Court Rules in Favor of Viasat in Patent Infringement Lawsuit
San Diego, Calif., April 25, 2014--On Thursday April 24, a verdict was handed down by a jury in the case brought by ViaSat against Loral Space and Communications and Space Systems/Loral (SS/L). ViaSat prevailed and SS/L – but not Loral Space and Communications – was found guilty of infringing three of ViaSat’s patents and of breaching certain non-disclosure agreements. Loral and SS/L plan to appeal the jury decision.
ViaSat alleged that three of its patents were infringed by SS/L in technology used for Jupiter-1 and the NBN Co satellites and reportedly sought up to US$800 million in damages for this infringement and the breach of the non-disclosure agreements. ViaSat was requesting that the damages be tripled, which would not be without precedent in cases of this nature. However the damages awarded were US$ 283 million, not $800 million, and the jury did not find that SS/L willfully violated any of ViaSat’s patents – something that would have been cause for the damages to be tripled.
SS/L counter claimed that ViaSat in turn infringed several of its patents, but this claim was dropped during the trial.
Jupiter-1 - or Echostar XVII as it later became known when Hughes was purchased by Echostar – is another High Throughput Satellite (HTS) also serving the North American market place and therefore a direct competitor to ViaSat. The NBN Co satellites will serve Australia when they are launched. Coincidently ViaSat subsequently won the contract to do the ground systems for NBN.
The background to this case between two well known and respected names in the satellite industry is unusual, in that a company who has not previously been involved in satellite design is suing a long-time designer and manufacturer of satellites over technology used in satellite design. SS/L has built over 240 satellites including IP-Star, the forerunner of today’s HTS. IPStar was launched in 2005 and provides 45Gbps throughput, making it the largest operating satellite before the launch of KA-SAT and ViaSat-1.
Building satellites truly is rocket science. One has to wonder if the members of the jury really had the capability to fully understand the technical issues raised.
ViaSat filed the first lawsuit on February 1, 2012 against SS/L (at the time a subsidiary of Loral Space and Communications). The three patents awarded to ViaSat relate to technologies used in the ViaSat-1 satellite (one of the first HTS) and the associated ground networks. On April 9th SS/L filed a counter suit arguing that ViaSat had infringed its patents in technology used by ViaSat in its ground terminals. It also argued that the ViaSat patents themselves are invalid because they use many of the same transmission strategies that Lockheed Martin intended to use in the now defunct Astrolink system.
In May of 2012 ViaSat amended the lawsuit to include Loral Space and Communications, claiming that it would not have signed the contract with SS/L if it had not been for the direct intervention of Michael Targoff, Vice Chairman of Loral Space and Communications who at the time was on the board of ViaSat. The signed contract for ViaSat-1, included an agreement that Loral would purchase 15% of ViaSat-1’s capacity. This capacity was subsequently sold to Telesat. Loral has a majority economic interest in Telesat.
In previous media interviews Targoff has said that “Most, if not all of their underlying claims relate to things that were known in the satellite industry or were laws-of-physics stuff”. And an unnamed engineer has been quoted as saying “a close reading of ViaSat’s patents could lead one to conclude that a satellite I was working on 20 years ago was built with ViaSat intellectual property!” Which begs the question “Should these patents have been granted in the first place?”
At the end of 2012 SS/L was sold to MDA, but the agreement between Loral Space and Communications and MDA included a clause that Loral was obligated to assume responsibility for the lawsuit and associated costs up to an undisclosed ceiling.
In September 2013 ViaSat filed another claim similar to the previous one but only against SS/L. MDA believes that as this case is so similar to the other one it should be covered by the same indemnity clause. Loral disagrees but the two companies have agreed to defer judgment about this until October 2016, or following a court ruling or settlement of the original lawsuit. In October last year SS/L asked for this case to be dismissed arguing that it was it was a waste of time and money.
Now that we know the initial outcome of this trial it is interesting to ponder some of the implications.
Apart from the economic impact to Loral of the damages awarded and the potential mess that could ensue for SS/L and owners of other HTS currently being built by SS/L; this judgment could also stifle SS/L’s ability to compete for any HTS in the future. Given that this segment has become a significant part of the satellite manufacturing business, extending to Ku as well as Ka-Band systems, this would be a major blow not only to SS/L but also to satellite operators world wide, as one of the pre-eminent manufacturers of HTS is removed from what already is a short list. Notably, this list includes Airbus – formerly Eads-Astrium, manufacturer of KA-SAT another HTS owned by Eutelsat and launched just before ViaSat-1. One wonders why ViaSat accepts that a European company has the skill to develop a HTS without its aid, but an American one does not. ViaSat did however provide the terminals for KA-SAT.
The alternative scenario would be that ViaSat decides to license the technology to SS/L. ViaSat already has an agreement with Boeing, manufacturer of ViaSat-2 to jointly market satellites that use the same technology as ViaSat-2, an even larger satellite than ViaSat-1. So if ViaSat licensed the technology to SS/L it would be in a powerful position to control its competitors.
Obviously this is not the end of this case. John Celli, president of Space Systems Loral, said the company would ask U.S. District Judge Marilyn Huff to throw out the verdict, and if necessary, would appeal the case. Michael Targoff, Vice Chairman of Loral stated: "We are extremely disappointed with the verdict. We continue to believe that SSL's conduct was consistent with, and in due regard for, all applicable and valid intellectual property rights of ViaSat and that SSL did not breach any contracts. We believe that SSL has strong grounds for a reversal of the jury verdict, which we believe will ultimately result in vindication of our position. Justice in this case hinged on the complicated history of satellite technology, which was understandably difficult for the jury to completely comprehend. In particular, the damages awarded were not in any way justified by the evidence presented."
For the other side Rick Baldridge, ViaSat President and CEO said: “We will continue our commitment to protect our intellectual property and innovation." ViaSat has requested that the court enter a permanent injunction prohibiting SS/L from manufacturing or selling infringing satellites or satellite components, including the continued manufacturing of infringing satellites currently under construction. If granted this would presumably include Echostar XIX – the more powerful follow-on to Echostar XVII and the two NBN Co satellites.
It is not unusual for initial decisions to be overturned, but it could take years before a final outcome is known. The case between ICO and Boeing for example, took seven years to reach settlement. Initially ICO was awarded $603M, that decision was subsequently reversed and the case was finally settled by ICO withdrawing its appeal and Boeing agreeing to pay ICO $10M.
To date, the only real winners in this case are the lawyers, who have already cost both companies substantial amounts of money and will continue to do so as this painful litigation drags on. Not to mention the additional business that will undoubtedly be generated for them by other manufacturers and satellite buyers as both scrutinize contracts in order to protect themselves from ever being involved in a similar debacle.
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