Rovi Restarting Licensing Talks with Netflix Following ITC Ruling

Rovi sued Netflix in U.S. District Court, San Jose, Calif., in 2012 along with LG Electronics, Mitsubishi, Roku and Vizio, claiming the companies violated seven patents, including those covering parental control technology, a client-server-based interactive program guide for TVs and a method for providing personalized viewing recommendations. Rovi has since reached settlements with LG, Mitsubishi and Vizio. The administrative law judge in June ruled Netflix didn’t violate the patent involving parental control, but found three other patents valid. The full ITC is expected to issue a final ruling by October. The federal court case was stayed pending the ITC investigation. “Now that the detailed ruling is available, we have restarted these negotiations and anticipate bringing them to closure,” Carson said. He said Rovi also will restart “litigation as quickly as possible” after the final ITC decision.

In the federal court case, Netflix’s entire video streaming service will be at issue, as opposed to the more limited ITC review of imported products that potentially infringe U.S. patents, Carson said. Rovi argued in the ITC case that an “infringing application” was being embedded in a product by an offshore supplier

"The ITC case turned on the importation issue,” Carson said. “In a U.S. District Court, Netflix’s entire service will be reviewed and importation will not be an issue. In that venue, we believe that similar findings on claims construction and validity will result in a favorable verdict on infringement. We hope the ITC’s finding of validity will convince Netflix and others that commercial negotiation should be used to resolve matters. However, if this doesn’t prove feasible, we will continue to use all of our remedies to protect our IP, including litigation.” Netflix officials didn’t comment.

Having reached over-the-top licensing deals with Apple, Hulu and Walmart’s Vudu, Rovi has created “enough momentum” with OTT services to begin “stepping up the pace” of negotiations in that segment, Carson said. Rovi initially landed an agreement with Apple in 2010 and has a longtime pact with Samsung that was extended to include OTT services, analysts have said.

Rovi “continues to make progress” on potentially deploying TotalGuide IPG-equipped set-top boxes with Cogeco and BendBroadband as well as “other service providers, said a company spokesman. He declined to disclose the timing for introduction. The set-top TotalGuide IPG also was being tested in field trials with Armstrong Cable and Charter Communications at one point. Carson didn’t provide an update during the call on those potential deployments. The deployment with Charter was among the largest potential agreements, with the cable operator having more than 4 million subscribers. Rovi initially hoped to have the cable set-top deployments start in early 2012, but later revised that to this year. Eleven mostly smaller cable operators renewed licensing pacts with Rovi in Q4 2012 that included the TotalGuide IPG, and six were expected to introduce the feature in the first half. Canadian cable operator Cogeco, along with BendBroadband and Eastlink, have begun offering TotalGuide XD and two more service providers submitted applications to Apple in Q2, Rovi officials said. TotalGuide XD allows channels to be tuned from a smartphone or tablet. While TotalGuide XD initially was available only for the iPad, it will be released as an Android application in September, Carson said. Armstrong has been testing TotalGuide XD for a year. Blue Ridge Communications, Buckeye Cable and Mediacom also have TotalGuide XD agreements with Rovi.