Gemstar-TV Guide International Inc. took some body blows during the final
week of its patent-infringement hearing at the International Trade Commission in
Washington, D.C., but it's still too early to predict how its case against
Scientific-Atlanta Inc., EchoStar Communications Corp. and Pioneer Electronics
Corp. will turn out.
S-A, EchoStar and Pioneer called several witnesses to the stand in an attempt
to debunk Gemstar's claim that the companies are infringing on its
interactive-program-guide patents, including former NASA computer scientist
Vernon Rhyne, who disputed arguments by Gemstar's key expert witness, Phillip
Faillace.
Gemstar's legal team has secured several victories for the company in the
past, including the $200 million settlement it extracted from Motorola Inc. in a
patent-infringement case last year.
While the outcome of this case won't be known until March -- when ITC
administrative law judge Paul Luckern issues his initial determination -- it's
clear that the ITC case has been a difficult one so far for Gemstar, Banc of
America Securities LLC analyst Michael Benevento said.
'If you thought just based on Gemstar's previous track record of litigation
that they were going to line them up and knock them down, that's clearly not
been the case,' Benevento said. 'This is not the 49ers vs. the Santa Clara
high-school football team -- this is a case of two formidable players duking it
out in the courtroom.'
Gemstar filed the complaint in February, asking the commission to block S-A,
EchoStar and Pioneer from importing set-tops with what it calls 'infringing'
IPGs.
Gemstar also hopes an ITC victory will help it to settle or win separate
patent-infringement suits it is waging in federal courts against S-A, EchoStar
and Pioneer.
S-A, EchoStar and Pioneer attempted to demonstrate that Gemstar has misused
its IPG patents by striking exclusive license deals with hardware manufacturers
and agreements that stifle competition and innovation.
S-A vice president Steven Havey testified about a December 1999 meeting he
had with Gemstar CEO Henry Yuen at the Western Show, where Yuen proposed a
'no-gun saloon' concept in which S-A and Gemstar would cross-license their IPG
patents.
Havey described how one year later, Yuen, frustrated that S-A and other
manufacturers hadn't licensed Gemstar's IPG patents, sent top Gemstar executives
Peter Boylan and Jonathan Orlick to meet with Havey.
Boylan and Orlick informed Havey of infringement suits that had been filed
against Motorola and Pioneer and said Yuen wanted a $20 million 'good-faith
payment' from S-A to show that it was serious about negotiating a license.
'[Yuen] was at his wits' end. He felt that he'd amassed this great portfolio
of patents and didn't understand why people didn't want to pay for them,' Havey
testified.
S-A sued Gemstar on antitrust and patent-invalidity claims a couple of days
later, and Gemstar quickly filed a countersuit.
The defendants in the ITC case also elicited testimony from Edward Neil, who
claimed to be a co-inventor of one of Gemstar's key patents.
But Benevento noted that even if Neil was found to be a co-inventor o the
patent, Gemstar has 170 U.S. patents in its portfolio, many of which are crucial
for the deployment of IPG products.
The next key step in the ITC case will come in mid-February, when the parties
are scheduled to give oral arguments, which will precede Luckern's initial
determination in March.
