Permanent Injunction Granted Against Verizon's Video on Demand Service Even Though Plaintiff Was Not a Direct Competitor

December 7, 2011

After ActiveVideo Networks, Inc. ("ActiveVideo") prevailed on a patent infringement action against Verizon Communications, Inc. ("Verizon") before a jury, ActiveVideo moved for a permanent injunction. ActiveVideo moved to enjoin Verizon's further use of Verizon's Video on Demand ("VOD") services offered through its FiOS system. Verizon opposed the motion and also asked for a "sunset" provision in the event the district court deemed an injunction appropriate. Verizon also asked the district court to stay any injunction pending appeal.

After reviewing the requirements of a permanent injunction in a patent infringement matter with particular reference to the Supreme Court's decision in eBay, Inc. v. MercExchange, L.L.C. , 547 U.S. 388 (2006), the district court turned to analyzing the traditional four-factor test for determining whether an injunction was appropriate in this case.

Addressing the first factor (Irreparable Harm Suffered by ActiveVideo), Verizon argued that ActiveVideo had not carried its burden of proof because Verizon and ActiveVideo are not direct competitors in the television market. Reviewing recent Federal Circuit precedent, the district court determined that the inquiry does not end "in the absence of direct competition." Instead, the district court found that ActiveVideo and Verizon are indirect competitors because Verizon competes with licensees of ActiveVideo such as Cablevision. "Verizon's unlawful infringement unquestionably impedes upon the portion of the market share which Cablevision could have, and thus it impedes on ActiveVideo's ability to introduce its patented technology to the portion of the market that Verizon controls. There is no doubt that ActiveVideo suffers indirect losses when Cablevision suffers direct losses from Verizon's infringement."

Turing to the second factor (Adequacy of Remedies Available at Law), the district court also found that this factor favored ActiveVideo. "Because of Verizon's infringement, ActiveVideo's business opportunities have been significantly hampered." The district court also found that monetary damages would be inadequate because losses with brand recognition and market share are difficult to convert into an estimate of monetary damages.

The district court also concluded that the third factor (Balance of Hardships) weighed in favor of granting the permanent injunction. The district court reached this conclusion because Verizon is a much larger company than ActiveVideo and because ActiveVideo is reliant on its patents, while Verizon is working on a non-infringing alternative that will alleviate the hardship it faces.

Finally, addressing the fourth factor (Public Interest), the district court also concluded that this factor favored the issuance of the permanent injunction. "The Court concludes that the public has an interest in protecting patent rights, and the Court acknowledges that public policy generally favors the enforcement of such rights."

The district court also declined to stay the injunction pending the appeal because the district court did not believe that there was a strong likelihood that Verizon would prevail on appeal. The district court did, however, provide Verizon with a "sunset period" before the injunction would take effect and found this was an additional reason why a stay of the permanent injunction was not necessary. The district court awarded a royalty payment as well during the "sunset period" finding that a rate of $2.74 per FiOS TV subscribe per month was appropriate during the period.

ActiveVideo Networks, Inc. v. Verizon Communications, Inc. Case No. 2:10cv248 (E.D. Va. Nov. 23, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.