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Patently ineffective

Gemstar loses another round in court

Gemstar-TV Guide Intl., a company whose name has become synonymous with the word “lawsuit,” is claiming the legal high ground, even after another of its intellectual property infringement claims was tossed out of court.

Scientific-Atlanta on Wednesday claimed victory in its ongoing patent-infringement defense as a Georgia federal judge threw out part of a lawsuit filed by Gemstar, ruling the set-top box maker did not infringe two Gemstar patents. The court also said Gemstar cannot raise any more infringement claims against Scientific-Atlanta on those patents.

But a combative Gemstar quickly fired back, insisting it did not even claim infringement against Scientific-Atlanta on the patents addressed in this week’s court ruling.

“The court’s decision does not prevent the company from asserting infringement claims under these patents in other proceedings, to the extent that such proceedings involve other parties or products,” the company said in a statement.

Scientific-Atlanta won a similarly favorable ruling last November in the same court concerning different IPG patents. There are still several other Gemstar patents being contested in the Georgia court, however.

SEC probes

The licensing deals with S-A, for which Gemstar inappropriately recognized revenues, are at the heart of a slew of ongoing SEC investigations into Gemstar accounting practices.

Litigating against alleged infringement of its 180-odd IPG patents had been a cornerstone of Gemstar’s business under founder and former CEO Henry Yuen. In fact, observers say the company risks the perception of spending more time litigating than operating, even after Yuen’s ouster.

Last week, Gemstar lost another outstanding patent case against DBS provider EchoStar when a U.S. District Court in Atlanta ruled that the electronic programming guide had no case in a patent suit.

Yet the company has been working steadily under new CEO Jeff Shell to resolve many of its outstanding disputes. Last month, the company paid out $39.5 million in a suit over its failed acquisition of Diva Systems.

Still on the hook

Yuen was ousted last fall along with former chief financial officer Elsie Leung. Both are now facing an SEC civil suit, charged with fraud and falsification of information and records. The fraud charges relate to some $223 million in inflated revenues during 2000-02. If Yuen and Leung are found personally accountable for misleading the public on the health of its IPG ad and licensing revenues, Gemstar could face shareholder lawsuits. Meanwhile, Yuen has filed his own suit against the SEC, claiming the regulator is illegally withholding severance payments.

In addition to its new management team, Gemstar has since fortified corporate governance procedures to rectify the situation. But the fate of its IPG technology is still unknown. Gemstar majority owner News Corp. has indicated it may well use the technology as the de facto program guide on DirecTV if it successfully acquires the U.S. DBS provider. That move could irk some cable operators currently using the Gemstar IPG.

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