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Gemstar Suit Targets Virgin Media

Gemstar-TV Guide International Inc. (Nasdaq: GMST)'s legal team jumped the pond this week to reenter litigation mode, this time targeting U.K.-based Virgin Media Inc. (Nasdaq: VMED).

Gemstar, together with subsidiaries StarSight Telecast Inc. and United Video Properties Inc., filed a lawsuit alleging that Virgin Media Limited and Virgin Media Payments Limited have infringed three European patents -- EP (UK) 0 969 662, EP (UK) 1 377 049, and EP (UK) 1 613 066 -- linked to interactive program guides (IPGs) and the execution of video recordings via an IPG.

Virgin's cable unit reported having 4.8 million "on-net" customers at the end of the third quarter of 2007. The operator also ended the period with 192,200 V+ DVR subscribers, representing 6 percent of its base of digital video subscribers.

Gemstar's suit against Virgin Media marks the first legal volley from the IPG specialist since Macrovision Solutions Corp. agreed last month to acquire Gemstar in a cash and stock deal valued at $2.8 billion. (See Macrovision to Buy Gemstar-TV Guide for $2.8B.)

Gemstar claimed it had failed to reach a business deal with Virgin Media and was left with no other option but to throw the book at the operator.

"We have worked diligently to license Virgin Media for their distribution of various set-top boxes that contain IPGs covered by our patents, but negotiations did not lead to a resolution," said Gemstar EVP of intellectual property and licensing Samir Armaly, in a statement. "While we would have preferred to reach a commercial solution with Virgin Media, we ultimately have a responsibility to our shareholders, licensees, and other stakeholders to protect the value of our intellectual property."

A Gemstar-TV Guide spokeswoman said the suit is seeking an injunction. Gemstar is also seeking an inquiry into financial damages, but a specific amount has not been disclosed.

Virgin did not hold much back in its response to the allegations.

"We're confident the courts will see Gemstar's action for what it is: a piece of flagrant opportunism," a Virgin spokesperson said in an emailed statement. "We have been advised by our external counsel that the case is without merit and we will defend it vigorously."

Gemstar says it has more than 200 issued and pending patents for the U.K. alone. In the U.S., Comcast Corp. (Nasdaq: CMCSA, CMCSK), the region's largest cable MSO, has avoided IPG-related legal entanglements with Gemstar largely due to the GuideWorks LLC joint venture. Gemstar has a 49 percent stake in the J.V., with Comcast holding the majority share.

Time Warner Cable Inc. (NYSE: TWC) has also taken a good portion of its IPG development work in-house, but is legally protected thanks to a licensing deal it struck with Gemstar in the fall of 2003.

— Jeff Baumgartner, Site Editor, Cable Digital News

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