Porn Valley- A case heard yesterday could determine who controls streaming media. Acacia Technologies Group, a company that claims to hold patents to Digital Media Transmission (DMT) technology, duked it out against 13 adult entertainment companies before a judge in a U.S. District Court in Irvine, Calif. The outcome could set a precedent regarding the validity of Acacia’s claim that its patents covering audio and video distribution give it the right to charge licensing fees to stream virtually anything via the Web, from sexy shower scenes to re-purposed TV spots.

“It’s a crucial day for the industry,” declares Dan Rayburn, executive-VP of StreamingMedia.com, an online resource for the streaming media industry, where he has been evangelizing the case against Acacia. Rayburn is concerned that “people just see it as an adult issue” and don’t realize the impact a ruling in favor of Acacia could make.

Acacia Technologies group has entered into 114 DMT licensing agreements with a variety of companies. In addition to countless adult entertainment firms, on-demand film companies such as On Command and LodgeNet Entertainment Corp., as well as online streaming music companies like radioio and Radio Free Virgin, have received letters from Acacia regarding licensing fees. LodgeNet has agreed to license Acacia’s patents.

Acacia has also set its sights on colleges such as the University of Virginia and three Oregon University System schools. Universities often stream content on their web sites, including lectures, campus video tours, and radio station transmissions.

“We think there’s a likelihood that Acacia will prevail,” predicts Zack Zalon, general manager of Radio Free Virgin. The digital broadcasting company has paid licensing fees to Acacia since November of 2002. Acacia’s DMT licensing fees are generally based on a percentage of a licensee’s revenues. Radio Free Virgin has received dozens of patent claims that its attorneys have determined to be spurious. “This is the only patent that has any level of specificity regarding streaming media,” Zalon contends.

Zalon’s assessment sounds like heresy to the anti-Acacia contingent. To them, Acacia may as well claim to own a patent on air. Many contend that the patent-holder is going after easy targets, small streamers, and cash-strapped educational institutions that can’t afford legal battles, and therefore will buckle under Acacia’s pressure to pay up.

It’s “legal extortion,” insists Michael Roe, founder of radioio and principal of ioMedia. About a year ago, he received a letter from Acacia that stated, “Our goal is to enter into a licensing agreement with radioio.” Soon after, Roe went public, publishing a copy of the letter to his site and sending an official statement to a mailing list that he says includes “the who’s who of the media with regard to digital content.” After that, Acacia “basically backed off.” Since then, Roe has “talked to everyone from Microsoft to Apple” in an attempt to “wake up the industry.”

Roe worries that Acacia will continue to raise its fees as more companies agree to license the use of its patents. He and others believe that the burden of the fees could lead to the demise of many small streaming media outlets and curb use of streaming media by firms that can’t afford to–or refuse to–pay.