Earlier today, the jury came back with a verdict in the CDN patent suit between Level 3 Communications (NYSE:LVLT, news, filings) and Limelight Networks (NASDAQ:LLNW, news, filings), declaring that Limelight did not infringe on either of the two patents. The jury did not declare either patent invalid, but simply said there was no infringement. Level 3 may still appeal the verdict and the appeals process could take a year or two, but this is a better result for Limelight than last year's loss to Akamai (NASDAQ:AKAM, news, filings) with a $45M payout that is still under appeal.
This is a big victory for Limelight. It may not wipe out all the uncertainty hanging over them, but it does give investors a light at the end of the tunnel. There are many out there who have felt the company was simply doomed, but a pathway to survival is now visible: don't lose the appeal to Level 3, and finish re-designing the network not to infringe in Akamai so even if that appeal fails the cash outlay is survivable. That increasing clarity makes it much easier for a buyer to swoop in and take Limelight out, a network operator for example.
A few weeks ago, Dan Rayburn made the case that Level 3 and Limelight should settle. I didn't think they would, but maybe now the time is right. Does Level 3 really want to pay for this appeals process during a horrible economy where their cashflow levels are critical? I doubt it. And Limelight would certainly like the whole thing to go away immediately rather than years later. Perhaps a variant on Dan's proposal might work now, although obviously with the jury verdict the balance would tilt toward Limelight. Level 3 has a deep patent portfolio, perhaps Limelight might license some items to increase its own defense in the future. And they do need IP transit, a strategic purchase as part of a settlement might go a long way.
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