Akamai Sues Limelight Networks

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.