Netflix has launched a counteroffensive in its long-running patent battle with Broadcom, filing a virtualization technology lawsuit against a VMware subsidiary. The streaming company’s complaint, filed (PDF) on December 23, 2024 in the Northern District of California, lists five patents (originally developed by HP), marking an aggressive shift in Netflix’s typically defensive IP strategy.
Netflix has endured nearly five years of patent litigation with Broadcom, beginning in March 2020 during the early stages of the COVID-19 pandemic. Broadcom’s original lawsuit alleged that Netflix’s streaming services irreparably harmed its semiconductor business for set-top boxes, a market segment that continues to decline as streaming services gain prominence.
Strategic patent arsenal
The Netflix lawsuit centers on five virtualization patents that made their way through the secondary market before landing in Netflix’s portfolio. The patents previously passed by Regional Resources Ltd. relate to the underlying virtualization technologies allegedly used by VMware:
- US Patent No. 7,779,424 and his family patent 7,797,707, both addressing systems for attributing CPU usage in virtual machine environments,
- US Patent No. 8,799,891, which relates to CPU utilization attribution for virtual machine monitors,
- US Patent No. 8,185,893, describing virtual machine startup and load balancing,
- US Patent No. 8,863,122 describing remote control of multiple virtual machines through a graphical interface.
The complaint alleges willful infringement, suggesting that Broadcom and VMware have demonstrated, at the very least, willful blindness in their use of the patented technologies. If proven, the charge could lead to higher damages.
A year of legal setbacks for Broadcom
The countersuit caps a challenging year for Broadcom’s patent enforcement efforts. A key moment came in July 2024 when the German Federal Patent Court (Bundespatentgericht) invalidated Broadcom’s streaming patent EP2575366. The ruling essentially overturned a €7.05 million contempt fine previously imposed on Netflix by the Munich I Regional Court.
Another failure quickly followed in the US. The Court of Appeals for the Federal Circuit revived two of Netflix’s challenges to Broadcom’s patent that had previously been upheld by the Patent Trial & Appeal Board, further weakening Broadcom’s position.
Broadcom’s legal troubles weren’t just limited to its dispute with Netflix. In August 2024, the company suffered two consecutive defeats against Tesla at the Unified Patent Court (UPC) within four days. Local divisions in Hamburg and Munich ruled against Broadcom, adding to its enforcement failures.
Jurisdiction and legal strategy
While the Northern District of California is not known for speedy proceedings or special favoring of patent holders, Netflix’s choice of venue was primarily determined by the parties’ substantial commercial presence in the district. Broadcom has offices in Palo Alto, Petaluma and San Jose, while Netflix is headquartered in Los Gatos.
The lawsuit, led by renowned Baker Botts patent litigator Rachael Lamkin, represents an unusual move for Netflix, which has historically shied away from patent enforcement. Legal analysts suggest the approach may speed up settlement negotiations rather than indicate a major shift in Netflix’s intellectual property strategy.
International implications and prospects
Despite potential interest in expanding its legal pressure through the Unified Patent Court (UPC) or German national courts, Netflix’s current patent portfolio in dispute consists entirely of US assets. This restriction could limit the possibilities of international litigation.
This latest development follows Broadcom’s previous success against Volkswagen/Audi. Industry sources indicate that a settlement of around one billion euros was reached for the patent, which was later overturned following a challenge by Nvidia, which acted in support of its customer Nintendo. This history of high-stakes patent litigation has made Broadcom’s enforcement campaigns a closely watched phenomenon in the tech industry.
The countersuit represents more than just another chapter in the ongoing Netflix-Broadcom dispute; highlights the evolving dynamics of patent litigation in the technology sector. As traditional hardware companies like Broadcom face market pressures from streaming services and software companies like Netflix build defensive patent portfolios, the industry may see more cases of patents originally developed for one technology sector being deployed in areas which were not taken into account at the time of application.
The success of Netflix’s strategy will likely depend on the technical merits of the virtualization patents and how its offensive move affects the broader dynamics of the ongoing multi-jurisdictional dispute between the tech giants. As the case progresses, it may set important precedents for how streaming companies and emerging sector players defend and defend against patent claims from traditional technology providers.
(Photo by Venti Views)
See also: Microsoft sued in UK over cloud licensing practices
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