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Verizon: We Already Selected VOD When ActiveVideo Came Calling

Verizon Communications filed its final brief Thursday with the U.S. Courts of Appeals for the Federal Circuit in its appeal of patent-infringement rulings in favor of ActiveVideo Networks, asserting that it had already selected SeaChange International's VOD system when ActiveVideo approached it about an interactive TV gaming service in 2005.

"Verizon copied nothing from AVN," the company said in the brief. The Verizon filing was in reply to ActiveVideo's brief with the court accusing the telco of deliberately misappropriating the interactive TV vendor's technology.

San Jose, Calif.-based ActiveVideo, whose largest customer is Cablevision Systems, sued Verizon in May 2010 over its patents covering interactive TV and video-on-demand.

In August 2011, a federal jury in Virginia found Verizon's FiOS TV violated four ActiveVideo patents and awarded ActiveVideo $115 million in damages. Then in November, a federal district court judge issued a permanent injunction effective May 23, 2012, barring Verizon from using two of the patents, and ordered the telco to pay royalties to ActiveVideo until then.

Verizon, which won a stay on the payments pending appeal, is seeking a judgment of non-infringement from the appeals court, as well as a reversal on the lower court's injunction and damages awards.

The telco noted that the jury found the infringement was not willful.

"The undisputed evidence is that, by the time Verizon first met with AVN in 2005, Verizon had already chosen SeaChange to supply Verizon's accused VOD services. Verizon talked with AVN about AVN's interactive gaming services, not the accused services," Verizon said. "In the end, AVN never successfully integrated its interactive gaming product with SeaChange... and Verizon never adopted AVN's, or anyone else's, interactive games."

The Virginia court's injunction applies to two ActiveVideo patents: U.S. Patent Nos.: 5,550,578, "Interactive And Conventional Television Information System"; and 6,205,582, "Interactive Cable Television System With Frame Server."

According to the telco, ActiveVideo's brief actually confirms non-infringement on all patent claims. ActiveVideo asserted that under its patents, "any [set-top box] (from an old fashioned 'converter' box to a sophisticated ‘multimedia' model) could be used" to provide interactive services. Verizon argued this establishes that FiOS TV doesn't infringe the patents in question, because the telco offers as part of the service the low-end Motorola DCT-700 set-top -- a "bare-bones" device that lacks the processing power and memory to render the interactive FiOS interface and "which therefore cannot be using AVN's invention."

In addition, Verizon claimed, FiOS TV does not infringe the '582 patent because FiOS TV does not contain "individually assignable processors," and doesn't infringe the '578 patent because the service lacks the required "interactive controllers" in "television communication" with an "information source" as specified in ActiveVideo's claims.

ActiveVideo, asked to respond, said in a statement: "These are the same arguments that Verizon made and lost in the District Court jury trial. The facts remain unchanged: Verizon has been found guilty of infringement of ActiveVideo's technology and has been ordered to pay damages and royalties of up to $260.1 million."

Continued ActiveVideo, "We are confident that the Federal Circuit will uphold the original jury decision, and that damages, royalties and the injunction prohibiting their unlawful use of ActiveVideo's technology beginning in May will be upheld."

Verizon has said it is working with its current VOD systems vendor, Cisco Systems, to develop a workaround that does not use the ActiveVideo patents. Otherwise, the telco may be forced to disable FiOS TV's VOD and interactive widgets by May.

Until the injunction goes into effect, Judge Raymond Jackson for the U.S. District Court for the Eastern District of Virginia ordered Verizon to pay $2.74 per month per subscriber in royalties to ActiveVideo. With about 4.2 million FiOS TV subscribers at the end of 2011, Verizon at this point would have to pay about $11.5 million per month.