Never heard of the company Essociate? Neither has most of the industry. That’s because their business model, according to many CPA network owners I have spoken to is simple: they allege that they own the patent for affiliate marketing and want to make sure that everyone pays them a hefty fee to run an affiliate network. Based on that, it appears that they will either shut down the industry completely, or worse, force small companies to pay them money to even exist.
Technically, I can’t explain the full patent, but based on lawsuits they have filed, pretty much any affiliate and cpa network that works with other cpa and affiliate networks, or any other affiliate program, or has the ability to, is purportedly violating their patent.
It means any affiliate network; any CPA network is a potential target of their lawsuits.
One of the issues that CPA Networks have been bringing up over and over again is that Essociate is targeting them, but not the affiliate serving companies that they license. You see, most affiliate networks don’t actually own their own affiliate technology but license from companies like Cake, DirectTrack and HasOffers. In theory, they are not violating the patent, but the company they lease the servers and technology from might be.
However, while some of these affiliate networks don’t have huge pockets and can’t afford to defend themselves, companies like DirectTrack do. Instead of suing those companies, they appear to be going after the smaller guys, like BluePhoenix Media, MaxBounty and W4. You see, patent disputes are quite expensive, and most of these companies appear to be coerced into settling instead of having to spend upwards of $500,000 to defend themselves.
Why would they sue these companies? Because they are building a war chest to eventually sue the bigger companies??
In the meantime, small companies, new companies, and growing companies are becoming victims of a patent war. This company, Essociate who no one has heard of is going after the industry, one company after another, seemingly trying to get money from whoever can’t afford to fight it.
Good news is that some companies are standing up for the industry. ShareASale has filed a lawsuit against Essociate seeking relief and invalidating the Essociate Patent. This is one step in the right direction, as most of the industry believes that there is no patent for a system and methodology that almost everyone uses, with or without technology.
The other light at the end of the tunnel is an ongoing debate on the validity of software patents in general. According to insiders, the Supreme Court could very soon invalidate software patents of this kind. In fact, based on a recent ruling by the Courts, more and more overreaching software patents are currently becoming invalidated.
It’s my opinion that what Essociate is doing is HIGHLY QUESTIONABLE. While some people might see this method of going after companies as legitimate, I think it’s a sign of a fractured legal system — on in which you can sue for anything, threaten to shut down someone’s business and in general, make a living hell of small businesses if you have the RESOURCES TO DO SO.
I hope they lose their lawsuits, get their patent invalidated and then wonder why no one in the industry will return their calls.