Netflix Scores Victory in Rovi Patent Litigation

Legal

Rovi shares plummet more than 17% on ruling

Netflix won a key victory in its ongoing patent-infringement litigation with entertainment-tech firm Rovi, as a U.S. federal judge ruled Wednesday that the five Rovi-owned patents at issue were invalid.

Judge Phyllis J. Hamilton, of the U.S. District Court for the Northern District of California, granted Netflix’s motion for summary judgment on the five patents, which cover interactive TV and electronic-program guides. She ruled the patents were invalid on the grounds that they are not directed to patentable subject matter, citing the Supreme Court’s 2014 ruling in Alice Corp. Pty. Ltd. v. CLS Bank International.

Netflix said in a statement, “We are gratified by the court’s judgment, which confirmed that Rovi’s patents are so broad and abstract as to be invalid.”

In mid-day trading Thursday, Rovi’s stock had plummeted more than 17%, to $14.50 per share. [UPDATE: The stock closed Thursday at $14 per share, down 20%.]

Rovi said it planned to appeal the ruling. “While we are pleased that the court sided with Rovi on the key claim-construction issues, we are disappointed in, and strongly disagree with, the court’s decision finding the five patents invalid and plan to appeal that decision,” Samir Armaly, Rovi’s EVP of intellectual property and licensing, said in a statement.

Rovi, dating back to predecessor company Gemstar-TV Guide International, has aggressively pursued licensing deals and litigation for its patent portfolio from pay-TV providers, CE manufacturers and over-the-top video providers. The company sued Netflix in 2011, and Netflix countersued seeking to dismiss the claims. In 2013 the U.S. International Trade Commission ruled that Netflix did not infringe a Rovi patent covering parental controls for TV user interfaces.

OTT providers including Apple, Google and Hulu have previously reached agreements with Rovi to license patents, Armaly said, “and we remain confident that Netflix requires a similar license.” In addition, Rovi recently inked a patent deal with Charter Communications covering both set-top-box and second-screen video platforms.

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