Last week Widevine settled its long-running patent litigation with Verimatrix.  Terms of the settlement were not disclosed, but the result was typical in such cases: the defendant (Verimatrix) took a license to the plaintiff’s (Widevine’s) patents in suit, presumably in exchange for a sum of money, while the defendant made no admission of having infringed the patents and the plaintiff’s patents remain valid.

Widevine asserted two US patents in the suit, 7,165,175 and 7,376,831, both related to encrypting media data sent over a network.  Widevine filed the original suit in August 2007, a few months after the ‘175 patent issued.  It filed suit based on the ‘831 patent in May 2008, the same day on which that patent issued.

During most of the life of this litigation, the two content protection technology vendors were head-to-head competitors in the TelcoTV/IPTV market, along with other companies such as SecureMedia and Latens.  But now the two companies appear to be drifting apart as momentum in that market is slowing down (at least in North America and Europe).  Verimatrix is making moves towards the DVB market, while Widevine has been placing its bets on two emerging digital video environments: the CinemaNow/Best Buy digital home ecosystem and the TV Anywhere service that has been in the works since 2006.

The fact that Widevine and Verimatrix have diverged somewhat in their target markets may have occasioned the settlement of the litigation.  But another factor to consider is that the settlement occurred just a few weeks before the case was scheduled to go to trial.  That’s a typical time for patent cases to settle: all of the evidence has been produced, and the judge has ruled on the “constructions” or meanings of terms in the patent claims.  At this point, the two sides are fully aware of each other’s positions and have formed a picture of how the evidence will “play” for a jury.  Many of the patent cases I’ve been involved with as an expert witness have settled around this time; it’s rare for one to actually go to trial.

It’s also worth mentioning that the Eastern Texas district, where this suit was filed, has a track record of about 80% pro-plaintiff verdicts for cases that do go to juries (small wonder that most patent cases are filed there).  That in itself is a powerful motivation for a defendant to settle.

In any case, Widevine has put significant resources into bulking up its patent portfolio over the years: it has 15 issued US patents, and about 45 in other countries, with priority dates going back to 1999.  (In contrast, Verimatrix has 3 US patents.)  Widevine has succeeded in showing the industry that it is willing and able to assert its patents over the long haul; it will be interesting to see what the company does with its IP investment next.

In the meantime, both companies’ customers can rest assured that they will be able to continue to use the products they bought.  IP risk has hampered the growth of certain segments of the content protection technology market, so any reduction of that risk is a good thing.