Certain patent portfolios give rise to litigation again and again over the years. An Alcatel-Lucent subsidiary named Multimedia Patent Trust has previously litigated against Microsoft, Gateway, Dell and a long list of consumer electronics manufacturers and broadcasters over patents originally obtained by AT&T (Lucent was an AT&T subsidiary, while it is now part of Alcatel-Lucent). It was also at the center of litigation instigated by the MPEG LA licensing organization that claimed some patents held by the Multimedia Patent Trust had actually been committed by its corporate parent to MPEG patent pools (more on that further below).
Yesterday, Multimedia Patent Trust filed a new complaint against Apple, LG, Canon and TiVo with the US District Court for the Southern District of California, alleging the infringement of four different patents. All of those patents related to video codecs (encoding/decoding technologies). Canon is alleged to infringe all four of those patents; Apple and TiVo, three of them; and LG, two of them.
The accused products include pretty much the whole range of Apple's offerings, Canon's VIXIA camcorders and video processing software (such as Roxio MyDVD), no less than 64 different LG mobile phones (apparently, however, not including its LG Optimus 7 Windows-based phone), and several TiVo digital video recorders as well as its Desktop Plus software.
For Apple and LG, it's only about money: injunctions against them are highly unlikely
Two of the four asserted patents have already expired, another one will expire within less than a year, and the fourth patent in the spring of 2014. Multimedia Patent Trust seeks an injunction concerning whichever patents will not have expired by the time of the ruling, which will realistically be only the fourth one -- which is, however, asserted only against Canon and TiVo but not against Apple and LG -- or maybe none at all. So at least for Apple and LG, the risk of an injunction is next to nil, and for Canon and TiVo it's connected to only one of the patents. But even after expiration of a patent, its owner can collect damages for past infringement, and that's what Alcatel-Lucent really seems to be going after.
In the following paragraphs I'll take a closer look at the patents-in-suit, the accused products, Multimedia Patent Trust's litigation history, and its choice of forum.
As a side note, the suit was filed by the law firm of Quinn Emanuel Urquhart & Sullivan, which specializes in litigation, is representing Motorola against Apple on multiple fronts, and is known for its closeness to Google and long-standing relationship with IBM. However, it appears that the Quinn Emanuel attorneys working on this matter are all based in Los Angeles and not involved with any of the litigation between Apple and Motorola (I will double-check on this).
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Before I go into more detail, let me tell you that I became aware of this new suit through Priorsmart's daily newsletter that lists new patent suits. If you're also interested in subscribing to it, here's an invitation. I find it really useful.
The four patents-in-suit
US Patent No. 4,958,226: Conditional motion compensated interpolation of digital motion video; application filed on 27 September 1989, expired last year; asserted against Apple, Canon and TiVo, but not against LG
US Patent No. 5,136,377: Adaptive non-linear quantizer; application filed on 11 December 1990, just expired; asserted against all four defendants and previously against Microsoft and others
US Patent No. 5,227,878: Adaptive coding and decoding of frames and fields of video; application filed on 15 November 1991, will expire in November 2011; asserted against all four defendants
US Patent No. 5,500,678: Optimized scanning of transform coefficients in video coding; application filed on 18 March 1994, will expire in March 2014; as I mentioned, this one is not asserted against Apple and LG; it is asserted against Canon and TiVo, and it was previously asserted against Microsoft and others
I previously gave a rough overview of the products that allegedly infringe the asserted patents. Let's take a closer look at the accused Apple and LG products.
Three of the patents (all but the fourth one) are asserted in some way against Apple. The list of accused products for each of those three patents have many products in common: a range of computers (MacBook, MacBook Pro, MacBook Air, iMac, Mac Mini, Mac Pro), a range of video processing software (Final Cut Studio, Final Cut Express, Final Cut Pro, Final Cut Server), Apple's iLife software suite, Apple's QuickTime X and QuickTime Pro codecs, the iPhone 4, and the iPod touch (4th generation).
The '226 and '878 patents allegedly also read on the QuickTime Player, iTunes, the iPad, and AppleTV. The '337 and '878 patents are allegedly also infringed by the iPhone 3GS (the '878 also by the iPhone 3G) and the 5th generation iPod nano, whereas the '878 patent is furthermore asserted against the 6th generation iPod and additional generations of the iPod nano (3rd through 5th) and iPod touch (1st through 4th).
The assertions against LG appear to relate to different operating systems. They include some Android phones such as the Ally or Optimus M but I didn't find any LG products based on Windows Phone 7 at first sight (I specifically looked for the LG Optimus 7). Given that the same patent holder previously settled litigation with Microsoft, there may be arrangements in place that take care of that.
Here's the complete list of accused LG phones: Ally (V5740), Apex (US740), Axis (LGAS740), Banter Touch (UN510), Bliss (UX700), Chocolate (VX8500), Chocolate (VX8550), Chocolate 3 (VX8560), Chocolate Touch (VX8575), Dare (VX9700), Decoy (VX8610), Encore (GT550), EnV (VX9900), enV Touch (VX11000), EnV2 (VX9100), EnV3 (VX9200), eXpo (GW820), Fathom (VS750), Force (LX370), Glimmer (AX830), Incite (CT810), Invision (CB630), Lotus (LX600), Muziq (LX570), Neon (GT365), Neon II (GW370), Octane (VN530), Optimus (P509), Optimus M (MS690), Optimus S (LS670, Quantum (C900), Prime (GS390), Rhythm (AX585), Rhythm (UX585), Rumor (LX260), Scoop (AX260), Shine (CU720), Spyder (LG830), Spyder II (LG840), Swift (AX500), Trax (CU575), Tritan (AX840), Tritan (UX840), Venus (VX8800), Versa (VX9600), Vortex (VS660), Voyager (VX10000), Vu (CU915), Vu (CU920), Wave (AX380), Xenon (GR500), AX565, AX8600, CF360, CU500v, CU515, LG260, LG380, LX400, UX380, VX8350, VX8360, VX8700, VX9400.
In my reporting on smartphone disputes, I will increasingly discuss the accused products. You can find information on accused products in some other -- actually even more important -- cases in my new one-page chart covering major ITC investigations related to smartphones as well as in the reference part (after the diagrams) of my Apple v. Android visualization.
I said before that Multimedia Patent Trust has a history of litigation, and I mentioned a controversy with the MPEG LA patent pool company.
A few years ago, Multimedia Patent Trust obtained a $1.53 billion jury verdict against Microsoft, which was and probably still is the record amount of patent infringement damages ever awarded by a jury in a US court -- in fact, a jury of the same court in which it filed this new suit. However, the Alcatel-Lucent subsidiary never received the full amount. On 6 August 2007, the judge tossed out the jury verdict after a second review. Observers attributed that decision to standards previously established by the US Supreme Court.
I found an SEC filing by Microsoft that summarizes this litigation (Microsoft refers to Alcatel-Lucent, the parent company of Multimedia Patent Trust) and the outcome:
"In 2003 we filed an action in U.S. District Court in California seeking a declaratory judgment that we do not infringe certain Alcatel-Lucent patents (although this action began before the merger of Alcatel and Lucent in 2006, for simplicity we refer to the post-merger entity of Alcatel-Lucent). In April 2008, a jury returned a verdict in Alcatel-Lucent’s favor in a trial on a consolidated group of one video and three user interface patents. The jury concluded that we had infringed two user interface patents and awarded $367 million in damages. In June 2008, the trial judge increased the amount of damages to $512 million to include $145 million of interest. We have appealed. In December 2008, we entered into a settlement agreement resolving all of the litigation pending between Microsoft and Alcatel-Lucent, except one of the two patents the jury concluded we had infringed in the April 2008 verdict. Approximately $500 million remains in dispute in the remaining matter. In April 2009, the U.S. Patent and Trademark Office, after a reexamination of the remaining patent in dispute, determined that the patent was invalid."
So while the exact amount isn't mentioned, it's clear that it was nowhere near the original $1.53 billion, given that the last damage award appealed by Microsoft amounted to about a third of that amount, and if it was settled, it was presumably settled for less.
Wikipedia has an article dedicated to Alcatel-Lucent v. Microsoft.
Two of the four patents asserted against Apple, LG, Canon and TiVo were also used against Microsoft, but it appears that Microsoft never accepted those patents as valid, nor admitted an infringement. I venture to guess that the defendants in this new case will also contest the validity and the alleged infringement of the patents-in-suit.
MPEG LA sued Alcatel-Lucent over some patents considered essential to standards
In November 2007 -- even before the aforementioned litigation was settled -- MPEG LA sued Alcatel-Lucent in Delaware, claiming that Alcatel-Lucent as a member of the MPEG LA patent pool had an obligation to license certain patents on reasonable and non-discriminatory (RAND) terms but set up Multimedia Patent Trust as a formally separate entity only in order to circumvent those obligations. Bloomberg quoted a lawyer for MPEG LA as saying that "preventing the patents from being swept into the MPEG LA portfolio was the one and only reason for the transfer of the patents to the trust". Betanews quoted an MPEG LA statement:
"The only purpose of the transfer was to avoid Alcatel's contractual commitment in order to extract additional royalties from MPEG-2 patent pool licensees."
There's a term for that kind of alleged behavior: patent ambush.
"As part of the settlement, in addition to other consideration, the Multimedia Patent Trust will submit the patents that were diverted to it in conjunction with the 2006 merger between Lucent and Alcatel for a determination of essentiality in accordance with MPEG LA’s normal procedures. If it is determined that one or more of the patents are MPEG-2 Essential Patents or MPEG-2 Systems Essential Patents, the Multimedia Patent Trust will join the MPEG-2 Patent Portfolio License and/or the MPEG-2 Systems Patent Portfolio License as a Licensor and all such patents will be included."
So the key question that still had to be resolved after the settlement was whether any of those patents were considered essential to the MPEG-2 standard. The latest list of MPEG-2 patents (as of 01 October 2010) indeed contains several Alcatel-Lucent patents. However, none of those are asserted in this new suit against Apple, LG, Canon and TiVo.
By asking for a straightforward injunction (concerning those patents that haven't expired), Multimedia Patent Trust indirectly asserts in its new complaint that the patents-in-suit are not essential to an industry standard.
It remains to be seen whether the defendants are going to claim that those patents belong to either MPEG-2 or some other industry standards concerning which Alcatel-Lucent made commitments in the past. In some other ongoing patent infringement disputes, such RAND commitments play a key role: Myriad Group [Google ally] v. Oracle, Microsoft v. Motorola, and Apple v. Nokia.
I will keep an eye on what happens in this case since it involves major players, but like I said before, at least from a smartphone point of view it's only about money, not about possible injunctions.
Apple can probably handle the cost of this easily: if it can't win the case, it can just write a check. If LG loses, it may have to add yet another company to a long list of patent holders seeking royalties on Android-based devices. However, it's nothing new that Google's mobile operating system isn't truly "free" because of patent licensing (and litigation) costs.
This case can have certain effects on the high tech industry, and it might raise interesting legal questions. But if you're primarily interested in disputes that may result in products potentially becoming unavailable within a year or two, I recommend focusing particularly on certain ITC investigations.
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