Verizon Ordered to Pay Royalties in Video-on-Demand Case

Verizon Communications Inc. must pay as much as $11 million in royalties every month to continue providing its FiOS TV customers with video-on-demand services that were found to infringe a California company’s patents.

The royalties will be paid to ActiveVideo Networks Inc., based on a rate of $2.74 for every FiOS television subscriber starting Dec. 1. Verizon has until May 23 to design a way to get around the ActiveVideo’s patented technology or it must stop using the inventions, U.S. District Judge Raymond Jackson in Norfolk, Virginia, said in an opinion issued today.

The closely held San Jose, California-based company said it licenses its technology to Cablevision Systems Corp. (CVC) for CloudTV, which competes with Verizon in the New York area.

“It is only right that Verizon, having been found to infringe our patents, should be prevented from competing with us,” Jeff Miller, chief executive of ActiveVideo, said in an e- mailed statement.

ActiveVideo won a $115 million verdict in August after a jury determined that Verizon was infringing the company’s patents. The judgment has since grown to $139.1 million.

“ActiveVideo thinks that if Verizon ceased infringing, Cablevision’s market share would increase and its subscriber base for CloudTV would also increase,” Jackson wrote. “It is true that both parties will suffer hardship in this case, but the greater hardships lie with ActiveVideo.”

New York-based Verizon reported adding 131,000 new FiOS television subscribers in the third quarter for a total of 4 million FiOS TV subscribers.

Verizon, which said it has been working on alternative technology since March, urged the judge not to impose any limits on the FiOS service, arguing that it doesn’t compete directly with ActiveVideo. Verizon, the second-largest U.S. phone company, has said it plans to appeal the verdict.

The case is ActiveVideo Networks Inc. v. Verizon Communications Inc. (VZ), 10cv248, U.S. District Court, Eastern District of Virginia (Norfolk).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net;

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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