Time Warner, Gemstar Declare a Little Peace

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Washington-Three months into its feud with Gemstar International Group Ltd. over carriage of electronic program guides, Time Warner Cable decided to call a truce.

But the MSO's actions fell short of totally satisfying Gemstar.

In March, Gemstar filed a complaint with the Federal Communications Commission over Time Warner's decision to strip out Gemstar's EPG, which it transmits to cable subscribers using a portion of a local TV station's signal called the vertical blanking interval.

In a June 15 letter, Time Warner told Gemstar that "in a gesture of goodwill," it would immediately stop stripping the EPG on all of its cable systems while the FCC evaluated Gemstar's complaint.

But Time Warner said it would not back down from its legal positions presented to the FCC. In fact, the MSO said, it would revoke its decision if Gemstar attempted to "frustrate or delay" the commission's review of Time Warner's claim that it had control over VBI data unrelated to the TV channel on which it is carried.

Time Warner said it hoped its decision to restore Gemstar's service would inspire the company to work out a business deal so its subscribers can receive the EPG material, which includes programming information on all of the cable channels.

"We believe our discussions should begin as soon as possible," Time Warner senior vice president and general counsel Marc Apfelbaum said.

In a June 22 response, Gemstar said Time Warner's decision was "a salutary one," and it would be pleased to take up the offer to strike a deal.

But Gemstar said that as of the date of its reply letter, Time Warner was continuing to block Gemstar's service in eight markets, including Los Angeles; Charlotte, N.C.; and Portland, Maine.

"We bring this to your attention in the expectation that these are aberrations that will promptly cease," Gemstar executive vice president and general counsel Stephen A. Weiswasser said.

Based in Pasadena, Calif., Gemstar controls about 90 patents for interactive TV that it licenses to various players.

The company has agreed to buy TV Guide Inc. for $9.2 billion-a deal that would leave News Corp. and Liberty Media Group with a total of 45 percent of the new company.

Sens. Mike DeWine (R-Ohio) and Herb Kohl (D-Wis.) have asked the Department of Justice to examine the possible anti-competitive effects of Gemstar's patents in the context of the TV Guide merger.

When the feud with Time Warner erupted, Gemstar called the MSO's actions "deliberate and malicious," asking the FCC to enjoin Time Warner from engaging in actions it said violated provisions of the Cable Act.

In response, Time Warner said Gemstar's legal position was "outlandish," claiming that cable operators could filter VBI data that was totally unrelated to program listings and pointing to Gemstar content that included promotional announcements and advertisements.

Time Warner gained support from the National Cable Television Association. The Walt Disney Co. backed Gemstar not only at the FCC, but also on Capitol Hill, where Disney circulated Gemstar's complaint as an example of discriminatory conduct that could mushroom into a bigger problem on the Internet after America Online Inc. buys Time Warner Inc.

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