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OpenTV Sees Legal Liberation

OpenTV Corp. (Nasdaq: OPTV) hopes a proposed legal settlement with what's still left of Liberate Technologies will help the set-top middleware and applications company establish stronger relationships with U.S. cable operators.

Under a proposed settlement filed this week with the District Court in San Francisco, Liberate acknowledged that OpenTV's patents are indeed valid and enforceable. According to a copy of the proposed order obtained by Cable Digital News, Liberate also admits that "certain of its activities," mostly from international deployments, infringed on some OpenTV patents related to interactive television. OpenTV originally filed the lawsuit in February 2002.

The court has yet to sign off on the proposed settlement.

Today, there is little left of Liberate, as the company has since shed the majority of its assets.

In April 2005, Double C Technologies LLC, a joint venture of Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cox Communications Inc. , polished off an $82 million cash deal to purchase substantially all of Liberate's North American assts. That MSO joint venture operates under the name of TVWorks LLC . In July 2005, SeaChange International Inc. (Nasdaq: SEAC) closed a $23.5 million deal to obtain Liberate's assets outside of North America, which also included deployments with a handful of European cable operators.

The anticipated settlement covers only Liberate's historical, legacy deployments before those asset transactions took place.

On a call Wednesday afternoon to discuss the company's third-quarter results, OpenTV acting CEO Ben Bennett noted that TVWorks had agreed to pay OpenTV $1.5 million in exchange for a "limited release" covering Liberate's activities prior to the acquisition, and coverage of two OpenTV patents.

In addition to validating the strength of OpenTV's intellectual property portfolio, the settlement "removes a longstanding distraction with some of our important commercial relationships, particularly with respect to U.S. cable," Bennett said.

OpenTV's success with U.S. cable operators has been limited. Time Warner Cable Inc. (NYSE: TWC) has agreed to deploy OpenTV middleware in the MSO's Motorola Inc. (NYSE: MOT) set-top markets, but that rollout has been delayed to sometime next year. Bennett said Wednesday that he could not provide an update on the timing of that deployment. (See Time Warner Cable Delays OpenTV Rollout .)

OpenTV also believes its advanced advertising technologies will gain traction with U.S. cable operators. Targeted advertising is a component of "Canoe," a secretive, cable industry-wide project that first came to light in mid-September. (See Cable's 'Canoe' RFI Paddles Toward Deadline.)

"We believe resolution of the Liberate litigation will help clear the deck for us in working with Comcast and other cable operators to take the next step in the advertising space," Bennett said, noting later that he hopes it will lead to licensing deals rather than legal battles.

OpenTV did leave the door open to future lawsuits, however. When asked if OpenTV might pursue legal action against the acquirer of Liberate's European assets, OpenTV general counsel Mark Beariault said, "We're always looking to aggressively protect our intellectual property," but he did not mention any potential targets.

"We will absolutely defend our intellectual property moving forward," added Bennett. "But I think what we're looking for here is to clear the decks and engage with U.S. cable in a meaningful manner."

During the call, OpenTV execs offered little more detail about a signed letter of intent to sell PlayJam, now considered a "non-core" asset. The company did not cite a buyer nor a purchase price, but said it expects to complete the deal by the end of 2007.

Strategically, OpenTV said it wants to shed the games unit so it can focus on its core middleware and advanced advertising businesses.

"In my experience, OpenTV has suffered from juggling too many balls," Bennett said. "We need to simplify."

— Jeff Baumgartner, Site Editor, Cable Digital News


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