Tuesday, May 3, 2011

LG subsidiary Zenith files new ITC complaint and lawsuit against Sony in wider dispute involving 50 patents

Compared to Apple's huge patent wars with Nokia and more recently with Samsung, the ever-widening Korean-Japanese dispute between LG and Sony gets less attention except on a few occasions such as Sony's ITC complaint over a host of LG smartphones, LG's ITC complaint over the PlayStation 3, and the temporary seizure of 300,000 PS3s by Dutch authorities. More recently, Sony made headline news mostly with PlayStation Network security issues.

The patent dispute between LG and Sony is nevertheless a huge conflict in which the parties have brought against each other more than a dozen complaints and asserted a total of 50 US patents (31 from LG including its Zenith Electronics subsidiary, and 19 from Sony) plus the European counterparts of some of those. The products at issue are diverse: they include Blu-ray Disc players, digital television sets, smartphones, and video game consoles.

The latest development is that Zenith Electronics, a wholly-owned LG subsidiary, filed two parallel complaints against Sony on Friday (April 29, 2011). Both relate to Sony Bravia HTDV (high-definition television) sets implementing the ATSC digital television standard, but relate to different patents. One complaint over three patents (previously asserted against Sony in the Eastern District of Texas) was lodged with the ITC, requesting an import ban of the accused products, while the other complaint, over two patents (not previously asserted against Sony), was filed with the US District Court for the Northern District of Illinois.

The ATSC digital television standard for HDTV

The short version is that the ATSC digital TV standard is now synonymous with HDTV in the US market. Another important set of digital TV specifications was developed by the EBU (European Broadcasting Union).

The Federal Communications Commission (FCC) of the United States encouraged a group of US-based TV companies to form in 1993 the so-called Grand Alliance (GA) in order to develop a US standard for digital television. According to Wikipedia, the GA "consisted of AT&T, General Instrument Corporation [Motorola], Massachusetts Institute of Technology, Philips Consumer Electronics, David Sarnoff Research Center, Thomson Consumer Electronics, and Zenith Electronics Corporation [the LG subsidiary that brought the two complaints discussed in this post]."

The Advanced Television Systems Committee (ATSC) website lists the ATSC digital television standard on this page. You can find different revisions of the standard there. Since a 2008 revision, the AVC/H.264 codec is also supported; previously, ATSC only supported its predecessor, MPEG 2.

The new ITC complaint

There are already three ongoing ITC investigations of four complaints the parties lodged against each other (investigations no. 337-TA-758, no. 337-TA-764, and no. 337-TA-765). Two of those investigations (no. 337-TA-758 and no. 337-TA-765) relate to complaints lodged by Sony. The third one of those ITC investigations (no. 337-TA-764) simultaneously looks into two LG complaints, one over the PS3 and one over the Bravia TV sets. While the products and patents at issue in those two complaints are unrelated, the ITC decided to combine them because they involve basically the same parties.

If the latest complaint also gives rise to an investigation (which I would except to happen), there will either be a fourth investigation or, since the aforementioned one just started about two months ago, the ITC might order consolidation of the new complaint into that existing investigation (no. 337-TA-764). The fact that the latest complaint is brought by Zenith, not LG itself, may represent an impediment to consolidation because LG and Zenith are formally different legal entities.

The patents asserted in the ITC complaint are:

Zenith previously asserted those three patents -- and seven others -- against Sony in a complaint filed with the US District Court of the Eastern District of Texas on October 29, 2010 (case no. 5:10-cv-00184). That one was the first lawsuit between LG and Sony at least in recent memory. On April 25, 2011 the Texas court agreed with Sony that the Northern District of California was a more convenient location (and equally in the interest of justice). For instance, San Francisco is closer to Korea and Japan in terms of air travel time than Texas. Assuming the ITC now votes to investigate Zenith's complaint over three of those ten patents, the California court will likely stay the related claims in that federal lawsuit but continue with respect to the other seven patents.

Interestingly, Zenith mentions in its ITC complaint that it previously sued various other companies over those three patents and, according to its own representations, succeeded either in the form of settlements (such as with Thomson, Philips, TTE and Pioneer, all of whom took a license) or favorable rulings. Zenith furthermore says that Sony used to have a license to "certain Zenith patents", which has however expired according to the complaint.

The new federal lawsuit

The case no. for the new federal lawsuit is 1:11-cv-02885, Northern District of Illinois. Previously, Zenith sued in Eastern Texas (as mentioned in the previous section), and its parent company LG Electronics filed two suits against Sony in the Southern District of California as well as in the Netherlands. Sony filed two infringement lawsuits and a declaratory judgment action (seeking the invalidation of certain patents) against LG in the Central District of California.

Zenith asserts the following patents in its federal complaint:

The federal complaint is less detailed than the ITC complaint, but it's possible that Sony also had a license to those patents in the past.

Since Zenith is based in Illinois (as is Motorola, which was also involved with the creation of that standard), the LG subsidiary may be able to keep that lawsuit in that state, unlike the one in Texas that was ordered to be transferred to California. Zenith might even try to finally move the original Texas suit to Illinois instead of California.

Next steps

This dispute started last fall and has resulted in a number of complaints especially during the last three months. The fact that LG has asserted more patents so far doesn't necessarily mean that LG is more aggressive in all respects. For example, Sony was the first of the two litigants to involve the ITC, which got LG so worked up that they tried to disrupt Sony's European PlayStation 3 sales.

While the dispute already relates to a variety of product categories, which is reflective of the level of diversification of these two consumer electronics giants, further escalation is still a possibility. For example, while Sony has asserted patents against a number of LG smartphones, LG might own patents in that field that it could assert against Sony as well. Both companies are Android adopters, which is another aspect under which this conflict could get very interesting going forward.

There's no question that this dispute will end with a cross-license deal, and so far LG appears to be very confident that Sony will end up being the net payer and that LG will generate significant income from this on the bottom line. But Sony also has a strong patent portfolio and may actually aim for a cross-license with no or very little money changing hands. There's no doubt that they both have a hard time agreeing on a deal, and this dispute may take a while.

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