Ad company wins $6.9M verdict against Yahoo

An Internet advertising company won nearly $6.9 million after a federal jury trial in Texas of its patent lawsuit against corporate giant Yahoo Inc.

The Newport Beach, Calif.-based company, Creative Internet Advertising, alleged it offered a demonstration of its technology in a sales pitch to Yahoo while its patent application was pending. But the Internet search engine provider turned it down.

The following year, Yahoo rolled out the same idea, the plaintiff said.

The technology in question allows instant messaging programs to include ads in the background of the text boxes, but also lets users opt out of displaying the ads. The inventors went to several companies and pitched their invention as a way those companies could make more money with what they already do, explained plaintiff’s attorney Anthony Simon.

Creative alleged Yahoo infringed on its patent after signing a nondisclosure agreement to visit and review how the technology worked.

Yahoo’s use of the background ad technology continued as Creative spent three years informing Yahoo in writing that it was infringing on the company’s patent and asking to resolve the issue, Simon said.

“They gave Yahoo every opportunity to make a deal for years,” said Simon, of The Simon Law Firm in St. Louis.

The jury came back with a $6.6 million verdict for Creative, finding that Yahoo engaged in willful infringement.

The parties agreed after trial to add nearly $250,000 to cover the last few months through the verdict.

The jury also called for a 20 percent royalty rate for Creative going forward, Simon said.

The patent will be in place for another nine years.

An attorney for Yahoo, Jason White of Howrey in Chicago, said Yahoo doesn’t comment on pending litigation. Yahoo has filed notice that it plans to appeal the verdict.

The judge who oversaw the trial, U.S. Magistrate Judge John Love, denied Yahoo’s post-trial motions.

A hearing is set for the end of September on motions to enhance damages, award attorney fees and to determine if there should be an ongoing royalty and set that rate, Simon said.

The case went through mediation twice, he said, but Yahoo never made a substantial enough offer to settle it. He declined to provide figures.

Simon said he could have filed the case in nearly any court in the United States as it involves Internet traffic. But he chose the U.S. District Court in eastern Texas because the case could reach trial fairly quickly. That court’s judges are familiar with patent law, and local court rules streamline the discovery process, he said.

Creative also sued AOL, but those parties reached a confidential settlement before trial, Simon said.

OUT-OF-STATE VERDICT

■ $6,873,950 jury verdict

Patent infringement

■ Court: U.S. District Court for the Eastern District of Texas

■ Case Number/Date: 6:07-cv-354/May 15, 2009

■ Judge: John Love

■ Plaintiff’s Experts: Michele Riley, Baltimore (damages); David Klausner, Emerald Lakes Hills, Calif. (technical expert)

■ Defendant’s Experts: Brian Napper, San Francisco (damages); Benjamin Goldberg, New York (technical expert)

■ Caption: Creative Internet Advertising Corp. v. Yahoo Inc.

■ Plaintiff’s Attorneys: Anthony G. Simon and Timothy E. Grochocinski, The Simon Law Firm, St. Louis; T. John Ward Jr., Ward & Smith, Longview, Texas; Eric Albritton, Albritton Law Firm, Longview, Texas; Charles Craig Tadlock, Tadlock Law Firm, Irving, Texas

■ Defendant’s Attorneys: Henry Bunsow and Jason C. White, Howrey, San Francisco and Chicago; Otis Carroll, Ireland, Carroll & Kelley, Tyler, Texas