News

Patent Parries: Cox Beats Verizon; Comcast Inks No-Sue Pact

10/10/2008 8:00 PM Eastern

Cox Communications beat back Verizon Communications' patent-infringement claims with a key courtroom victory last week, while Comcast landed a deal with the telco giant to avoid patent litigation.

In the Cox case, a federal jury returned a verdict that the operator did not infringe six Verizon patents related to Internet phone systems. Verizon had sought $404 million in damages.

Before that decision was announced, Comcast had reached an agreement on a litigation cease-fire with Verizon on patents, under which both parties agreed to not sue the other for a five-year period over intellectual-property claims in exchange for Comcast spending millions on Verizon Wireless services.

Analysts said Cox's win should provide protection to other cable operators. The decision eliminated “negotiating leverage” Verizon would have had with other cable companies if the telco had prevailed, investment bank Stifel Nicolaus said in a research note.

“Cox is extremely pleased with the decision,” the cable provider said in a statement. “We remain deeply committed to providing our customers high-quality phone service at a great value, and look forward to competing vigorously with Verizon in the marketplace, not the courtroom.”

Asked to comment, Verizon spokesman David Fish said in a statement, “Verizon is a major-league innovator in new technology for our customers, and we will continue to innovate and to protect our patented inventions.” He said Verizon has not determined whether it will appeal the decision.

The decision by the eight-member jury in the U.S. District Court for the Eastern District of Virginia was entered Oct. 6, after a two-week trial. Verizon sued Cox in January.

Verizon filed a similar suit against Charter Communications, in the U.S. District Court for the Eastern District Court of Texas, alleging the MSO infringed the same patents at issue in the Cox case. That case is scheduled to go to trial in February 2010; Charter has previously said it would “vigorously defend itself.”

Bill Boice, a partner with law firm Kilpatrick Stockton, which represented Cox, noted that the Virginia jury also found the cable company had provided “clear and convincing evidence” that Verizon's claims on two patents were invalid.

Those two patents — U.S. Patent No. 6,104,711, for an “Enhanced Internet domain name server” to translate information from a public, packet-based network; and U.S. Patent No. 6,282,574, an extension of the prior patent — were at the heart of Verizon's suit against voice-over-Internet protocol provider Vonage Holdings. A jury last year found Vonage had infringed the '574 and '711 patents, and Vonage ended up paying the telco $117.5 million as part of a settlement agreement.

Boice said the most important evidence related to those two patents was supplied by Cox's expert witness, Mark Handley, a professor of networked systems at University College London.

Handley is one of the inventors of the Session Initiation Protocol, a standard for Internet telephony signaling. He testified that SIP provides the same functionality described by Verizon's patents, but was established prior to the patents being granted.

The jury's decision showed the Verizon patents “just don't cover what Cox and perhaps other cable-telephone systems use,” Boice said.

Comcast, for its part, was looking to forestall any courtroom drama through its five-year pact with Verizon.

The deal is not the equivalent of a license because there are not complete releases of damage liability, company executives said. When the agreement expires, both parties reserve the right to seek historical damages, but dating back no further than the point at which the agreement was signed.

Under the deal, Comcast will procure Verizon Wireless services for its employees worth approximately $90 million over five years, according to executives familiar with the arrangement. Comcast could purchase additional services that would make the total cost closer to $280 million, The Wall Street Journal reported.

Verizon and Comcast have the option to extend the deal another two years, if Comcast continues to purchase wireless services under the agreement.

The deal covers thousands of voice, video and data patents held by the two companies. Under the terms of the agreement, neither party is admitting infringement or validity of any patents in the other company's portfolio.

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