With a single decision in the UK High Court Rovi’s EPG patent dominion and its future revenue from them should lie in a heap. Effectively the Rovi patents have fallen foul of the differences that the US have added to their patent interpretation, which makes the country out of step certainly with Europe, but also with much of the civilized world. Rovi now houses the Gemstar EPG patents which have brought the company $billions in licensing revenues.
The big difference between the US patent system is that in Europe judges apply a test of what is patentable by asking is it ‘a technical solution to a technical problem.’ In the US, software and business processes have famously been patentable, which is achieved by calling the process a computer program or saying that it relies on a specialist computer, when in fact that is only one way of implementing what is simply an idea.
This perhaps explains why in the past Rovi has mostly sought patent license either from US companies or from multinational consumer electronics giants which wish to sell devices in the US. As it has set its sights further afield, it was bound to meet this type of challenge.
What happened this with is that Virgin Media has now won the UK appeal brought by Rovi which agreed with a lower court decision from 2009, that Virgin Media does not infringe European patents for interactive program guides held by Rovi. The three patents were all deemed invalid and Rovi had decided to continue fighting the case on two of them, and has now definitively lost.
But almost as if this was a matter of little importance to Rovi its press releases this week related to two more such deals, one in Canada, with the same kind of patent regime as the US, with Videotron, an extension of an existing deal, and the other with M7, which owns a Netherlands DTH satellite TV operation, as well as other pay TV services in Europe.
Rovi pointed out that M7 joins its existing list of licensed operators in Europe including KDG, CANAL+, BSkyB in the UK, Portugal Telecom, Sky Italia and Sky Deutschland, Unitymedia and UPC Broadband. It lists these because they are the largest four pay TV operators in Europe ‘ the News Corp controlled Sky branded services (16 million homes), the Liberty Media UPC and Unitymedia cable groups (19 million homes), the 11 millon home CanalSat in France, Belgium, Switzerland and parts of Africa and Kabel Deutschland with 9 million homes in Germany. Between them they make up 55 million homes in Europe and they must ALL now look at where Virgin sits, paying no royalty and decide if they want to be held to ransom, where a rival gets away scot free.
It is just as well that the Gemstar part of Rovi is now entering into a new business area around TotalGuide, offering online access to TV programming metadata and using it to drive intelligent search capabilities similar to the way TiVo has evolved.
Rovi was formed by the merger of Gemstar with Macrovision, which holds patents which are even weaker in our view and similarly dependent upon being able to patent ideas. However Macrovision offered a series of sophisticated content protection products, which largely rely on the ministrations of the Digital Millenium Copyright Act, which has been taken for the basis of law in hundreds of countries now. So its revenue remains safe. More recently the company has bought Sonic Solutions, which had just purchased DiVX.
Like any company that has lost a patent dispute Rovi will be trying to put out fires among its existing customers, trying to establish that what it offers is value for money and that the patents remain in force around much of the world. However increasingly EPGs are appearing which pay no homage to Rovi, simply because they do not present themselves as a simple grid from left to right across the screen, and instead do clever things like go backwards, to allow catch up TV that has already been viewed and owe more in design to Sony’s Cross Media Bar than a left to right listing. Virtually no handset manufacturer has been asked to pay royalties on the patents, and Rovi’s campaign for Europe has only just begun with the licenses it cited above ‘ the top four operators, who are unlikely to pull the plug on any deal, since they will now be contractually bound for some time to come.