Cablevision, Verizon Brace for Court Collision

Setting the stage for a courtroom showdown later this month, a judge at the U.S. International Trade Commission (USITC) denied Cablevision Systems Corp. (NYSE: CVC)'s requests for a ruling that the MSO is not infringing on Verizon Communications Inc. (NYSE: VZ) patents related to digital set-tops and interactive program guides.

Seeking to block Cablevision from importing three advanced set-tops manufactured by Cisco Systems Inc. (Nasdaq: CSCO), Verizon filed a complaint against Cablevision at the ITC last March. In denying Cablevision's motion for a summary judgment that it hasn't infringed on Verizon’s patents, ITC administrative law judge E. James Gildea ruled that his staff of investigators have found "four material issues that are still in dispute." (See It's On: Verizon-Cablevision Patent Spat Heats Up.)

"Good cause does not exist to grant the motion in lieu of a trial of all issues on the merits," Gildea wrote in a ruling that he made on Dec. 22 but was not released publicly until last Friday. The ITC is scheduled to kick off a six-day hearing of the case Jan. 24, and issue a final decision by August.

Five motions for summary judgment have been filed in the case -- four from Cablevision, and one from Verizon, a source said. Gildea has denied three of Cablevision's motions, and on Tuesday (Jan. 11), granted Verizon a motion for summary judgment stating that it has a substantial domestic industry at stake in its dispute with Cablevision, the source said. A fifth motion for summary judgment from Cablevision is pending.

The stakes in the case are huge for Verizon and Cablevision, which are both relying on the rollout of advanced interactive TV products to lure and retain subscribers.

While Verizon's FiOS TV offers subscribers a high-tech interactive program guide and interactive TV widgets and applications such as Facebook , Cablevision has looked to differentiate itself with an IPG that contains mosaic channels that display multiple networks from the same genre on a single screen such as iO Kids and iO Sports. It also offers several interactive TV channels such as MSG Varsity and Optimum Autos and has had some early success with interactive advertising campaigns. (See Cablevision Adds ActiveVideo Apps, Cablevision Eyes T-Commerce Launch in 2010 and Cablevision Gets Interactive.)

Verizon claims that several of Cablevision's advanced products violate its patents. Exhibits Verizon has submitted in the case include documents related to Optimum Autos, Optimum Homes, MSG Varsity and the "Quick View" function on Cablevision’s IPG.

Interpretation will be key
The ITC case will hinge on the interpretation of Verizon's IPG patents. In Cablevision's motion for summary judgment, the MSO argued that it doesn't violate one of Verizon's IPG patents since the patent refers to allowing viewers to surf directly from TV shows in the same program category using a single click of a remote control, while Cablevision requires subscribers to click "several different buttons before the television tuner switches between channels broadcasting the same type of programs."

Verizon's exhibits and witness lists include several technology vendors of Cablevision, including interactive TV software firms ActiveVideo and Zodiac Interactive , and set-top suppliers Cisco and Samsung Corp.

ActiveVideo built Cablevision's Quick View channels and also supplies technology for MSG Varsity and other interactive TV channels, while Zodiac supplies Cablevision with technology for its coming remote-storage DVR and interactive TV applications. (See ActiveVideo Suit Targets Verizon and Cablevision Powers Up for ITV.)

Dozens of executives from Cablevision, Verizon, and cable technology firms have been deposed in the case, including current and former employees of Time Warner Cable Inc. (NYSE: TWC), Cisco and what used to be its Scientific Atlanta unit (Cisco bought SA in 2006), Cable Television Laboratories Inc. (CableLabs) and ActiveVideo.

Verizon attorneys may also be raising questions about Cablevision's plans to deploy tru2way-based boxes from Samsung. Its exhibits include the user guide, photos, and e-mails related to Samsung's SMT-C5320 set-top. (See Samsung Boxes Break In at Cablevision .)

Cablevision officials insist that the MSO hasn't violated Verizon's intellectual property. "We believe these claims are without merit, and we are defending against them vigorously," spokesman Jim Maiella said in a statement.

Verizon officials declined to comment on the ITC litigation.

Seeds of the Full Service Network
Cablevision's exhibits indicate that it will attempt to show that it hasn't infringed on Verizon's patents since it relies in part on technology that Scientific-Atlanta (now part of Cisco) developed for Time Warner Cable's Full Service Network (FSN), a digital TV experiment conducted in the mid-1990s that tested video on demand, home shopping and other interactive TV services in Orlando, Fla.

Time Warner Cable Executive VP of Advanced Engineering Mike Hayashi is included on Cablevision’s witness list, along with veteran TW Cable engineer Louis Williamson. Cablevision's witness list also includes Cisco executives Greg Durden, Kinney Bacon, Carla Cravalho, David Hansen and David Lett, and ActiveVideo VP Greg Brown.

Cablevision has also deposed several Verizon executives, including VP of Consumer Strategy and Planning Shawn Strickland; Director of Consumer Product Development Joe Ambeault; Director of Network Engineering Frank Boersma; and Senior VP of Consumer Product Management Eric Bruno.

Cablevision also lists several of its own employees as witnesses, including SVP of Strategic Product Development Patrick Donoghue; VP of Direct Marketing Kathy Filosa; Director of Product Development Adam Labelson; SVP of Software Technology Richard Neill; and Director of Advanced Technology Development Kenneth Silver.

According to a schedule set by the ITC, Gildea is expected to make an initial determination in April. A final determination, which will be voted on by all six ITC commissioners, is scheduled to be issued by August.

However, Cablevision could reach a settlement with Verizon before a final determination has been issued.

— Steve Donohue, Special to Light Reading Cable

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