Court orders Verizon to end use of ActiveVideo patents, telco vows appeal

Verizon (NYSE: VZ) is working with Cisco (Nasdaq: CSCO) to change the way its video-on-demand service works, looking to put an end to its court battles with ActiveVideo, which on Wednesday won an injunction that will prohibit the telco from using two of its patents, and cost it close to $11 million a month until it does.

Verizon is appealing the ruling, which forces it to stop infringing on the patents by May 23. The ruling takes effect Dec. 1, and will cost Verizon $2.74 per FiOS TV subscriber. The company has 3.98 million subscribers at the close of the third quarter.

Verizon Friday said it was "confident" that the ruling would be turned over on appeal, and said it was "working with the vendor of our equipment, Cisco Systems, to implement changes that will end any argument about the use of ActiveVideo's patents."

ActiveVideo president and CEO Jeff Miller said that any changes would require Verizon to "significantly redesign FiOS TV and likely remove much of the functionality that consumers demand."

"Verizon's continued refusal to accept the numerous court rulings and the jury's verdict is not in the best interests of its customers or shareholders, and ActiveVideo is confident the appellate courts will agree," Miller said.

A jury awarded ActiveVideo $115 million in damages in August, and the court added another $24.1 million in October.

Following the decision, which came after a three week trial and two days of jury deliberation in the U.S. District Court for the Eastern District of Virginia, ActiveVideo said the company also would seek an injunction against Verizon and its FiOS TV service.

ActiveVideo filed the case in May 2010, contending Verizon infringed on four of its patents relating to the delivery of advanced television applications such as video-on-demand (VOD) and interactive TV.

ActiveVideo has a substantial portfolio of patents dating back to the early 1990s. The ActiveVideo CloudTV platform is currently deployed with major cable system operators, including Cablevision (NYSE: CVC), its largest customer.

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