Broadcom's video coding patent affirmed by German court, Netflix found infringing

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Broadcom's video coding patent affirmed by German court, Netflix found infringing
Credit: © Reuters.

Shares of Broadcom Inc. (NASDAQ: AVGO ) saw a 0.4% increase in premarket trading today after the German Federal Patent Court preliminarily validated the company's `366 Patent related to HEVC/H.265 video coding, a technology crucial for Ultra HD content delivery by streaming services. This decision follows a judgment by the Munich District Court on September 19, 2023, that declared Netflix (NASDAQ: NFLX ) had infringed this patent and issued an injunction against further infringement in Germany.

In response to Netflix's non-compliance with the injunction, Broadcom has invoked Section 890 of the German Civil Procedure Code, seeking penalties that could lead to a €250,000 fine per infringement or six month’s imprisonment for board members. Mark Terrano, Broadcom's VP and GM of the Intellectual Property and Licensing Division, praised the German court's recognition of their patented contributions to video technology.

Interestingly, despite being embroiled in this legal dispute, Netflix also experienced a 0.4% rise in premarket stock today. Meanwhile, S&P 500 futures gained 0.5%.

This development is part of an ongoing patent dispute between Broadcom and Netflix that spans U.S., German, and Dutch jurisdictions since 2018. The final decision on Netflix’s invalidity lawsuit is still pending, with a hearing scheduled for July 18, 2024.

InvestingPro Insights

Broadcom Inc. ( NASDAQ : AVGO) has been showing some promising metrics according to InvestingPro. The company’s high earnings quality, with free cash flow exceeding net income, and the consistent increase in earnings per share are notable. The company has also raised its dividend for 13 consecutive years, which is a testament to its financial health. The InvestingPro data for Broadcom also reveals a P/E Ratio of 26.26, a revenue growth of 11.91% over the last twelve months as of Q3 2023, and a 1-year price total return of 101.4%.

On the other hand, Netflix (NASDAQ: NFLX) is also performing well, despite the ongoing patent dispute. Netflix yields a high return on invested capital and has seen 14 analysts revise their earnings upwards for the upcoming period. The InvestingPro data for Netflix presents a P/E Ratio of 41.83, an impressive revenue growth of 4.03% over the last twelve months as of Q3 2023, and a 1-year price total return of 57.85%.

These InvestingPro Tips and data points provide valuable insights for investors interested in these companies. For a comprehensive list of InvestingPro Tips, consider subscribing to InvestingPro for more detailed insights and real-time data.

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