Broadcom Sues Netflix for Patent Infringement
As people all over the globe deal with the coronavirus pandemic and are undoubtedly looking for sources of entertainment, one large semiconductor company, Broadcom, is taking its troubles to court against streaming behemoth Netflix.[1] On March 13, 2020, Broadcom filed suit in the Northern District of California against Netflix alleging infringement on eight patents owned by Broadcom.[2]
Broadcom is an industry leader in the semiconductor industry, providing chips that deliver voice, video, data, and multimedia connections in all settings.[3] Under this umbrella, Broadcom sells chips that are used in traditional cable boxes, and these sales have been substantially damaged by consumers moving away from traditional cable and towards streaming services such as Netflix.[4] Of note, major TV providers such as Comcast, AT&T/DirectTV, Charter, Dish, and Verizon all saw their paid subscribers fall in 2018.[5] The number of subscribers shrank 4.2%, outpacing the losses in 2017 and 2018.[6] This comes as more and more consumers shift to internet only packages that allow them to stream services such as Netflix without traditional cable television.[7]
In addition to harming Broadcom’s chip sales with traditional cable services, Broadcom also alleges that Netflix has used its patented technology to build its own business at Broadcom’s expense.[8] Of the eight patent claims that Broadcom makes, a few are of particular note.[9]
First and foremost, the complaint cites U.S. Patent No. 7,266,079, titled “Dynamic Network Load Balancing Over 24 Heterogeneous Link Speed.”[10] This patent claims to balance transmission unit traffic over network links to make for more efficient data transmission.[11] In practice, this allows Netflix to make a more seamless viewing experience for the end user by efficiently transmitting the video files.
Next, Broadcom alleges that U.S. Patent No. 8,959,245—titled “Multiple Pathway Session Setup to Support QoS Services”—is crucial to Netflix’s offering and is being used illegally.[12] This patent was granted in 2008, and claims to solve issues pertaining to quality of services for delivering things such as high-quality video to end users by utilizing multiple routes available in the network, thereby increasing the reliability of the transmissions.[13] This patent effectively improves the functionality of a computer network by providing a new approach for content delivery that enables higher quality of service standards.[14]
Further, Broadcom alleges that Netflix is violating U.S. Patent No. 6,341,375, titled “Video on demand DVD system.”[15] This patent is of particular importance to Netflix because it provides a new system to deliver video to multiple users, and solves issues of older systems.[16] The complaint states, “[t]he inventions of the ’375 Patent resolve technical problems related to conventional video-on-demand systems that require the use of physical connections and short distances between the sources of video and the decoders or players on which the end-user views video content. In prior art systems, each user has a dedicated video system, such as a DVD player, and decoder at the user’s location.”[17] Since Netflix supplies videos to millions of users, Broadcom alleges that this patent is of particular value, and that Netflix is stealing its use from Broadcom, causing damage to Broadcom’s business.
The last patent of particular note is U.S. Patent No. 8,270,992, titled “Automatic Quality of Service Based Resource Allocation.”[18] This patent, the complaint states is directed to improve the functionality of a communication network used to provide a digital media service, such as video streaming over the internet.[19] This patent specifically deals with the unstable network connections, which is frequently seen when dealing with portable electronics. The patent claims to draw from the best available network as to not disrupt the end user.[20]
Netflix’s infringement, Broadcom alleges, has caused substantial and irreparable harm to Broadcom’s business.[21] Interestingly, it would seem as though Netflix was not caught by surprise of these allegations. The complaint states that Broadcom representatives contacted Netflix in September and engaged in negotiations in October surrounding a potential licensing deal.[22] During these discussions, Broadcom alleges that Netflix did not dispute the infringement claim or otherwise assert that it does not infringe on the patents owned by Broadcom.[23] Broadcom also states that Netflix declined to make a counter offer for licensing the patents, leaving Broadcom no choice but filing the complaint in order to protect its rights and investments.[24]
While this case is incredibly early in its procedural posture, it certainly will have impact on both businesses going forward, as Netflix attempts to keep its customer base in the ever-growing field of streaming services, and as Broadcom attempts to recoup its investment in valuable patents. Somewhat ironically, this suit will be going on when people are streaming more content than ever, as Americans around the country and people around the globe are stuck inside due to the coronavirus pandemic. While the outcome is certainly up in the air, one thing is clear: people need content now more than ever, and Netflix will provide it one way or another.
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