Can You Hear Me Now?

September 30, 2011, 3:58 PM

What happens when a small company backed by a big investor is kicked to the curb by the Phone Company? Throw in a multiple-year courtship of that company gone bad along with a preemptive suit by the Phone Company to squash the companys major customer and you can get the kind of facts that can lead to a multimillion dollar jury verdict. That is exactly what happened in a recent jury trial in the Norfolk Division of the Eastern District of Virginia where a small company, ActiveVideo Networks, Inc. (ActiveVideo), sued several Verizon entities claiming the Phone Company infringed a series of ActiveVideos interactive video technology patents. The result was a message that even the non-4G T-Mobile girl could hear and understand: a historic $115 Million verdict against Verizon.

So what exactly happened that led Big Red to see red? San Jose based ActiveVideo (formerly ICTV) pioneered certain technology central to offering interactive services over cable systems in the early 1990s. The technology is used in the delivery of certain interactive applications like video-on-demand and interactive TV. Over the course of the next decade, ICTV sought to interest the industry, including Verizon, in this technology and, in the process, lent Verizon two systems to study. Repeated questions, technical assistance and demonstrations of the technology unfortunately led to no business. Years passed and finally, after repeated requests for the return of the systems, Verizon sent back the systems, one in total disrepair, claiming it was not interested in the technology any more. In the interim, however, Verizon had developed its own similar technology along with others and launched this technology as part of its FiOS interactive services. In addition, because ActiveVideos largest and only current customer of the time controlled strategic parts of the New York City market, Verizon launched an attack against Cablevision in the International Trade Commission seeking to shut it down.

ActiveVideo filed suit against Verizon in May 2010, alleging that the Verizon FiOS system infringed four patents covering technology created and owned by ActiveVideo. Prior to trial, the Court invalidated certain patents asserted by Verizon in its counterclaim against ActiveVideo. At the end of the three and a half week trial that spanned July into August, the Norfolk Federal Court jury found that Verizon had infringed all asserted claims of the ActiveVideo patents through its deployment of Verizons FiOS interactive services. By ruling in the companys favor, the jury affirmed ActiveVideos rights as the inventor of the technology in question. ActiveVideo also has filed a motion seeking a permanent injunction to prevent Verizon from continued use of the company's technology. Verizon has filed an appeal. Stay tuned.

Stephen E. Noona is the head of Kaufman & Canoles Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group. He has been counsel in over ninety (90) patent cases in the Eastern District, is Fellow in the American College of Trial Lawyers and has appeared before the judges in all four Divisions of the Eastern District on patent and intellectual property matters.Stephen served as co-counsel for ActiveVideo in its successful case against Verizon. Stephen E. Noona