Broadcom Vs Netflix: A Patent Dispute That Can Decide How Digital Video Content Is Broadcast And Streamed

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Broadcom Inc., a global corporation with technological expertise in the development, manufacture and supply of a wide range of semiconductor and infrastructure software products, for use in data center, networking, software, broadband, wireless, and storage and industrial markets has recently has a filed lawsuit of patent infringement against Netflix, popular and leading US based video streaming service provider. The lawsuit was filed around mid-March in the Central District Court of California, USA.  Developments of this case would be followed world over with much interest not only because of the patent related implications the case could have, but also because of possibility of bringing about tectonic shift in the landscape of broadcasting and streaming. So, while this legal battle would be fought in the ‘battlefield’ of patent, overall this could be viewed as a war for market-share of eyeballs!

Broadcom has been known as a major set-top box chip maker and has been witnessing pressure on growth and market share, particularly its set-top box chip business. A primary reason for this trend could be attributed to the online video streaming service provider Netflix. There are other contributing factors too, for instance the US-China trade war, however, competition with Netflix would always be viewed as the one holding the jugular. Broadcom’s other businesses are holding steady and is expected to grow. Around end of 2018, Broadcom acquired CA Technologies which is in the business of creating systems and applications software. An interesting development noticed recently was that just some time back Broadcom reclassified its wireless chip business as “non core”. The wireless chip business essentially includes Broadcom’s businesses are radio-frequency chips for wireless communications; Wi-Fi, Bluetooth and GPS chips; and touch controller and wireless charging application-specific integrated circuits, and it is believed Apple Inc is eyeing to acquire these businesses. Earlier, Apple and Broadcom lost a patent lawsuit against Caltech. The court ordered Apple to pay around USD 838 million, while Broadcom was ordered to pay around USD 270 million forinfringing patents of Caltech.

Netflix, with an aggressive growth strategy has established itself as a dominant global player in the video streaming industry. It is known to have expanded to 190 countries in 7 years and its worldwide subscriber base stands at around 158 million growing at a fast pace while its revenue for the twelve months ending December 31, 2019 was USD 20.156 billion, recording a year-over-year increase of around28% increase. At the same time, Netflix has been facing growth pressure in its home territory of US, primarily due to increasing competition and loss of content from major content provider such as Disney (now also a competitor).

Talking about patents, Broadcom is claiming that Netflix has infringed nine of its U.S. patents and has also accused Netflix of indirect infringement by inducing end users to infringe through their use of the Netflix software application. Broadcom alleges that the patents in question cover technologies pertaining to internet video streaming technology which has helped Netflix draw away consumers from traditional cable television services and grow to its current form. The technologies includetechnologies for efficient server resource use, systems for reliable content delivery with minimal interruptions, and encoding content in formats compatible with client devices. Broadcom further alleges that Netflix’s infringing use of the patented technologies has helped the company draw consumers away from the traditional cable television services market, resulting in a substantial reduction to Broadcom’s set top box business.

Earlier, the parties unsuccessfully attempted to get into a licensing arrangement, which means there is a higher chance this battle in the court-of-law may go the whole distance. Consumers of content will therefore have to keep an eye on this case, since ultimately this may shape how they consume digital content.