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Summary:

In the words of Yogi Berra, its like déjà vu all over again. Back in the first Internet bubble, we were all entertained and amused by legal wranglings of various content delivery networks. For a while it was all quiet, but the fireworks are starting again. […]

In the words of Yogi Berra, its like déjà vu all over again. Back in the first Internet bubble, we were all entertained and amused by legal wranglings of various content delivery networks. For a while it was all quiet, but the fireworks are starting again. Limelight Networks, a Tempe, AZ.-based start-up that is quite the buzz amongst digital content players has been sued by old dog, Akamai Technologies and the Massachusetts Institute of Technology for patent infringements.

Chief executives of both companies, Paul Sagan Akamai and Bill Rinehart of Limelight have been contacted and we are waiting to hear from them about these lawsuits. Nevertheless, court documents show that, the lawsuit was filed in the US District Court in the State of Massachusetts in late June 2006. MIT and Akamai allege that Limelight is infringing on Patent # 6,108,703 and patent # 6,553,413. Both patents were issued to MIT and are licensed exclusively to Akamai.

The lawsuit comes at an awkward time for Limelight Networks, which is the CDN for hot young start-ups such as You Tube among its 500 customers. Other notable customers include Microsoft’s XBox Live, Brightcove, and CBS Sportsline.
Well-placed technology sources say that Limelight is in the process of raising a monster round of financing, which would value the company well in excess of $200 million. Goldman Sachs’ private equity arm is said to be the driving force behind the round, and we will report more details as they become available, but at this point consider this reports as “highly rumored.”

Still, the word of this monster round should not come as a surprise. Limelight has been one of the few beneficiaries of the digital content boom. Their customers, swear by the company’s technical capabilities. In a press release, the company claimed that its first quarter (2006) revenues had reached $10 million, up 40% compared to the fourth quarter of 2005. Limelight says that first quarter was its 10th consecutive quarter of net income profitability and monthly revenues exceeded $4 million for the first time in March 2006.

In the past, Akamai and MIT have aggressively protected these patents. The two sides were locked in a legal wrestling match with Cable & Wireless. Akamai had also sued Speedera, another CDN, but in the end bought the rival company. We have said in the past, the eyeballs are back, and so are the CDN lawsuits. Let the fireworks begin.

  1. Limelight also is MySpace’s CDN… a pretty big customer :)

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  2. What is a CDN?

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  3. Isn’t Limelight also responsible for XBox Live content?

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  4. CDN = Content Distribution Network

    4 players in this section, Akamai, Limelight, VitalStream, Savvis who took over C&S’s liquidation.

    Anybody has ideas what the patent is about?

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  5. Sagan will never learn. This just puts Limelight on the map. Eventually he will have to buy them too.

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  6. Limelight was already on the map. Anyone who is familiar with the sector knows about them. They have better support and prices than Akamai so the boys in Boston are getting nervous.

    Look at the size of their latest customers. YouTube & Brightcove alone will probably end up pushing more bandwidth than 50% of Akamai’s customers within a year.

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  7. Pretty impressive, I can’t believe how fast these companies are taking off!

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  8. Mr. Malik -

    Does Apple still own a piece of Akamai?

    Gerald in Tulsa

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  9. Gerald, I would have to look into that. Not sure, what is the case as we speak. but be assured that I will have something for you.

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  10. i think the big issue will this lawsuit throw a monkey wrench in limelight’s works. could this become a problem when it comes to growth and raising future financing.

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  11. Jesse Kopelman Wednesday, July 12, 2006

    Recently it seems like increased funding, whether through VC or public offering, triggers IP infringement law suites. Perhaps it is just coincidence, but I wonder. Are there teams of lawyers and accountants out there who just sit around reading SEC disclosures and funding rumors while cross referencing patents, just waiting for the most opportune moment to pull the litigative trigger?

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  12. All those CDNs are legacy technology. Netli is the Web 2.0 ADN (application delivery network) They can accelerate dynamic and static web content to local-like performance with no changes to the infrastructure.

    Check out what there customer HP says:
    “Netli’s NetLightning service has given us the outstanding performance we required with a transparent implementation and no capital investment,” said Tony Hinojosa, Portal Development Manager of the Enterprise Solutions Partners Division’s DSPP Web site at HP. “Since we subscribed to NetLightning, our DSPP site has been averaging more than two million additional hits per month and our worldwide partners can now access information in less than a second, making them happier and more productive. To put it simply, Netli is one of the best partnerships I have had in my 13 years at HP.” http://www.netli.com/news/testimonials/

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  13. Haha, a shameless plug by themselves ^^ :x

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  14. Akamai has done well dominating the CDN space and has now enterd into application performance services. The company is doing well and seems like it’s here to stay!

    Suing Limelight will put heat on them and who knows maybe Akamai will buy Limelight just like it did with SpeedEra.

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  15. Limelight is the most solid CDN on the market. We have used Vitalstream and others, but Limelight has the best uptime and customer service. Limelight also delivers all the STEAM content (video game downloads, large files) and they deliver most of the video for the high end players.

    Akami is an overpriced behemoth that is trying to squeeze out the better priced, and better delivery, competition.

    Go Limelight!!!!!

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  16. Most solid CDN run by one of the most crooked CEO’s in awhile. Investor beware.

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  17. i agree with David.

    Check out what the SEC thinks of this CEO.

    http://216.109.125.130/search/cache?p=critical path rinehart &prssweb=Search&ei=UTF-8&fr=FP-tab-web-t400&x=wrt&u=www.sec.gov/litigation/complaints/comp17701.htm&w=critical path rinehart&d=fuTp7jmtNHbY&icp=1&.intl=us

    Guess Goldman Sachs private equity no longer does due diligence.

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  18. Looks like Limelight got their funding… 130 Big ones…

    http://today.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?view=CN&storyID=2006-07-26T040009Z01N25198776RTRIDST0_TECH-LIMELIGHT-FUNDING.XML&rpc=66

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  19. Ahh I miss the good ol days of inflating numbers, talking about edge this and that, and most of all doing a press release every time we streamed something.

    Listen the InterWeb is the wild west and Mr. Rinehart is just playing by those rules. If the boys in NYC want to give up the money whats wrong with that? Once they implode via scandle, youboob will find another startup who will provide them with below cost hosting to fule ‘yet another round of funding’.

    At least they dont have to worry about sunspots.

    Cheers

    Peter

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  20. Who ever is spreading false information should be ashamed of themselves. Myspace’s CDN is VitalStream, get your fact straight buddy.

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  21. Vince,

    Uhm, the domain in this URL doesn’t seem to be owned by VitalStream.. http://myspace-800.vo.llnwd.net/01018/00/80/1018830800_m.jpg

    Looks like you need to get your facts straight

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  22. cdn = content delivery network

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  23. MySpaces uses both Akamai and LimeLight, depending on the application. I know, I work there, and on this exact stuff. Blah.

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  24. [...] which is the biggest CDN player had sued Limelight, a year ago, alleging patent infringement. The court decision bumped up the stock by [...]

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  25. [...] do any patent research before building their product and is currently being sued by both Akamai and Level 3. Microsoft does have an army of attorneys on staff, but are they really looking to get [...]

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  26. Hey guys Akamai Is just playin the fool guys Lime light has got a pretty good development team and they are based out of Scottsdale AZ.They have infact got a great package to offer with cheap pricing.Their provisioning seems to be good and they have a good support services system.

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  27. [...] in 2006, Akamai sued Limelight over some patent disputes. In respect to both companies, there’s some really high-level [...]

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  28. [...] in 2006, Akamai sued Limelight over some patent disputes. In respect to both companies, there’s some really high-level [...]

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  29. [...] Akamai Technologies Limelight Networks. Not surprisingly, Akamai says it will appeal the decision. Akamai had filed a law suit against Limelight in July 2006 and the two companies have been duking it out in the courts. Akamai won the lawsuit but Limelight [...]

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