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Owner of OpenTV slaps Netflix with patent lawsuit

Owner of OpenTV slaps Netflix with patent lawsuit

The owner of interactive television pioneer OpenTV sued Netflix Inc on Wednesday, alleging the company infringed on patents that cover technology underpinning the fast-growing Internet video sector.

Switzerland-based Kudelski SA, which owns OpenTV, said in its lawsuit that Netflix infringed on seven U.S. patents covering aspects of over-the-top TV technology (OTT), including: the use of viewer information to make recommendations; digital rights management; and video playback.

Kudelski tried for about a year to encourage Netflix to discuss licensing its patents, but the video streaming company has so far not played ball, according to the lawsuit, which was filed on Wednesday in the U.S. District Court for the District of Delaware, a common venue for patent cases.

“Companies like Netflix have, in essence, stood on the shoulders of giants, largely focusing their R&D efforts on aggregating these previously patented technologies and using them to provide a rich customer experience,” Kudelski said in the complaint.

Netflix spokesman Joris Evers declined to comment.

Netflix shares fell 1.7 percent to close at $93.9785 on Wednesday.

The suit comes amid a boom in digital TV shows and movies delivered over the Internet to smart TVs, tablets and smart phones. Netflix, whose iconic red envelopes have come to symbolize the DVD delivery-by-mail market, introduced video streaming in 2007, 10 years after the company was founded, and quickly grew into a market leader.

But the market is getting crowded, and Netflix is being chased by Inc and Wal-Mart Stores Inc’s Vudu service, as well as streaming video website Hulu, which is owned by Walt Disney Co, News Corp and Comcast Corp.

Apple Inc, the world’s largest computer maker by market value, is also widely expected to enter the smart TV market, spurring further growth.

The Internet TV sector shares some attributes of the smartphone business, with over a decade of innovation and patents produced by companies that are no longer dominant.

Grant Moss, CEO of patent broker and advisory firm Adapt IP Ventures, expects a repeat of the recent smartphone patent wars, but on a smaller scale.