Jupiter, NetRatings Renew Patent Lawsuit

With their proposed merger still under federal scrutiny, Internet research firms Jupiter Media Metrix (Nasdaq: JMXI) and NetRatings (Nasdaq: NTRT) said late Friday that they will go ahead with a patent infringement lawsuit that had previously been put on hold as a condition of the acquisition.

The action, filed by Jupiter in March 2001, charges that NetRatings violated its rival's proprietary online measurement and tracking methods. When the roughly US$71 million stock-and-cash deal was struck in late October, however, both firms said they would defer settlement of the complaint pending completion of the merger.

In a brief statement, Jupiter and NetRatings said they modified the terms of their acquisition agreement to allow the litigation to proceed in order to protect their own interests and "preserve their respective positions" in the suit.

Under the Microscope

While the two have said that the integration would allow them to develop a single standard for measuring online traffic, the U.S. Federal Trade Commission (FTC) asked the firms to supply it with additional information on the deal in December.

The FTC has been actively examining antitrust concerns posed by online mergers in recent years, though recently the Bush Administration proposed that similar antitrust reviews be handled solely by the Justice Department.

Despite the federal inquiry, Jupiter and NetRatings said they are "continuing to work diligently" to respond to the FTC's request in a timeframe that would allow the transaction to close before the end of the first quarter.

Waiting for Green

Under the U.S. law known as the Hart-Scott-Rodino Antitrust Improvements Act, if the research firms demonstrate "substantial compliance" with the FTC request for information they would be free to merge after 30 days, pending the government's approval.

Jupiter shareholders must also greenlight the deal as well. Additionally, the companies said the patent lawsuit will be terminated upon the closing of the merger.

Going Court Side

As one of the online industry's most heated sectors, the Internet measuring niche has given rise to bitter rivalries as niche players seek to prove that their qualitative methods are more accurate than their competitors'. The ratings are often used to lure strategic partners.

Jupiter's complaint against NetRatings is not the first time it has sought redress for alleged patent infringement violations in court.

For instance, the New York-based company filed an action against PC Data in the U.S. District Court for the District of Delaware in September 2000.

At the time, Jupiter said it filed suit to ensure that its competitors could not duplicate its technology and procedures, which the firm maintained had given it a strategic market advantage over its rivals.

The suit wound up forcing PC Data and its Internet division out of the Internet measurement business, with the company signing off on a permanent injunction that prohibited it from using its tracing software. PC Data also agreed to transfer its rights to the technology to Jupiter.