With their proposed merger still under federal scrutiny, Internet researchfirms Jupiter Media Metrix (Nasdaq: JMXI) and NetRatings (Nasdaq: NTRT) said late Friday that they will go ahead with a patent infringement lawsuit that had previouslybeen put on hold as a condition of the acquisition.
The action, filed by Jupiter in March 2001, charges thatNetRatings violated its rival’s proprietary online measurement and trackingmethods. 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 oftheir acquisition agreement to allow the litigation to proceed in order toprotect their own interests and “preserve their respective positions” in thesuit.
Under the Microscope
While the two have said that the integration would allow them todevelop a single standard for measuring online traffic, the U.S. FederalTrade Commission (FTC) asked the firms to supply it with additional information onthe deal in December.
The FTC has been actively examining antitrustconcerns 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 atimeframe that would allow the transaction to close before the end of thefirst 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 forinformation they would be free to merge after 30 days, pending thegovernment’s approval.
Jupiter shareholders must also greenlight the deal as well. Additionally,the companies said the patent lawsuit will be terminated upon the closing ofthe merger.
Going Court Side
As one of the online industry’s most heated sectors, the Internet measuringniche has given rise to bitter rivalries as niche players seekto 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 soughtredress 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 inSeptember 2000.
At the time, Jupiter said it filed suit to ensure that itscompetitors could not duplicate its technology and procedures, which thefirm maintained had given it a strategic market advantage over its rivals.
The suit wound up forcing PC Data and its Internet division out of theInternet measurement business, with the company signing off ona permanent injunction that prohibited it from using its tracing software. PC Data also agreed to transfer its rights to the technology to Jupiter.