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Verizon has 6 months to re-engineer FiOS VOD

Mon, 11/28/2011 - 2:18pm
Brian Santo

Verizon suffered a body blow that threatens to temporarily cripple its video-on-demand (VOD) service. In the latest development in its long-running patent infringement case brought against it by ActiveVideo, a U.S. District Court decided late last week to grant ActiveVideo's request for an injunction against FiOS VOD.

The court gave Verizon six months to implement a different, non-infringing system for delivering its VOD services.

Court documents also revealed that ActiveVideo is providing the technology upon which Cablevision is basing its interactive TV services. The relationship has long been assumed, but prior to this has never been confirmed by either of the two parties.

The U.S. District Court for the Eastern District of Virginia restated its earlier ruling that Verizon is infringing four ActiveVideo patents with its delivery of VOD. The new ruling is that the infringement is causing harm to ActiveVideo.

The harm derives from the fact that Cablevision makes use of ActiveVideo's CloudTV platform, according to the court decision. The Court agreed with ActiveVideo that Cablevision could reasonably be expected to gain more subscribers in the absence of direct competition from Verizon with services that are based on ActiveVideo's technology.

If Cablevision were doing more business with consumers, it would also be doing more business with ActiveVideo. Furthermore, ActiveVideo has argued – and the court agreed – that if Cablevision were doing more business because of its relationship with ActiveVideo, that would help ActiveVideo attract other cable industry customers.

Verizon argued that it does not directly compete with ActiveVideo (and in fact could be a customer), and that there is no legal precedent for finding harm against a non-competitor. The court, however, found a precedent, which led to its determination that the two are indirect competitors.

Verizon also argued that monetary damages and subsequent royalties should be adequate. The court disagreed that monetary damages are adequate and affirmed ActiveVideo's right to not license its technology to Verizon.

Verizon asked for a minimum of eight months to put a new VOD system in place. Since the infringement has been established in previous court action, the court was unmoved by the request. "Verizon knew from the beginning of August that they should be working toward implementing a non-infringing alternative," the decision reads.

The court also ordered that during the six month "sunset" period that Verizon has to implement a new VOD system, Verizon will have to pay ActiveVideo royalties of $2.74 for every FiOS TV subscriber every month. With about 3.8 million subs, that will work out to well over $60 million by the end of the sunset period.

Verizon was unable to respond to queries by press time, but ActiveVideo's statement makes it clear that it thinks Verizon has quite a challenge ahead of it.

"In order for Verizon to avoid infringing our pioneering technology, it will have to significantly redesign FiOS TV and likely remove much of the functionality that consumers demand," said Jeff Miller, president and CEO of ActiveVideo. "Verizon's continued refusal to accept the numerous court rulings and the jury's verdict is not in the best interests of its customers or shareholders, and ActiveVideo is confident the appellate courts will agree."

Verizon currently uses equipment from SeaChange International to deliver its VOD.

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