Context: In the early phase of the COVID-19 pandemic, Broadcom (Avago) started to sue Netflix over video streaming patents (March 14, 2020 Variety article). Para. 20 of the complaint (PDF) alleges that Broadcom’s business of selling “semiconductor chips used in the set top boxes that enable traditional cable television services” was substantially and irreparably harmed by Netflix: “[A]s a direct result of the on-
demand streaming services provided by Netflix, the market for traditional cable
services that require set top boxes has declined, and continues to decline, thereby
substantially reducing Broadcom’s set top box business.” Lawsuits in other jurisdictions, particularly Germany, followed (some of those developments will be discussed further below).
What’s new: Netflix may have determined that sometimes the best defense is a good offense. To end a dreadful year for Broadcom’s multi-year (but so far unsuccessful) enforcement campaign against the streaming company with a retaliatory strike, Netflix yesterday filed an infringement lawsuit over a handful of former HP patents in the Northern District of California against Broadcom and its VMware subsidiary. Those virtualization patents are allegedly infringed by VMware.
Direct impact: Netflix may realistically not have had an alternative to that district, which is neither a rocket docket nor patentee-friendly but where all the parties are based. While it will take some time before this case could give Netflix any leverage in the form of a damages award, Broadcom has been unsuccessfully trying for almost five years to force Netflix into a settlement, so Netflix may be hoping that there comes a point at which Broadcom’s board or senior executives will pull the plug on that litigation and opt for a face-saving exit.
Wider ramifications: In order to gain actual leverage, Netflix may also want to sue Broadcom and/or any of its subsidiaries in the Unified Patent Court (UPC) and/or in German national court. However, those HP virtualization patents are U.S.-only assets.
It is out of character for Netflix to assert patents, but for the reasons stated above, the purpose may be to accelerate the path toward a settlement. Netflix’s offensive case has been brought by a team of lawyers led by Baker Botts’s Rachael Lamkin, a very well-known patent litigator. Here’s the complaint:
These are the five patents-in-suit, which were originally obtained by HP but somehow ended up on the secondary market, temporarily being owned by an entity named Regional Resources Ltd.:
- U.S. Patent No. 7,779,424 (“System and method for attributing to a corresponding virtual machine CPU usage of an isolated driver domain in which a shared resource’s device driver resides”)
- U.S. Patent No. 7,797,707 (same family and title as the ‘424 patent)
- U.S. Patent No. 8,799,891 (“System and method for attributing CPU usage of a virtual machine monitor to a corresponding virtual machine”)
- U.S. Patent No., 8,185,893 (“Starting up at least one virtual machine in a physical machine by a load balancer”)
- U.S. Patent No. 8,863,122 (“Remote control of a plurality of virtual machines using actions facilitated through a graphic user interface”)
Netflix alleges willful infringement, making it sound like there was (allegedly) at least willful blindness in play.
About a year ago, Broadcom announced a €7.05 million contempt fine that the Munich I Regional Court had imposed on Netflix (December 22, 2023 Broadcom press release) over its continued infringement (despite its belief to have worked around it) of Broadcom’s (Avago’s) EP2575366 (“Signaling of coding unit prediction and prediction unit partition mode for video coding”). So there was probably some hope on Broadcom’s side that the case could settle quickly, but Netflix proved resilient and perseverant:
On July 18, 2024, the Bundespatentgericht (Federal Patent Court of Germany) declared that streaming patent invalid (PDF (in German)). Invalidity works retroactively in Germany, therefore also overturning any past contempt fines, though Broadcom may have appealed the decision in the meantime.
A mere five days later, the United States Court of Appeal for the Federal Circuit handed Netflix another win by reviving (PDF) two challenges to a Broadcom patent after the Patent Trial & Appeal Board (PTAB) of the United States Patent & Trademark Office (USPTO) had sided with Broadcom.
All in all, 2024 has been a very bad year for Broadcom’s patent enforcement efforts. It also lost two cases against Tesla in the UPC, within four days of each other: in the Hamburg Local Division (LD) on August 26 (PDF (in German)) and in the Munich LD on August 30 (PDF (in German)).
Prior to the Netflix and Tesla campaigns, Broadcom was more successful against Volkswagen/Audi (who according to rumor paid approximately 1 billion euros over a patent that was later held invalid as a result of a challenge by Nvidia in support of its customer Nintendo).