German Court Ruling Threatens Apple's Video Services

The ruling by a three-judge panel at the Duesseldorf district court on Tuesday said that Apple must not supply software that infringes an OpenTV patent covering the mixing of video, audio and online information in a single video stream.

The court's decision puts pressure on Apple to seek a licensing deal from Kudelski, though the US technology leviathan could comply by removing or disabling the offending features from its video streaming products. In the worst case, it would have to pull the devices from the market.

Products that could be affected range from iPhones to iPad tablets, Mac computers, the iTunes music service, the Quicktime video software player and Apple TV, the Silicon Valley company's video streaming box, according to court documents.

"The claim is predominantly valid and well-founded," the Duesseldorf court said in its ruling.

Potential fines
It is unclear whether Apple will appeal. The company faces fines of up to EUR 250,000 per infringement if it fails to comply, but the ruling did not specify how this would be calculated or what the total amount of penalties might be.

Apple and Kudelski representatives declined to comment.

Since 2012 Kudelski has waged a high-profile campaign on intellectual property licensing, taking on some of the world's biggest technology groups in courts far and wide. It has reached settlement deals with Google, Cisco Systems and Netflix. Financial terms were not disclosed.

Outstanding legal action includes cases against Apple and Verizon's AOL.

The German injunction will come into effect once Apple has been notified in writing that OpenTV has posted security of EUR 4 million ($4.5 million) demanded by the court as potential compensation for Apple's losses if the decision is reversed on appeal.

Apple can apply to the regional appeal court for a stay of enforcement, which can usually be obtained in a matter of weeks, and appeal against the substantive ruling in that higher court.

OpenTV, which has filed a similar case against Apple in the United States, alleged in the German case that Apple products infringed three patents owned by it or other Kudelski operations. Kudelski acquired OpenTV in 2010 and initiated the German case in 2014.

Patent challenge
Apple responded by filing to have the OpenTV patent invalidated in the Federal Patent Court in Munich.

The Duesseldorf court stated in Tuesday's ruling that it was sufficiently confident that Apple would not succeed in having the Munich court invalidate OpenTV patents.

Asked about the Apple challenges to the OpenTV patents, a spokeswoman for the Munich court said two nullity cases relating to patents for video delivery and integrated interactive video and Internet were pending.

"In respect of the course of the usual procedure in nullity proceedings an oral hearing might possibly take place in the first quarter of 2017. As the proceedings are not public at this stage, it is not possible to submit further information," she said in an email.

This week's ruling in the Duesseldorf court found that Apple products infringed a single dot-com era patent filed in 1997 by ACTV Inc, which was later acquired by OpenTV. European Patent number 0 885 525 B2 is entitled "An Integrated Interactive Video and Internet System".

Kudelski has developed and acquired a range of movie and digital TV technologies over several decades and became a player in the streaming-video market through its OpenTV acquisition.

The company, which is facing flat revenue growth in its overall business, has two main operating units: secure media distribution systems used in TV set-top boxes and access control systems for car parks, stadiums and ski lifts.

Shares in Kudelski, which has a modest market capitalisation of 793 million Swiss francs ($818.2 million), were down 1.9 percent at 15.85 francs at 1400 GMT on Thursday.

© Thomson Reuters 2016