Can You Hear Me Now: Part Deux?

What happens when a small company backed by a big investor is kicked to the curb by the Phone Company? Throw in a multiple-year courtship of that company gone bad along with a preemptive suit by the Phone Company to squash the company’s major customer and you can get the kind of facts that can lead to a multimillion dollar jury verdict. That is exactly what happened in a recent jury trial in the Norfolk Division of the Eastern District of Virginia where a small company, ActiveVideo Networks, Inc. (ActiveVideo), sued several Verizon entities claiming the Phone Company infringed a series of ActiveVideos interactive video technology patents. The result was a message that even the non- 4G, now leather clad T-Mobile girl could hear and understand: an historic $115 Million verdict against Verizon that was augmented by an injunction and post-judgment royalties that swelled the verdict too over $260 Million. This blog has followed the case with great interest in several posts. Naturally, Verizon flooded the market with press releases castigating the process and promising an appeal to the United States Court of Appeals for the Federal Circuit, where all patent case appeals are heard and where Verizon believed that the wiser, appellate justices would undo the jurys verdict. On August 24, 2012, however, after engaging upon a somewhat expedited review, the Federal Circuit, among other things, affirmed the jurys verdict on damages, reversed the Courts injunction, and remanded the matter for further proceedings to determine an appropriate, higher, post-judgment royalty for Verizon to pay ActiveVideo. In particular, the Federal Circuit affirmed both the original jury award from the United States District Court for the Eastern District of Virginia, as well as subsequent awards of interest and royalties granted by Judge Raymond A. Jackson. The Court also remanded to the District Court calculation of an ongoing per-subscriber royalty, should an analysis of Verizon’s current FiOS system reveal continued infringement of ActiveVideo patents. The Court of Appeals upheld the jury finding of infringement of three key ActiveVideo patents, while reversing the infringement finding on a fourth patent, and affirmed the District Court’s ruling that the ActiveVideo patents are not invalid. Even though the court reversed on one of the four patents found to infringe, the Court of Appeals held that there should be no reduction in the amount of damages, affirming the full measure of damages awarded by the jury and all subsequent monetary awards by the District Court. In large part, the Federal Circuit upheld the many challenged rulings of Judge Jackson and made clear that Big Red was on the hook for big green. Verizons options are to seek a rehearing or appeal to the U.S. Supreme Court. Moving forward, Verizon claims to have designed around the patents but ActiveVideo already had filed contempt proceedings that allege; the contempt proceedings were stayed pending the Federal Circuits decision but could be reopened soon. With the Courts decision, it appears that Verizon will have to look long and hard at its design around and may need to pay cable company rates to offer video on demand in the future. Stay tuned. Stephen E. Noona is the head of Kaufman & Canoles Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group. He has been counsel in over ninety (95) patent cases in the Eastern District, is Fellow in the American College of Trial Lawyers and has appeared before the judges in all four Divisions of the Eastern District on patent and intellectual property matters. Stephen served as co-counsel for ActiveVideo in its successful case against Verizon. Stephen E. Noona