Legal Law

Develop attitudes

One of the predictions regarding the (hopefully soon to come) post-COVID 19 patent landscape is that more operational companies with sizeable patent portfolios will be considering monetization options. The reasoning behind this prediction is simple. In a challenging revenue environment, even companies that have been reluctant to enforce patents will be under pressure to transform a potentially substantial cost center into a revenue-generating business unit. At the same time, monetizing patents is a difficult undertaking even under optimal economic conditions. While litigation funders and law firms are ready to help, developing and implementing a viable monetization strategy takes time, thought, and significant buy-in within the corporate ranks. In short, a monetization campaign needs to be a deliberate effort, not on a whim or based on the idea that following the herd in a certain direction is a good idea.

One company that has been involved in a number of high-profile patent enforcement efforts is LG, a consumer goods giant (and quite a frequent patent applicant himself). Perhaps the most prominent example of LG’s enforcement efforts, the company sued major TV competitor Hisense in November 2019 as part of a larger global patent enforcement move against other TV competitors. The Hisense lawsuit was reportedly settled last week, at least according to a file entry filed with the California court handling the case. This settlement report came just weeks after Hisense filed a notice of establishment of intellectual property rights for all relevant claims arising from two of the asserted patents. While it’s impossible to know how cheap the Hisense claim was or not for LG, the case provides a current example of a large tech company turning to its patent portfolio to generate revenue from a competitor in the market.

While patent cases filed on LG’s own behalf are rare, there are other well-known examples of LG’s sale of patents for assertion by other companies. Just last week, for example, the Federal Circuit addressed such a sold LG patent in an interesting decision on previous licenses and patent exhaustion. In this case, Evolved Wireless v HTC Corporation et. al., Appeal Case Nos. 2020-1335, 2020-1337, 2020-1339, 2020-1340, 2020-1363 (CAFC), the Federal Circuit upheld the District Court’s finding that “Evolved’s patent infringement claims through a license agreement and doctrine of patent exhaustion. “As a background, it should be noted that the patent in question in the appeal was only one of five patents asserted in a legal dispute against the various defendants. These patents were originally sold by LG to a company called TQ Lambda before Evolved picked them up for enforcement. (Given the challenges of patent monetization today, even for patents with an LG pedigree, only the patent at issue in the appeal was listed as potential revenue for Evolved before it was also rejected by the district court.)

When Evolved acquired the remaining patent, it was subject to charges from LG, including an LG license to Qualcomm that was granted back in 1993. As that LG Qualcomm license (which apparently never was considered in full, unedited form by the District Court) was renewed over the years, one thing remained constant – LG agreed that it would not be under any of its patents because of Qualcomm or Qualcomm’s customers suing their smartphone sales. Since the no-action license / contract was extended at the product level rather than the patent level, the asserted patent was included in the scope of the license because it was granted before the final renewal.

After Evolved sued Qualcomm’s customers, the license between LG and Qualcomm came into play. As the Federal Circuit noted, if Qualcomm was licensed under the LG Agreement, then patent exhaustion meant that Qualcomm’s sales to its cellphone-making customers (e.g., the defendants Evolved sued) were licensed sales, and thus were immune from liability for violations. In the appeal process, everyone agreed that exhaustion would occur. The battle was over whether or not the 4G-enabled products sold by the defendants were licensed under Qualcomm. When the Federal Circuit found this to be the case, it upheld the district court’s finding that the infringement / patent exhaustion was not infringed.

But all was not lost for Evolved. Since the license between LG and Qualcomm expired in late 2018 and the district court never addressed this termination in its summary decision, the Federal Circuit cited with the instruction that “the district court should decide whether – and why or why not – consider evidence offered to Evolveds the termination as part of the summary judgment. If the District Court determines that the termination issue has been properly raised, the District Court should, if necessary, conduct further proceedings to determine whether termination has occurred and, in that case, the implications for Evolved’s license and claims for infringement for the Time after termination. “In short, there could be a post-Federal Circuit decision for Evolved to bypass Qualcomm’s 2019 licensing issue and resell products that allegedly violate the law.

Ultimately, it is currently difficult to assess whether Evolved still has the chance to generate license revenues from the smartphone manufacturers that are sued. If anything, Evolved’s tortured litigation story could serve as yet another cautionary story for ex-patent monetizers looking for action in a patent law landscape that appears to favor defendants. At the same time, some on the claims side will support the fact that Evolved’s campaign is still alive at all, proving the importance of patent plaintiffs showing their resilience and determination in pursuing their goals. For those looking to follow in Evolved’s footsteps, we’ll see if the alleged interest of large patent holders in monetizing patents post COVID 19 leads to further attempts at patent enforcement by companies that match this profile – be it just below theirs own name or by sale to non-practicing companies. In other words, will evolving attitudes lead to action or not?

Please send me comments or questions at [email protected] or via Twitter: @gkroub. Suggestions or thoughts on topics are very welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading patent consultancy to the investment community. Gaston’s practice focuses on intellectual property litigation and related advice, with an emphasis on patent issues. You can reach him at [email protected] or follow him on Twitter: @gkroub.

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