Verizon Ordered To Pay $115M In Damages After Patent Loss

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Certain smartphone companies may want to take note of this one: using patents aggressively can produce pushback from unexpected places. Verizon is on the hook for $115 million after a major loss in court yesterday-one that, unless it’s overturned on appeal, could threaten the company’s FiOS internet service. Cloud-video provider ActiveVideo filed suit against Verizon not long after Verizon used patents to attack Cablevision (NYSE: CVC), ActiveVideo’s largest U.S. customer.

ActiveVideo sued Verizon back in May 2010, saying that Verizon’s FiOS system infringed on four ActiveVideo patents related to video-on-demand and interactive TV services. The verdict follows a three-week jury trial in Alexandria, Virginia.

In an interview with paidContent, ActiveVideo Networks CEO Jeff Miller said that filing a patent lawsuit was not an easy decision for his company, which is based in San Jose and has about 140 employees worldwide. “Our business focus has been to go out and sell products based on our patents,” said Miller. “We’ve not really been interested in litigating-we’ve never done it before and it’s not our strategy.”

But when Verizon used its own patents to go after Cablevision in March 2010, filing a complaint at the International Trade Commission, ActiveVideo felt a need to take legal action. “Not only was Verizon treating us poorly, but the company was attacking our customers,” said Miller.

Miller also said that his company began discussions with Verizon as early as 2005 about including ActiveVideo software in the FiOS system, but that “it never came to be, in spite of our best efforts.”

Now that it has won its court case against Verizon, ActiveVideo’s lawyers are going to pursue an injunction that would force Verizon to either alter its FiOS system or shut it down. But winning an injunction will require additional argument, and can be difficult even for patent plaintiffs who score a big win. Courts have imposed stricter rules for getting patent injunctions in recent years, so there are many steps to go before FiOS would be under any serious threat of being shut down.

The $115 million verdict is a huge sum-ActiveVideo’s lawyers told Law360 that it’s the biggest verdict ever in a patent case in the Eastern District of Virginia-but ActiveVideo didn’t get everything they were after in the case, either. The jury did not find that Verizon willfully infringed the patents, even though ActiveVideo had made that argument. And the jury found that a counter-attack by Verizon also had some merit-and that ActiveVideo was infringing two Verizon patents. But the jury ruled that damages for the counter-assertion should be only $16,000.

A spokesman for Verizon, Ed McFadden, offered this comment on the case: “Verizon disagrees with the verdict, and we’re confident that a court of appeals will reach the same conclusion. Verizon won’t be paying any damages while the appeal is ongoing.”

Verizon has been involved in high-stakes patent litigation before, although it’s more often on the plaintiff’s side of the courtroom. In 2006, Verizon sued Vonage for VoIP patents, and ultimately extracted a settlement from Vonage worth up to $120 million. But when Verizon used some of those same patents to go after Cox Communications in 2008, it was rebuffed.

The trial took place in the Eastern District of Virginia, a venue that has a reputation for being a “rocket docket” for fast-moving patent cases. This case went from filing to trial in 15 months, which is actually extremely speedy for a patent case.

Further reading:

»  ActiveVideo press release on the verdict

»  Jury’s verdict form in ActiveVideo v. Verizon [PDF]

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