Google, Apple, Napster Services in Danger?

By Ed Sutherland
January 3, 2007

Former video-on-demand movie download service Intertainer has filed a patent-infringement lawsuit against Google (Quote ), Apple (Quote ) and Napster (Quote ) asking a Texas district court to block the trio from offering video downloads.

In the lawsuit, filed Friday in the U.S. District Court for the Eastern District of Texas, Intertainer claims the companies infringed on a 2005 U.S. patent covering a "digital entertainment platform" enabling video services to manage, distribute and sell digital media. The suit asks for unspecified damages and licensing fees.

Founded in 1996, the video-on-demand provider gained 147,000 customers and a distribution agreement with Comcast (Quote ) before folding. Likened to Vongo, the digital download service was years ahead of its time, which is likely one of the reasons for its failure.

Intertainer was a broadband company before there were many broadband users, Yankee Group's Michael Goodman said. "There shouldn't be much head-scratching."

For Apple, the lawsuit could have serious consequences for its iTunes service, which boasts over one billion downloads. "An injunction would prevent downloads," Goodman speculated. As for Google, he said, a successful patent-infringement lawsuit could harm its movie download service.

Neither Apple nor Google were immediately available for comment. A Napster spokesperson said the company is looking into the matter.

It's too early to gauge the winner of the suit, but in a worst-case scenario, Apple would have to rewrite iTunes or pay Intertainer a licensing fee, Goodman said.

Patent expert Bruce Sunstein of Bromberg & Sunstein LLP believes the lawsuit is serious, judging by the number of patents cited in the application. The companies named in the suit will be forced to respond, he said. Key to the challenge will be whether the patent is too broad and when the alleged infringing services launched.

"This is going to be an interesting fight," Sunstein said.

In 2006 Intertainer settled an earlier lawsuit against Hollywood studios for an unknown amount. In 2002, Intertainer sued AOL Time Warner (Quote ), Sony Universal (Quote ), Col-Star and New Line Cinema for forcing it to pay exorbitant fees for first-run movies.

A jury will hear the case in Marshall, Texas, a favorite location for filing patent infringement lawsuits. One hundred percent of juries in Marshall find for patent owners, compared to 67 percent elsewhere in the state. Likewise, in Marshall, 60 percent of contested lawsuits end in victories for patent owners, versus a 20 percent national average, according to LegalMetric.