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Eric Boyko, CEO of Stingray Digital, says though the companies are clashing in U.S. court, it appears that a marriage between the two is not out of the question.Christinne Muschi/The Globe and Mail

Canada's Stingray Digital Group Inc. is swinging back in response to a lawsuit filed by U.S. rival Music Choice.

Music Choice, which is backed by a group of media giants that include Comcast Corp. and Time Warner Inc., sued Stingray for patent infringement in June, alleging the Montreal-based music channel provider had used confidential information about its technology after an attempt to acquire the U.S. company in 2013.

On Tuesday, Stingray insisted through a court filing that it has not infringed on these patents, and initiated a counterclaim against Music Choice.

The company said in documents filed in an eastern Texas courthouse that Music Choice has been engaged in "a smear campaign" to discredit Stingray and thwart its growth in the United States since as early as February, 2014. It also argued that the handful of patents at the centre of this dispute are invalid.

A spokesperson for Music Choice said the Pennsylvania-based company is reviewing Stingray's filing.

Stingray has claimed the timing of the Music Choice lawsuit was no coincidence.

It was filed just after Stingray, which reaches roughly 400 million households in about 152 countries, announced that it would expand its reach into the United States through a new pact with cable provider and Music Choice-backer Comcast.

Through a separate claim also filed on Tuesday in a Texas court, Stingray Music USA Inc. is seeking monetary damages for the harm it allegedly suffered as a result of what it describes as Music Choice's attempt to damage Stingray's reputation and impede its business in the United States through the dissemination of misinformation.

"Music Choice's illegal activity has damaged Stingray's brand and reputation," it alleged, "and caused Stingray to lose customers, make concessions in its contracts with customers, expend significant manpower and money in order to address the impact of the lies spread by Music Choice."

Stingray is pushing to expand its business beyond its home base, mainly through acquisitions. The company generates 43 per cent of its revenue from abroad and aims to increase that share to 70 per cent by 2020, having just opened a new regional headquarters in Singapore.

The Music Choice lawsuit has diverted some of the attention away from Stingray's performance of late. And although the companies are clashing in a U.S. court, it appears that a marriage between the two is not out of the question – at least according to Stingray.

During a June conference call, Stingray chief executive officer Eric Boyko said these legal proceedings "may put Music Choice in play and provide an opportunity for a future transaction."

Stingray (RAY.A)

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