Akamai Technologies (AKAM) has prevailed in its patent infringement case with rival Limelight Networks (LLNW), which has been ordered to pay damages of $45.5 million, Akamai announced today. Shares of Limelight plunged $1.97 to $4.40 a share after the ruling was announced, a drop of 31 percent. Akamai jumped $2.43 to $35.91, a jump of 7.3 percent, in late afternoon trading. Akamai said it will ask the Court to issue a permanent injunction prohibiting Limelight from infringing the patents, which Limelight has said could force it to shut down its CDN service.
"We are extremely pleased with the jury's verdict," said Melanie Haratunian, senior vice president and general counsel of Akamai. "Today's ruling recognizes the strength of Akamai's patent portfolio and is a tangible reflection of our resolve to vigorously defend the Company's intellectual property."
"We are disappointed with the jury's verdict in this matter," said Phil Maynard, chief legal counsel for Limelight. "We strongly believe that, like other companies that follow long-established Internet standards, we do not infringe the patent in this case. We will continue to remain a competitive choice in the marketplace as we pursue all appropriate legal avenues."
In its most recent SEC filing, Limelight stated that "an unfavorable outcome could seriously impact the Company's ability to conduct business" and that "a permanent injunction could prevent us from operating our CDN altogether."
Limelight has already disclosed more than $10.5 million in expenses related to the litigation.
This marked the third time that Akamai has successfully sued a rival for infringing on U.S. Patent No. 6,108,703, awarded to Akamai co-founders Tom Leighton and Daniel Lewin. The "703" patent was at issue in a permanent injunction against Cable and Wireless in 2001 and a preliminary injunction against Speedera before acquiring that company in 2005.
The verdict is likely to further stoke rumors that Limelight may be acquired. Dan Rayburn at The Business of Video believes Limelight is in play:
Discussions are underway about Limelight being acquired by a larger player in the space who would then fight Akamai in court over the ruling. Limelight does not have a lot of resources to fight such a ruling nor an extensive patent portfolio so they are limited in what they can do. While rumors have been circulating about Limelight being acquired by Microsoft, I am predicting it would be AT&T or Level 3. Talks are intensifying about the acquisition and I put the chance at over 50%.
In the meantime, Limelight's customers are wondering that to think. This from Federic at the Last Podcast:
Judging from some of the discussions I am seeing streaming by on Twitter right now - a certain amount of panic is already setting in among podcasters. The impact of this goes beyond podcasters, though. Quite a few other large companies have partnered with Limelight, such as Adobe, Rackspace, The FeedRoom, iFilm, Amazon's Unbox, MSNBC, Akimbo, mytoons, brightcove and even Microsoft's XBox Live.
Limelight has more than 1,150 customers worldwide.