Verizon Ordered to Pay ActiveVideo $11 million Monthly

-- Following Patent Infringement Ruling, Court Tells Verizon to Find Alternative Interactive TV Technology by May 23

A U.S. District court ordered Verizon to pay ActiveVideo nearly $11 million monthly to continue using technology in its FiOS TV service that it found infringed on the company's interactive TV patents. 

The injunction issued Wednesday by U.S. District Court Judge Raymond Jackson is a big score for ActiveVideo. The ruling will likely force Verizon to strike a licensing deal to use ActiveVideo's CloudTV technology, since Jackson said the telco has until May 23 to find alternative technology to power products such as its video-on-demand platform and its FiOS TV widget bazaar.

The patent litigation has led to the biggest payday yet for ActiveVideo, which has fought for more than 20 years to distribute its interactive TV products on U.S. cable systems. Formerly known as ICTV, the company also has licensing deals with Cablevision, Grande Communications and TV Guide

Cablevision signed a license agreement to use ActiveVideo's CloudTV technology in the interactive program guide for its iO: Interactive Optimum service in 2009. Cablevision also uses ActiveVideo technology for interactive advertising and programming.

Verizon contends that ActiveVideo collects 17 cents monthly per subscriber from Cablevision, and just 7 cents monthly per subscriber after its costs are calculated.  The telco has been ordered to pay ActiveVideo $2.74 monthly per subscriber, beginning in December, until it finds a replacement technology or reaches a licensing agreement with ActiveVideo.

Verizon reported last month that it counted 3.98 million FiOS TV subscribers at the end of the third quarter. Under Jackson's ruling that Verizon pay ActiveVideo royalties of $2.74 per subscriber monthly, Verizon would be ordered to pay ActiveVideo $10.9 million each month. 

Verizon protested the royalty fee that ActiveVideo wanted it to pay. But Jackson noted that a verdict ActiveVideo won in August, in which a jury ordered Verizon to pay ActiveVideo $115 million for patent infringement, increased the value of its patents. 

"ActiveVideo is in a better bargaining position with Verizon than it would have been with Cablevision in 2009," Jackson said in his ruling. 

Verizon said it is appealing the infringement verdict, in addition to the damages award and the injunction. The company said it is also working with technology vendor Cisco on changes to its interactive TV platform that it hopes would remove questions about whether it infringes on ActiveVideo's intellectual property.

“We are confident that the finding of a patent violation will be overturned on appeal," John Thorne, Verizon senior VP and deputy general counsel, said in a prepared statement. 

ActiveVideo CEO Jeff Miller praised Jackson's order. "We believe it is well past time for Verizon to comply with the court's decision, and to cease its unlawful and unauthorized use of our intellectual property," Miller said in a prepared statement. 

North America