Apple and LG Electronics Face Alcatel-Lucent in Court over Patent Infringement

Set up in 2006 to manage Alcatel-Lucent’s (News - Alert) trove of over 29,000 patents, the Multimedia Patent Trust (MPT) arm of the company has been busy flexing its muscles for several years. And, while most infringement actions tend to be settled for “undisclosed terms” before going to trial, such is not true of an action filed by Alcatel-Lucent (ALU) against Apple and LG Electronics (News - Alert), Multimedia Patent Trust v. Apple, 3:10-cv-02618, U.S. District Court, Southern District of California, which goes to trial in San Diego today.  

At issue is ALU’s contention that the two companies infringed patents for electronic devices including phones and computers.  In essence, they are accused of copying video-compression technology that allows data to be sent more efficiently over communications media, including the Internet and satellites, or stored on DVDs and Blu-Ray disks.

As widely reported, the trust claims its patents are infringed by products including multiple versions of Apple’s (News - Alert) iPhone, iPod, iPad and MacBook, as well as LG Electronics’s Chocolate Touch VX8575, Bliss UX700, Touch AX8575, Lotus Elite LX610, Mystique UN610 and Samba LG8575.

Alcatel-Lucent is seeking a “reasonable royalty” based on what it would have been paid if a licensing agreement had been reached before the infringements began. Those licensing negotiations would have occurred in 2005 for the Apple products and 2009 for the LG Electronics products, according to court filings. Apple is accused of infringing three ALU patents and LG Electronics two.

Just as an aside, this suit is not to be confused with another action filed back in August of this year, which saw the MPT sue Apple on three counts relating to a single patent regarding Apples’ QuickTime which also involved the encoding and decoding of digital video. 

It’s the pits

There are some interesting aspects of the suit against Apple and LG. These include:

• The denial of infringement by the accused, but with an interesting sidebar that the technology involved is a small part of the products in question. This could be interpreted as meaning that even if they are found to have infringed the value of this is a (pardon the expression) mere pittance of the value of the end product which contains a multitude of components.  
• While ALU did not specify in pretrial filings how much it seeks in damages.  In the court filings, a financial expert for the trust estimated that licensing negotiations could have resulted in Apple paying a $195.9 million royalty and LG Electronics a $9.1 million royalty. U.S. District Judge Marilyn Huff has ruled that some of the economic assumptions made were not proper and said those figures should be adjusted.

On the latter point, we have seen this before in patent litigation, particularly the Google v. Apple trial earlier this year which ended with a payout that hardly seemed worth all of the huffing and puffing. This raises the question as to why this case is going to trial in the first place. However, given the importance of video on devices and on the Web, establishing prior art here may be critical to a broader assertion of the need for ALU to be fully appreciated for its prior work in an area that is poised for explosive growth.

 It should also be noted that in February of this year, Alcatel-Lucent announced that it would be offering access to its worldwide patent portfolio through a licensing syndicate to be formed by RPX Corporation. That is the carrot and MPT is the stick when it comes to intellectual property monetization.  As such, it will be interesting to see not just what the verdict is in this case, but also the damages. 

Determination of what is Reasonable and Non-Discriminatory (RAND) is all intellectual property disputes are always at the heart of the matter once infringement is acknowledged. What happens here could be a harbinger of things to come, and not just regarding video but also in terms of other areas like mobility and optics where the MPT is managing a significant accumulation of many years of Bell Labs (News - Alert) and Alcatel Labs recognized innovations.  

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