Importantly, insiders own about 35% of the company having a vested interest in building shareholder value.

What wasn't mentioned is that just their radio division has over 5 million unique visitors that could be valued at $250 million just based on $50 per visitor. Recent comps including MySPace, YouTube, Facebook and many others are fetching $70-$80 per unique. Again, all the unique visitors in the world have no value unless you can effectivley monetize them through online advertising. The key process there is customizing content or ads to the end user based on proccured behavioral data. This company owns the patented technological process being used by a host of major internet players to monetize their online audiences and facilitate the growth of their online advertising initiatives. This is many of these large internet companies sole method for revenue generation and most have bet their future growth squarely on it, just look at AOL. They simply need this companies technology imo, this makes Modavoxand their patented IP extremely valuable. Not only for the leverage it gives to whoever owns it but for the leverage it gives them agains their competitors who may also be infringing. Anyone of the large internet companies who acquires this company may have literally gotten their hands on "a weapon of mass destruction" in terms of what they can do to the competition.

The company will be acquired, no doubt in my opinion. I see it as a matter of when and not if. They are sitting on some of the most valuable patented IP in the entire internet space imo. You're spot on as far as I'm concerned.

I just hope they don't sell out too cheap because as you point out, the biggest opportunity is the licensing one. They knock over AOL/Tacoda in their current suit against them, watch out!

Great article and work!

Yahoo! Paid Too Much for Maven Networks

Dan,

I totally agree with you. The price tag does appear rich.

I think it may be rich for another reason however. You stated, "Clearly, Yahoo! bought Maven for their technology platform and IP". Interestingly, to my knowledge, their ad platform and IP is not even patented. As it stands right now, one would wonder why Yahoo is paying that much for technology that Maven doesn't even yet currently own? They state it's "patent pending" but that's a long way from having a single patent physically issued to cover their IP. As the patent process progress's, I have a feeling they are going to find another company front and center in their priot art search.

You see, my research indicates their technology "appears" very similar to another company which already owns and has patented Maven's described technology. This company, Arizona based Modavox, is ironically already involved in a patent infringement suit against Tacoda for their behavioral targeting technology. www.modavox.com/news/0...

As you know, Tacoda was recently acquired by AOL and just last week, mysteriously David Morgan, it's founder left or "apparently left" AOL causing me and I'm sure some others to wonder if this doesn't have something to do with the situation he left AOL in when he sold them technology he didn't own and that appears to be infringing on Modavox's. Tacoda was sold for $275 million and again owned no patented IP top cover it's technological process.

Tacoda's platform was supposedly to be a cornerstone of their forthcoming Advertising company, "Platform A". One now must wonder how Modavox's suit plays into this since they own the seem to own the patented process allowing for the customization of content (Ads)to end users. You can have the audience and the advertisers, but if you can't customize the content to them, well you have a major issue prohibiting the actual monetization of online advertising initiatives.

Let's take a look at Maven and Modavox side by side based on available data. My research indicates the following:

Modavox has direct parallel/competitive services in their Interactive division. Maven’s advertising platform and Internet TV platforms look similar in terms of feature sets, and I would not be surprised to learn that Maven is a likely infringer on Modavox's patents in particular with their advertising platform.

CAPABILITIES
Media Management (CMS) (Modavox and Maven)
Work Flow (Modavox and Maven)
Player Experience (Modavox and Maven)
Self Publishing (Modavox and Maven)
Advertising (Modavox and Maven)
Analytics (Modavox and Maven)
Patented Infrastructure (MODAVOX only)

My opinion is there sure seems like there may be an indication of infringement on AD Platform: Customization of advertising content as announced in October 2007 by Maven….Modavox's original patent was issued years prior, their new patent was issued in 2007. Maven was founded in 2002. www.modavox.com/news/0...

“A unique component of Maven’s ad platform is the patent-pending dynamic ad insertion engine, which automatically determines optimal ad viewing points within a video clip based upon historical usage analytics (e.g. user viewing behavior and video popularity) and associated metadata (video length, topic, etc.). THIS ENABLES THE RELEVANT AD TO BE DELIVERED AT THE APPROPRIATE TIME TO THE RIGHT VIEWER"

Here is my understanding of Modavox's patented IP in layman's terms found from another online sourse:

"Modavox owns patented technologies that customize content to the end user. They don’t gather the information or spy on the user, behavioral marketing companies do that. What they are is simply the mechanism of what you do with that information once you have it. They might know know you’re a golfer, know you are 50 and they know I go to espn.com, now they might send me the Callaway Big Bertha driver advertisement just for me and those like me. That’s the company's intellectual property at work. It is a process of associating content and who or where you are, and customizing the delivery of that content to you. Its much broader than just behavioral. It has applications in many other technology verticals. Behavioral is just one of the most blatant and obvious offenders."

Now let's look at the Benefits of both company's platforms.

BENEFITS
Multi Platform and Device Support (Modavox and Maven)
Search Engine Optimization (Modavox and Maven)
Concurrent Publishing (Modavox and Maven)
Ad insertion (Modavox and Maven)
Media Management (Modavox and Maven)
Patented Infrastructure (MODAVOX only)

So did Yahoo pay too much for Maven? If my research is correct and Modavox does in fact own the patented technology that Maven may be infringing on just like Tacoda likely is, then my own answer, like your, is a resounding YES but perhaps for differing reasons.

Keep up the good work, I always enjoy your commentary here and in other sources.

John

Analysts Like Yahoo's BlueLithium Acquisition

Larry,

Another good piece by you. I am an avid reader of all of your commentary. Working in the internet sector, I find your commentary and insight to always be accurate and insightful, keep up the good work.

Regarding the recent acquisition of Blue Lithium by Yahoo, I too think it is a good move. However, a story you probably haven't heard that you probably soon will is that Blue Lithium's technology is in my opinion, infringing on another company's technology for which they just received their second patent from the USPTO on. This is the exact same company currently suing Tacoda, recently acquired by AOL for patent infringement.

Please see the other days release from this company.

"Second Patent Affirms Modavox's Leading-Edge Role in Web Processes Such as User-Based Customization of Online Content
Tuesday September 11, 9:29 am ET
Patent No. 7,269,636 Ratifies Scope of Claims and Further Defines Modavox Breakthrough Inventions


PHOENIX--(BUSINESS WIRE)--Modavox, Inc. (OTCBB:MDVX - News), an Internet broadcasting pioneer in the production and distribution of online audio and video, announced that the U.S. Patent Office today issued U.S. Patent No. 7,269,636. The patent refines the legal definition of Modavox inventions with claims that accurately reflect how the concepts taught by the foundational U.S. Patent No. 6,594,691 "Method and System for Adding Function to a Web Page" are implemented in state-of-the-art delivery infrastructure and delivery practices seen in the marketplace today.
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The new patent leads to a modified complaint filed today asserting the new patent in the infringement case against Tacoda, Inc., pending in the Southern District of New York (Case No. 07-CV-7088).

Modavox CEO, David J. Ide stated, "We've achieved another key identified milestone in the establishment of validity in our patents and the importance of our proprietary technology in our industry. We are pleased with the issuance by the U.S.P.T.O. today of our new patent. Our work for our customers continues to fuel new innovations as we strive as an organization to exceed expectations. Each day, we press forward to capitalize on the opportunities that our technology and position in the market have created and our new patent is just one manifestation of that sizable effort."

"The new patent provides a clearer picture of how state-of-the-art implementations are executed such as the behavioral marketing implementation of Tacoda," said Nathaniel Bradley, Chief Technology & Product officer for Modavox. "Products built upon this patented infrastructure are under constant development and deployment here, and are continually enriched with new innovations. For this reason, we are confident that this, given the required time, will yield even more patents and intellectual property for Modavox. It is important to note the significance of this latest issuance as it is the cornerstone of our patent enforcement strategy and the reason we've begun to take our first actions."

Andy Burgess, Modavox Intellectual Property Consultant, stated, "The 7,269,636 patent delineates an unambiguous threshold for web technologies that allows Modavox to pursue current and future infringement studies unhindered. In addition to Tacoda, we believe additional operations in the behavioral marketing space are infringing and action is being taken through comprehensive infringement analysis and third party verification practices that will provide conclusive actionable data for us moving forward. The 7,269,636 patent also gives an unbiased view as to the ownership of the online vertical market currently occupied by Modavox."

Dr. Daniel F. Coughlin of Fox Rothschild LLP, who is acting as Modavox's lead counsel in the company's intellectual property enforcement and licensing program, stated, "We are all justifiably encouraged by the validation of Modavox's core technology that this patent represents. It is clear that the U.S. Patent Office has recognized the unique importance of Modavox's technology not only in the time frame of its original development, but also in the context of the emerging markets that these patents enable. Modavox's expanding intellectual property places us in an ideal position to seek and gain the industry recognition that the company deserves. More specifically, we are today filing an Amended Complaint asserting the '636 patent in our case recently filed against Tacoda, Inc., pending in the Southern District of New York (Case No. 07-CV-7088). As Tacoda and the rest of the industry will realize, it will not be possible to ignore Modavox's position astride this technology.""

This company is pretty small but despite their small stature, I believe them to own some of the most valuable patented technolgy in the internet space. Their patent literally covers the process that is key to targeted online advertising and it also covers streaming video and audio. The exact process that all the big name internet titans are now leveraging in monetizing their online advertising initiatives.

There is one lady who is a little ahead of the cureve, Kate Kaye from clickz.com authored the following piece the other day:

By Kate Kaye, The ClickZ Network, Sep 12, 2007

"More behavioral targeting-related tremors rumbled yesterday as optimization firm Omniture and Modavox, which is suing AOL's Tacoda, announced new patents. The Modavox patent, which refines one previously issued by The U.S. Patent Office, has prompted the firm to revise its claims against the newly-acquired Tacoda, and threatens to become a thorn in the side of other behavioral targeting technology firms.

The fact that another behavioral targeting ad network, Blue Lithium, is also set to be scooped up by an online giant -- Yahoo -- raises questions as to whether they'll be Modavox's next lawsuit targets.

The patents and lawsuits in the behavioral targeting arena also bring to the fore concerns about long-controversial business method patents.

Adding to an extensive roster of U.S. and foreign-issued patents, the one awarded Omniture on August 21 deals with its behavioral targeting and testing systems for content and ad targeting, as well as maximizing search and performance-based ad revenue yields. Omniture, which filed for the patent in 2001, offers Web analytics, optimization and on-site behavioral targeting technology.

The company has been caught in the crosshairs of a technology patent suit in the past. Last year Omniture settled out of court with NetRatings, which had filed suits against Omniture and Coremetrics in 2005, claiming the companies were infringing on its patents for computer usage data analysis and reporting. Last year, Coremetrics also settled with NetRatings, now known as Nielsen/NetRatings following a merger with Nielsen.

It's unclear whether Omniture plans to sue or demand licensing fees from alleged patent infringers as a result of the newly-awarded patent. Omniture did not respond to several requests seeking comment for this story.

Teaching an Old Patent New Tricks

Modavox, on the other hand, has its sights set on taking the infringement lawsuit route to exploiting patents it believes relate to behavioral ad targeting. The multimedia production and services firm-turned-software provider has been assessing possible lawsuit targets, and believes its just-issued USPTO patent number 7,269,636 demonstrates a reaffirmation by the patent office of the legitimacy of the earlier patent it extends, thus bolstering its suit against Tacoda.

Daniel Coughlin, lead counsel in Modavox's intellectual property enforcement and licensing efforts and partner with Fox Rothschild LLP, told ClickZ News the new patent is "a straight continuation" of one previously-awarded in 2003 for technology that serves customized multimedia content and ads to Web users. Essentially, the new patent acts as an extension of the original, which was filed in 1999, tacking on additional claims in the hopes of keeping the initial patent up to date and, in this case, actionable in court.

"As [Modavox] trudges through the patent office, they're trying to hone their claims to cover what they see coming down the pike, to keep tailoring it to what else is out there in the market," said Brett Trout, a patent attorney specializing in Internet technologies.

Tacoda would not comment on the suit for this story. AOL agreed to buy the company last month for $275 million to expand the behavioral targeting capabilities of its Advertising.com ad network and on its own properties. Tacoda, which launched in 2001, alludes to its technology as patent-pending.

Modavox has begun dabbling in the online ad industry by opening a new Interactive Media Division facility in March and boosting rich media ad delivery capabilities through its acquisition of Kino Interactive last year. Yet, even though Modavox provides audio and video content and ad delivery services to some Gannett sites and other clients, it remains virtually unknown in the interactive ad industry.

By comparison, Tacoda has always served the online ad sector and was founded by a Web advertising technology veteran, Dave Morgan. He's also the founder of one of the first online ad networks, Real Media, which has since merged to become 24/7 Real Media and was recently acquired by agency holding company WPP.

Tacoda could choose to settle out of court, saving years of legal wrangling with Modavox and lots of money. Of course, the defendant does have the option of enduring a legal battle to fight Modavox in the hopes of invalidating its patent. That's not only likely to be a laborious and lengthy task; it may not be in Tacoda's or AOL's best interest.

"If they win and invalidate [Modavox's] patent, they've kind of won the case for all their competitors as well," said Trout. "It kind of puts AOL at a disadvantage." AOL did not respond to a request for comment regarding the case.

A Method to the Patent Madness

The patents in question are often referred to as business-method patents, as they cover the method by which a business function is performed. The latest patent awarded Modavox is described as a "Method and code module for adding function to a Web page," and expands upon the initial patent for a "Method and System for Adding Function to a Web Page."

Modavox counsel Coughlin prefers to call them software or technology patents. It's not surprising Modavox may dispute the business method moniker; such patents have been highly controversial since they got their start about a decade ago. Still, they've proliferated in the Internet arena ever since 1998, when a pivotal Federal court case allowed for a software patent, opening the flood gates to method patents. In years following, the USPTO began awarding business method patents to the likes of Amazon.com, eBay and Priceline.com for things like ecommerce transaction systems, data processing technologies, and even education and training processes.

"Everybody just inundated the patent office," said Trout, who suggested the patent office and judges deciding patent cases have been at a disadvantage because there isn't much to refer to by way of precedent. "The patent office is so far behind in terms of what the state of the art is," he continued. "A lot of times they issue things that have already been out there for quite some time."

The descriptions of these patents alone can even seem too generalized to apply to just one company's technology. Take Omniture's most recent patent covering a "Method for performing a plurality of candidate actions and monitoring the responses so as to choose the next candidate action to take to control a system so as to optimally control its objective function."

Modavox's Next Behavioral Prey Could Be More Vulnerable

Though it has yet to name names, Modavox has not been shy about its intentions to go after other companies in the behavioral targeting space. In a company statement, Modavox Intellectual Property Consultant Andy Burgess suggested the Tacoda suit, filed in New York's Southern District, is just the beginning. "In addition to Tacoda, we believe additional operations in the behavioral marketing space are infringing and action is being taken through comprehensive infringement analysis and third party verification practices that will provide conclusive actionable data for us moving forward."

If Tacoda's acquisition by AOL is any indication, Blue Lithium, a behavioral ad network recently acquired by Yahoo, could be a future target. While those firms may benefit from big legal teams and financial support, most companies in the behavioral targeting and related tech segments, such as Revenue Science and AlmondNet, are relatively small and vulnerable.

Coughlin expects the company may broaden its lawsuit reach in the future, but said it would focus on the behavioral targeting sector for now, noting, "We don't have the resources to go out against everybody all at the same time."

Patent suits like the ones Modavox is dangling tend to "have a very disproportionate impact on smaller companies," said Trout. He believes judges are unlikely to dismiss such cases because they serve as a means to educate the courts about emerging technologies and set precedents in nascent legal arenas. While they may assist the courts, they can hinder growth of young companies and stifle innovation. "Companies can't get any traction," continued Trout, adding, "Venture capitalists are reticent to fund [firms that are up against patent suits]."

According to Coughlin, Modavox might consider licensing its patents to supposed infringers. "It makes no sense to keep everybody else from practicing an invention if Modavox can't fully explore it all on their own," he said.

Trout and other technology patent lawyers anticipate more Internet technology and business method patent infringement suits; for one thing, precedents have not been set that would otherwise prohibit such cases from court dismissal.

If taken up by the senate and approved, a bill recently passed by the U.S. House of Representatives could put a damper on rampant business method patent filings and lawsuits."

I predict this company soon files suit against Blue Lithium and that they literally own the "Holy Grail" which will cause them to be soon scooped up by anyone of a handful of companies that will seek to leverage their patented technology directly agaisnt a handful of competitors.

My research indicates Tacoda, AOL, YouTube, Blue Lithium, Yahoo, Ebay amongst a host of others are all using this company's patented technology in their past and current operations. The damages could reach into the billions. They are obviously not adequately equipped to pursue all infringers being somewhat small, despite having top notch contingent council. Unlike others seeking to exploit just patents, they actually run a growing and profitable business using the technology itself in numerous E-learning, Internet Radio and Enterprise Communications applications

I don't expect the company to be around for very long for obvious reasons. There's a big story developing here as I'm sure you will recognize. Consider this a lead from someone who respects your writing and thoughts on topics of relevance.

Again, keep up the excellent work!

Rashid

Analysts Like Yahoo's BlueLithium Acquisition

Larry,

Another good piece by you. I am an avid reader of all of your commentary. Working in the internet sector, I find your commentary and insight to always be accurate and insightful, keep up the good work.

Regarding the recent acquisition of Blue Lithium by Yahoo, I too think it is a good move. However, a story you probably haven't heard that you probably soon will is that Blue Lithium's technology is in my opinion, infringing on another company's technology for which they just received their second patent from the USPTO on. This is the exact same company currently suing Tacoda, recently acquired by AOL for patent infringement.

Please see the other days release from this company.

"Second Patent Affirms Modavox's Leading-Edge Role in Web Processes Such as User-Based Customization of Online Content
Tuesday September 11, 9:29 am ET
Patent No. 7,269,636 Ratifies Scope of Claims and Further Defines Modavox Breakthrough Inventions


PHOENIX--(BUSINESS WIRE)--Modavox, Inc. (OTCBB:MDVX - News), an Internet broadcasting pioneer in the production and distribution of online audio and video, announced that the U.S. Patent Office today issued U.S. Patent No. 7,269,636. The patent refines the legal definition of Modavox inventions with claims that accurately reflect how the concepts taught by the foundational U.S. Patent No. 6,594,691 "Method and System for Adding Function to a Web Page" are implemented in state-of-the-art delivery infrastructure and delivery practices seen in the marketplace today.
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The new patent leads to a modified complaint filed today asserting the new patent in the infringement case against Tacoda, Inc., pending in the Southern District of New York (Case No. 07-CV-7088).

Modavox CEO, David J. Ide stated, "We've achieved another key identified milestone in the establishment of validity in our patents and the importance of our proprietary technology in our industry. We are pleased with the issuance by the U.S.P.T.O. today of our new patent. Our work for our customers continues to fuel new innovations as we strive as an organization to exceed expectations. Each day, we press forward to capitalize on the opportunities that our technology and position in the market have created and our new patent is just one manifestation of that sizable effort."

"The new patent provides a clearer picture of how state-of-the-art implementations are executed such as the behavioral marketing implementation of Tacoda," said Nathaniel Bradley, Chief Technology & Product officer for Modavox. "Products built upon this patented infrastructure are under constant development and deployment here, and are continually enriched with new innovations. For this reason, we are confident that this, given the required time, will yield even more patents and intellectual property for Modavox. It is important to note the significance of this latest issuance as it is the cornerstone of our patent enforcement strategy and the reason we've begun to take our first actions."

Andy Burgess, Modavox Intellectual Property Consultant, stated, "The 7,269,636 patent delineates an unambiguous threshold for web technologies that allows Modavox to pursue current and future infringement studies unhindered. In addition to Tacoda, we believe additional operations in the behavioral marketing space are infringing and action is being taken through comprehensive infringement analysis and third party verification practices that will provide conclusive actionable data for us moving forward. The 7,269,636 patent also gives an unbiased view as to the ownership of the online vertical market currently occupied by Modavox."

Dr. Daniel F. Coughlin of Fox Rothschild LLP, who is acting as Modavox's lead counsel in the company's intellectual property enforcement and licensing program, stated, "We are all justifiably encouraged by the validation of Modavox's core technology that this patent represents. It is clear that the U.S. Patent Office has recognized the unique importance of Modavox's technology not only in the time frame of its original development, but also in the context of the emerging markets that these patents enable. Modavox's expanding intellectual property places us in an ideal position to seek and gain the industry recognition that the company deserves. More specifically, we are today filing an Amended Complaint asserting the '636 patent in our case recently filed against Tacoda, Inc., pending in the Southern District of New York (Case No. 07-CV-7088). As Tacoda and the rest of the industry will realize, it will not be possible to ignore Modavox's position astride this technology.""

This company is pretty small but despite their small stature, I believe them to own some of the most valuable patented technolgy in the internet space. Their patent literally covers the process that is key to targeted online advertising and it also covers streaming video and audio. The exact process that all the big name internet titans are now leveraging in monetizing their online advertising initiatives.

There is one lady who is a little ahead of the cureve, Kate Kaye from clickz.com authored the following piece the other day:

By Kate Kaye, The ClickZ Network, Sep 12, 2007

"More behavioral targeting-related tremors rumbled yesterday as optimization firm Omniture and Modavox, which is suing AOL's Tacoda, announced new patents. The Modavox patent, which refines one previously issued by The U.S. Patent Office, has prompted the firm to revise its claims against the newly-acquired Tacoda, and threatens to become a thorn in the side of other behavioral targeting technology firms.

The fact that another behavioral targeting ad network, Blue Lithium, is also set to be scooped up by an online giant -- Yahoo -- raises questions as to whether they'll be Modavox's next lawsuit targets.

The patents and lawsuits in the behavioral targeting arena also bring to the fore concerns about long-controversial business method patents.

Adding to an extensive roster of U.S. and foreign-issued patents, the one awarded Omniture on August 21 deals with its behavioral targeting and testing systems for content and ad targeting, as well as maximizing search and performance-based ad revenue yields. Omniture, which filed for the patent in 2001, offers Web analytics, optimization and on-site behavioral targeting technology.

The company has been caught in the crosshairs of a technology patent suit in the past. Last year Omniture settled out of court with NetRatings, which had filed suits against Omniture and Coremetrics in 2005, claiming the companies were infringing on its patents for computer usage data analysis and reporting. Last year, Coremetrics also settled with NetRatings, now known as Nielsen/NetRatings following a merger with Nielsen.

It's unclear whether Omniture plans to sue or demand licensing fees from alleged patent infringers as a result of the newly-awarded patent. Omniture did not respond to several requests seeking comment for this story.

Teaching an Old Patent New Tricks

Modavox, on the other hand, has its sights set on taking the infringement lawsuit route to exploiting patents it believes relate to behavioral ad targeting. The multimedia production and services firm-turned-software provider has been assessing possible lawsuit targets, and believes its just-issued USPTO patent number 7,269,636 demonstrates a reaffirmation by the patent office of the legitimacy of the earlier patent it extends, thus bolstering its suit against Tacoda.

Daniel Coughlin, lead counsel in Modavox's intellectual property enforcement and licensing efforts and partner with Fox Rothschild LLP, told ClickZ News the new patent is "a straight continuation" of one previously-awarded in 2003 for technology that serves customized multimedia content and ads to Web users. Essentially, the new patent acts as an extension of the original, which was filed in 1999, tacking on additional claims in the hopes of keeping the initial patent up to date and, in this case, actionable in court.

"As [Modavox] trudges through the patent office, they're trying to hone their claims to cover what they see coming down the pike, to keep tailoring it to what else is out there in the market," said Brett Trout, a patent attorney specializing in Internet technologies.

Tacoda would not comment on the suit for this story. AOL agreed to buy the company last month for $275 million to expand the behavioral targeting capabilities of its Advertising.com ad network and on its own properties. Tacoda, which launched in 2001, alludes to its technology as patent-pending.

Modavox has begun dabbling in the online ad industry by opening a new Interactive Media Division facility in March and boosting rich media ad delivery capabilities through its acquisition of Kino Interactive last year. Yet, even though Modavox provides audio and video content and ad delivery services to some Gannett sites and other clients, it remains virtually unknown in the interactive ad industry.

By comparison, Tacoda has always served the online ad sector and was founded by a Web advertising technology veteran, Dave Morgan. He's also the founder of one of the first online ad networks, Real Media, which has since merged to become 24/7 Real Media and was recently acquired by agency holding company WPP.

Tacoda could choose to settle out of court, saving years of legal wrangling with Modavox and lots of money. Of course, the defendant does have the option of enduring a legal battle to fight Modavox in the hopes of invalidating its patent. That's not only likely to be a laborious and lengthy task; it may not be in Tacoda's or AOL's best interest.

"If they win and invalidate [Modavox's] patent, they've kind of won the case for all their competitors as well," said Trout. "It kind of puts AOL at a disadvantage." AOL did not respond to a request for comment regarding the case.

A Method to the Patent Madness

The patents in question are often referred to as business-method patents, as they cover the method by which a business function is performed. The latest patent awarded Modavox is described as a "Method and code module for adding function to a Web page," and expands upon the initial patent for a "Method and System for Adding Function to a Web Page."

Modavox counsel Coughlin prefers to call them software or technology patents. It's not surprising Modavox may dispute the business method moniker; such patents have been highly controversial since they got their start about a decade ago. Still, they've proliferated in the Internet arena ever since 1998, when a pivotal Federal court case allowed for a software patent, opening the flood gates to method patents. In years following, the USPTO began awarding business method patents to the likes of Amazon.com, eBay and Priceline.com for things like ecommerce transaction systems, data processing technologies, and even education and training processes.

"Everybody just inundated the patent office," said Trout, who suggested the patent office and judges deciding patent cases have been at a disadvantage because there isn't much to refer to by way of precedent. "The patent office is so far behind in terms of what the state of the art is," he continued. "A lot of times they issue things that have already been out there for quite some time."

The descriptions of these patents alone can even seem too generalized to apply to just one company's technology. Take Omniture's most recent patent covering a "Method for performing a plurality of candidate actions and monitoring the responses so as to choose the next candidate action to take to control a system so as to optimally control its objective function."

Modavox's Next Behavioral Prey Could Be More Vulnerable

Though it has yet to name names, Modavox has not been shy about its intentions to go after other companies in the behavioral targeting space. In a company statement, Modavox Intellectual Property Consultant Andy Burgess suggested the Tacoda suit, filed in New York's Southern District, is just the beginning. "In addition to Tacoda, we believe additional operations in the behavioral marketing space are infringing and action is being taken through comprehensive infringement analysis and third party verification practices that will provide conclusive actionable data for us moving forward."

If Tacoda's acquisition by AOL is any indication, Blue Lithium, a behavioral ad network recently acquired by Yahoo, could be a future target. While those firms may benefit from big legal teams and financial support, most companies in the behavioral targeting and related tech segments, such as Revenue Science and AlmondNet, are relatively small and vulnerable.

Coughlin expects the company may broaden its lawsuit reach in the future, but said it would focus on the behavioral targeting sector for now, noting, "We don't have the resources to go out against everybody all at the same time."

Patent suits like the ones Modavox is dangling tend to "have a very disproportionate impact on smaller companies," said Trout. He believes judges are unlikely to dismiss such cases because they serve as a means to educate the courts about emerging technologies and set precedents in nascent legal arenas. While they may assist the courts, they can hinder growth of young companies and stifle innovation. "Companies can't get any traction," continued Trout, adding, "Venture capitalists are reticent to fund [firms that are up against patent suits]."

According to Coughlin, Modavox might consider licensing its patents to supposed infringers. "It makes no sense to keep everybody else from practicing an invention if Modavox can't fully explore it all on their own," he said.

Trout and other technology patent lawyers anticipate more Internet technology and business method patent infringement suits; for one thing, precedents have not been set that would otherwise prohibit such cases from court dismissal.

If taken up by the senate and approved, a bill recently passed by the U.S. House of Representatives could put a damper on rampant business method patent filings and lawsuits."

I predict this company soon files suit against Blue Lithium and that they literally own the "Holy Grail" which will cause them to be soon scooped up by anyone of a handful of companies that will seek to leverage their patented technology directly agaisnt a handful of competitors.

My research indicates Tacoda, AOL, YouTube, Blue Lithium, Yahoo, Ebay amongst a host of others are all using this company's patented technology in their past and current operations. The damages could reach into the billions. They are obviously not adequately equipped to pursue all infringers being somewhat small, despite having top notch contingent council. Unlike others seeking to exploit just patents, they actually run a growing and profitable business using the technology itself in numerous E-learning, Internet Radio and Enterprise Communications applications

I don't expect the company to be around for very long for obvious reasons. There's a big story developing here as I'm sure you will recognize. Consider this a lead from someone who respects your writing and thoughts on topics of relevance.

Again, keep up the excellent work!

Rashid

7 Candidates For An eBAY Acquisition

I would add Modavox (MDVX) to that list.

Local.com Rising Sharply - Yet Still Undervalued

John,

Very well written article which I very much agree with. Today's pretty strong action on LOCM recouping earlier losses speaks directly to the credibility of your commentary. The share price will inevitably continue to be volatile, but as you note, their intellectual patented property has significant value to a host of different potential acquirers.

Along the same theme, I would also suggest you to take a look at Modavox, MDVX which too recently announced it has received additional patents on its online.

PHOENIX--(BUSINESS WIRE)--Modavox, Inc. (OTCBB: MDVX - News), Internet broadcasting pioneer and holder of several patented technologies, today announced it has received an official communication from the U.S. Patent and Trademark Office (USPTO) announcing the allowance of a new patent arising from the company's proprietary Internet technology. In this communication the USPTO also provided a favorable indication toward one or more additional pending patent applications relating to Modavox's core technology, although some interplay with the USPTO remains before Modavox obtains a final approval for any additional patents.

Andrew Burgess, Modavox Intellectual Property Consultant, stated, "The claims of the recently allowed patent reflect a further refinement of the legal definition of Modavox's technology from the broad, groundbreaking technical space created by Modavox's original patent. In this latest patent we have further refined the legal definition of our invention to reflect how the broad concepts of that invention are implemented in state-of-the-art delivery infrastructure and delivery practices seen in the market place today."

David J. Ide, Modavox President and CEO, stated, "We're focused on using our technology to capture new business, and create useful applications of our products, such as geographically-targete... advertising and user-customized content delivery, all built on the framework of our patented technology."

Modavox CTO and Chairman Nathanial T. Bradley added, "We're pleased to have our intellectual property fortified with this new U.S. Patent. This gives us the opportunity to continue our leadership in our field and is a testament to our tenure and growing opportunity in the production of innovative and breakthrough online communications technology products."

Dr. Daniel F. Coughlin, Partner, Fox Rothschild, LLP, stated, "The latest decision by the USPTO on Modavox's patented inventions is a further affirmation, in the context of a rigorous technical examination, of the pre-eminence of the company's technology, both legally, and in the marketplace. With an expanding arsenal of intellectual property rights, Modavox will now be better equipped than ever to not only deliver marketplace solutions for their clients and customers, but also to secure richly-deserved recognition for its pioneering inventions in this technical space. The issued and newly allowed patents, along with their pending patent applications, will undoubtedly prove to be key components to bring Modavox's proprietary technology to the broadest possible base of clients and licensees. In my view, it will be only a matter of time before the industry will universally recognize Modavox for its technical advances in this field."

and a recent article featured here at Seeking Alpha by the former Dir. of Research at Knobias and now President and Editor at Market News First.

He wrote, "Think about the way that advertisers have traditionally used the spray and pray method of advertising. The Internet has changed the way advertisers target specific demographics and a new concept is circulating in the media space, creating a disruptive technology that is getting the attention of everyone in the industry. As the media space continues to explode in every market cap, this disruption has resulted in media consolidation across the board.

Need examples? Look at Sam Zell's purchase of the Tribune Company (TRB), Rupert Murdoch's bidding for Dow Jones (DJ), Thomson's (TOC) recent purchase of Reuters (RTRSY) and a silent bid by private equity on the table for Bloomberg.

Clearly, the media space is as hot as any sector on Wall Street. The stark reality is that Wall Street analysts covering the media space have undervalued all assets because of this simple supply and demand function. No longer are there three mediums for content delivery; there are now six delivery platforms for content. It has quickly evolved from broadcast TV, cable TV and radio to broadcast TV, cable TV, radio, PC, laptop and cellular phone services. This means there is the same amount of content available and double the demand, in turn, making all existing content immediately more valuable.

What this means is billions of dollars spent on media-driven advertising have more places to run ads. For example, ESPN just became worth twice as much, and all IPTV content on the Internet just became more valuable. This is the disruptive technology the industry has been squirming about since 2001. Look out Google (GOOG), look out AOL (TWX) ... you may have an issue.

A subtle and somewhat still under-the-radar player in this whole picture is Modavox Inc. (MDVX.OB), ands many industry experts are now just beginning to wonder if some mega market cap Internet giants have been infringing on their patent for years now?

Modavox, Internet broadcasting pioneer and holder of several patented technologies, announced last week that it has received an official communication from the U.S. Patent and Trademark Office [USPTO] announcing the allowance of a new patent arising from the company's proprietary Internet technology. In this communication the USPTO also provided a favorable indication toward one or more additional pending patent applications relating to Modavox's core technology, although some interplay with the USPTO remains before Modavox obtains a final approval for any additional patents. This new patent covers Advertising and Streaming Media Delivery technology, one of the hottest and talked about technologies of the time as advertisers seek to monetize online ad dollars through streaming advertisements and geo-targeting of consumers. One has to wonder if any of these Internet house hold names may be interested or benefit from owning or partnering with this little company for its potentially very valuable intellectual property ... I think I already know the answer. The space itself has recently seen numerous acquisitions and consolidation making Modavox one to watch closely.

The question I ask myself each day is this: shouldn't we, as a news agency, cut a deal with Modavox to license their product? I think the answer to that question is a resounding YES!!!!"

Note that Modavox's patent law firm has posted the article to their own site. This is the same law firm that has apparently taken the issue up on a contingency basis.

www.foxrothschild.com/...

There's obviously a lot to digest here but I thought you would find Modavox to be an interesting situation. In addition to the patent issue, the company is profitable, has no debt, huge margins providing for huge earnings leverage and has a talented management team owning a large amount of the company's shares really alligning their goals with their shareholders.

Keep up the good work and thanks for your comments on LOCM as a fellow long.

J