CPAWay is one of our favorite CPA networks: fast growing with an innovative CEO committed to quality and service. So we were horrified when we heard a few weeks ago that CPAWay was the latest in a long line of networks sued by Essociate Inc. for patent infringement. Patent law suits can drag on for a long time and be very expensive, just ask ShareASale, Blue Whaler, Max Bounty and the various other networks that Essociate has attacked in the last couple of years. http://mthink.com/affiliate-performance-marketing/affiliate-networks-death-by-patent-infringement
CPAway has learned from the experience of others and has chosen to take a proactive approach, simply bypassing the legal battle by purchasing a license for the Essociate technology.
This is a move that allows them to avoid the distraction of a law suit while building on their ongoing success. Tom Dietzel, CPAWay’s President and CEO issued the following statement:
As President and CEO of CPAWay, Inc., I take much pride in the company I’ve built, the staff that makes all the day to day "stuff" happen and the upward direction it’s all moving in. I would never, nor have I ever, put my personal interests ahead of the interests of this organization. The families that depend on our existence carry a much greater value to me than any selfish monetary decision that could be made. I was recently sued by, and promptly settled with, Essociate, a fellow affiliate network. The suit included claims of an alleged infringement of patent no. 6,804,660. Essociate’s patent gives Essociate and its affiliate network licensees the exclusive right to enroll in a merchant’s affiliate network so that their own affiliates can drive traffic to, and generate revenues from, that merchant affiliate network.
Ahead of my decision to seek settlement, it was important to gather as much information as possible about all potential avenues available to me. I spoke with friends and colleagues within my business sector, read blogs, and visited marketing industry forums that discussed the patent suits Essociate had initiated. The running theme suggested that I should not settle, as settling would only embolden and insure future lawsuits. It was further suggested that the industry come together against Essociate, pool its resources and try to invalidate Essociate’s patent. It became obvious to me that once the "personal attack" emotion associated with this suit subsided, this decision would be one based strictly on business. As I previously mentioned, my company is moving in a positive direction and putting the brakes on that momentum while potentially gambling my entire staff’s future would not define prudent leadership. As with any lawsuit, opinion and here say are always present. Although Essociate’s settlements with past infringement defendants, to the best of my knowledge, have remained confidential, rumor has it that many defendants had spent six figures in litigation fees, followed by an additional six figures sum in licensing fees.
Because of the path CPAWay is on, the decision to do the opposite of what many law firms advised me to do was made. Having a clear understanding of what monies would have to be paid in attorney’s fees, as well as the cost in ultimately gaining the license, proved vital. I instead approached Essociate for a license without even having to respond to the complaint filed against CPAWay. Upon making this a final decision, I negotiated a purchase price for my license fee that I felt was fair and in the best interest of my company. This price point not only would be less than I would have inevitably spent if I chose to fight and the sure distraction that would have set in, that now does not exist was priceless. In an attempt at making lemonade from this lemon, I’ve laid the ground work for a strategic opportunity that allows for cross syndication of each other’s offers and campaigns. The benefit for my company will be both evident and measurable. It will ultimately enhance CPAWay’s traffic and overall market penetration.
As a young business owner, one of the things that I found out early on was to never stop learning and more importantly adapt quickly to your current environment. Our industry waits for no one, and indecision can prove lethal. I have learned many valuable lessons from this experience. For me, it became more about correctly playing the hand I was dealt than insisting on a new dealer. In the end, keeping CPAWay and its staff whole while staying on the growth path trumped most everything else that was thought and or spoken about.
We applaud Tom for taking an unemotional look at what he feels is best for his staff, and network. That’s a difficult thing to do, especially when the Essociate patent is regarded by many as extremely questionable. But fairness doesn’t apply to patent law, so each network that is hit by this type of suit has to make their own strategic decision.
The only problem is that, in the end, if Congress doesn’t reform patent law son, companies like Essociate will be able to draw rents on the entire online industry. Unfortunately, we may all have to just learn to live with that as an outcome.