Verizon ordered to pay royalties to ActiveVideo

NORFOLK, Dec 01, 2011 (The Virginian-Pilot – McClatchy-Tribune Information Services via COMTEX) –
A federal judge has ordered Verizon to begin paying up for using patents owned by a small tech company in its FiOS television service.

ActiveVideo Networks Inc., which was born in Virginia Beach and is now based in California, won a $115 million jury verdict in Norfolk federal court after a lengthy trial this summer. The jury found that Verizon used ActiveVideo’s patents to develop part of its FiOS cable TV system. U.S. District Judge Raymond A. Jackson tacked on an additional $24 million penalty.

In a Nov. 23 ruling, Jackson ordered Verizon to begin paying royalties of $2.74 per FiOS customer each month to ActiveVideo. With around 4 million FiOS customers, that amounts to about $11 million per month.

Since the verdict, ActiveVideo has sought a permanent injunction that could have prevented Verizon from providing its FiOS video-on-demand service. The judge granted the injunction but is giving Verizon six months to develop an on-demand service that does not infringe on ActiveVideo’s patents. Instead of halting the service, he ordered Verizon to begin paying royalties.

“Verizon could not immediately comply with an injunction order without causing substantial damage to its reputation and to its customers,” Jackson said in his ruling. “The extreme difficulty and expense that Verizon claims are associated with designing a non-infringing alternative only highlight the importance of ActiveVideo’s patents to Verizon and strengthen ActiveVideo’s bargaining position.”

ActiveVideo has a contract with Cablevision, one of Verizon’s chief rivals, to provide on-demand interactive technology. In ordering royalties be paid, Jackson found that Verizon gained an edge in the marketplace by its unauthorized use of ActiveVideo’s patents.

Jackson initially told Verizon to begin paying by today, but granted a two-week extension. Verizon continues to appeal the verdict and has asked the judge to set aside his ruling ordering royalty payments. A decision is expected before the first payment would be due Dec. 16.

A Verizon spokesman did not respond to phone and email questions Wednesday.

Verizon reported $28 billion in third-quarter revenue while sustaining $250 million in unexpected expenses from storm-related damages and a two-week strike, according to the company’s third-quarter report.

So the company isn’t worried about making such payments to ActiveVideo if it has to, one of the company’s lawyers said. Verizon has already posted a $145 million bond to cover the cost of the verdict and post-trial costs if it ultimately loses. Verizon has now offered to post another bond to cover the $66 million in royalties.

“We argued to Judge Jackson that we don’t need to file a bond,” said Norfolk attorney Greg Stillman, one of Verizon’s team of 26 attorneys on the case. “We thought that was unnecessary because Verizon has a few billion in the bank.”

Jackson has already denied a number of Verizon’s post-trial appeals. The case is now before the U.S. Court of Appeals for the Federal Circuit in Washington.

Tim McGlone, (757) 446-2343, tim.mcglone@pilotonline.com
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