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Judge upholds jury decision in nCUBE-SeaChange patent spat

Mon, 04/12/2004 - 8:00pm
Jeff Baumgartner

A Delaware judge last week upheld a jury decision from 2002 that SeaChange International infringed on key patents tied to nCUBE Corp 's video-on-demand technology.

A Delaware jury ruled more than a year ago that SeaChange had "willfully infringed" on nCUBE's patent, holding that SeaChange must pay nCUBE in excess of $2 million and a 7 percent royalty on all sales of infringing products after Feb. 1, 2002. In the case, nCUBE alleged that SeaChange infringed on U.S. Patent 5,805,804, which describes "a unique video server architecture specially suited for VOD delivery."

In his opinion of the case, Judge Joseph Farnan Jr. held that SeaChange "deliberately copied the invention of the [nCUBE] patent," and awarded double damages to nCUBE. More specifically, the judge awarded nCUBE "enhanced damages" of roughly $4 million, prejudgment interest of $62,000, and two-thirds of attorneys' fees and costs of about $1.8 million.

In response, SeaChange said it will fight back, noting in a release that the judge's opinions "clear the path for the appeal process to proceed." SeaChange has previously maintained that it has created a workaround.

SeaChange also has been setting money aside ever since last year's jury decision. In the company's fiscal fourth quarter of 2003, SeaChange reserved $3.5 million to compensate for the nCUBE case. In its most recent 10-Q, SeaChange said charges linked to the case totaled $14.4 million.

Although the judge's decision was made last week, it took until Tuesday for the results to be released publicly. SeaChange investors appeared unfazed by the news, with company share prices rising 2.51 percent to $14.30 apiece in early trading Tuesday. That wasn't the story Monday, when SeaChange shares dropped from $15 to $13.95.

In other litigation between the two companies, SeaChange filed a lawsuit against nCUBE in 2000, alleging that nCUBE infringed on a patent (No. 5,862,312) for a "loosely coupled mass storage computer cluster." nCUBE challenged a ruling that SeaChange's patent was valid. A trial for that case has not yet been set. nCUBE, though, said it implemented a workaround "a few days" following the initial ruling in the '312 case.

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