Netflix hits back at Broadcom with VMware patent lawsuit

Netflix has launched a counteroffensive in its long-running patent battle with Broadcom, filing a lawsuit over virtualisation technologies against the company’s VMware subsidiary. Filed [PDF] on December 23, 2024, in the Northern District of California, the streaming company’s complaint asserts 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 by Broadcom, beginning in March 2020 during the early stages of the COVID-19 pandemic. Broadcom’s initial lawsuit claimed that Netflix’s streaming services had irreparably damaged 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 centres on five virtualisation patents that made their way through the secondary market before landing in Netflix’s portfolio. The patents, which previously passed through Regional Resources Ltd., concern core virtualisation technologies allegedly used by VMware:

• US Patent No. 7,779,424 and its family patent 7,797,707, both addressing systems for attributing CPU usage in virtual machine environments,
• US Patent No. 8,799,891, covering CPU usage attribution for virtual machine monitors,
• US Patent No. 8,185,893, detailing 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 demonstrated at least deliberate blindness in their use of the patented technologies. If proven, the allegation could lead to enhanced damages.

A year of legal setbacks for Broadcom

The countersuit caps off a challenging year for Broadcom’s patent enforcement efforts. A pivotal moment came in July 2024 when the German Federal Patent Court (Bundespatentgericht) invalidated Broadcom’s streaming patent EP2575366. The ruling effectively nullified a €7.05 million contempt fine previously imposed on Netflix by the Munich I Regional Court.

Another setback quickly followed in the US. The Court of Appeals for the Federal Circuit revived two Netflix challenges to a Broadcom patent that the Patent Trial & Appeal Board had previously upheld, further weakening Broadcom’s position.

Broadcom’s legal difficulties weren’t limited to its dispute with Netflix. In August 2024, the company suffered two consecutive defeats against Tesla in the Unified Patent Court (UPC) inside four days. The Hamburg and Munich Local Divisions ruled against Broadcom, adding to its enforcement failures.

Jurisdiction and legal strategy

While the Northern District of California isn’t known for rapid proceedings or showing particular favouritism toward patent holders, Netflix’s choice of venue was primarily predetermined by the parties’ substantial business presence in the district. Broadcom maintains offices in Palo Alto, Petaluma, and San Jose, while Netflix is headquartered in Los Gatos.

Led by Baker Botts’s renowned patent litigator Rachael Lamkin, the lawsuit represents an unusual move for Netflix, which has historically avoided asserting patents. Legal analysts suggest the approach may accelerate settlement negotiations rather than indicate a fundamental 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 the dispute consists exclusively of US assets. This limitation could restrict international litigation options.

This latest development follows Broadcom’s previous success against Volkswagen/Audi. Industry sources suggest a settlement of approximately one billion Euros was reached over a patent that was later invalidated following a challenge by Nvidia, acting 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; it highlights the evolving dynamics of patent litigation in the tech 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 where patents initially developed for one technology sector are deployed in fields unenvisaged at the time of filing.

The success of Netflix’s strategy will likely depend on the technical merits of the virtualisation 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 against and counter patent assertions from traditional technology providers.

(Photo by Venti Views )

See also: Microsoft sued in UK over cloud licensing practices

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