Nokia completes next stage of transformation into patent troll with sale of HERE to automotive consortium

Nokia has just made the following announcement:

"Nokia completes next stage of transformation with agreement to sell HERE to automotive industry consortium at an enterprise value of EUR 2.8 billion"

The buyers are Audi, BMW, and Daimler. I once did a consulting project, unrelated to this transaction and more generally about IP strategy, for one of them (I closed my consulting business about a year ago, however, in order to focus on app development). It's a really positive sign that these traditional industry players decided to join forces (they're on better terms with each other than major smartphone makers, but don't coalesce every day) and to outbid the likes of Uber.

All three of them--I know their products fairly well because I've repeatedly bought cars from two of them and driven long-term rental cars from the remaining one--have a lot of work to do to defend their turf against Silicon Valley companies like Tesla, Google, and Apple (AppleInsider's Mikey Campbell is a great source on that secretive project). It's ridiculous that, for example, Mercedes doesn't even provide its customers (I'm driving a 2014 S-Class) with frequent software updates the way Tesla does. And I've seen massive user experience deficiencies in the user interfaces of all three of them, including stuff of the kind that is as crazy as the removal of the Start button from Windows was but would presumably get people fired (or never even hired in the first place) at a company like Apple.

For example, the list of recent destinations of my car's navigation system, which has an ultrawide screen (two, actually, but I'm speaking of the one relevant to this problem here), often displays the city and even the county before the street, which means that the street name doesn't appear (for space constraints, even on an ultrawide screen) until I select a list entry. That just makes no sense in a country in which streets have fairly distinct names and one rarely has destinations with identical street names in two cities. Another example: the same button that can be used to select a phone number while using voice control will get the entire operation aborted if you hit it again in order to dial, though you would use that very button to dial without voice control. These examples show that a company like Daimler may understand wheels and brakes, but hasn't (yet) figured out screen layout and user interface design. Today's announcement is not the only indication of progress. The Mercedes F 015 is also very exciting.

With the F 015 being many years off, my next car will most likely be a Tesla, and I will definitely consider an Apple or Google car once available. Still I hope that those automotive companies, who have now demonstrated that they increasingly invest in digital technologies, will learn about user experience up to the CEO level, will change their development cycles and business model so they can deliver frequent and free updates to customers, will dump fossil fuels before customers dump their products, and and will do all of that in time before companies like Apple, Google and Tesla will, in a hypothetical worst-case scenario, turn them into the next Nokia.

Talking about the Nokia we know, I think the headline of this blog post is an accurate modification of the headline of today's Nokia press release: the "next stage of transformation" here relates to Nokia's trollification. By selling the HERE mapping business, Nokia has divested yet another product business. It was a licensing business, but a licensing business in which customers got something real and functional, as opposed to paying up for overbroad and often invalid (at least that's what German courts thought when Nokia sued HTC and ViewSonic a couple of years ago) patents.

Nokia's acquisition of Alcatel-Lucent has received regulatory clearance in the U.S. and Europe. Today's press release says the deal is expected to "close in the first half of 2016." It would be nice if this resulted in Nokia again focusing a bit more on actual products, but I'm very skeptical.

I guess it won't take long before numerous former Alcatel-Lucent patents show up in various lawsuits brought by patent assertion entities (PAEs). No company in the industry appears to be nearly as active and agressive in connection with privateering as Nokia. In May, Nokia and Ericsson sought to justify their privateering ways after IAM (Intellectual Asset Management) Magazine wrote about this topic, citing this blog.

Audi, BMW and Daimler will probably be among the targets of such patent assertions, given that cars are increasingly smartphones on wheels...

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Nokia and Ericsson seek to justify their privateering ways, defend patent transfers to NPEs

The debate over privateering (patent transfers by large operating companies to so-called non-producing entities or patent assertion entities) is in full swing, and it will be with us for a while. The week before last I made a call for input in an effort to build a smartphone-related privateering directory. This week, IAM (Intellectual Asset Management) magazine politely disagreed with my approach, and I respectfully disagree with them.

At the heart of that disagreement is the question of whether infringers unwilling to take a license are the real issue. IAM thinks so; I don't. When the "smartphone patent wars" started in 2010, and in the following two to three years, I also believed that more companies should take licenses and felt that certain right holders had a reasonable basis for asserting their IP in court. But what has come out of all those lawsuits so far does not support claims of massive patent violations: most smartphone patent lawsuits go nowhere and even the few assertions that do succeed usually don't have meaningful results. in this field of technology (which is a large one because smartphones are highly multifunctional) I can now understand each and every defendant who isn't impressed by claims to infringe many patents held by someone. I wouldn't have thought back in 2010 that Motorola still hasn't felt forced to take an Android patent license from Microsoft after four and a half years of crossjurisdictional litigation. But that's the way it is (unless there's a reversal of fortunes down the road) and I can't blame others for "doing a Motorola" when they face royalty demands.

Smartphone patent assertions are so vastly unsuccessful that I've arrived at the conclusion the term "intellectual property" is a propagandistic misnomer for smartphone patents. I still like IP as a term for patents in a field where the system may work, for copyright, for trademarks, and for certain other categories of rights that are reasonably reliable. IPRs will never come with the degree of legal certainty that real property provides and I understand that. However, when the vast majority of assertions turn out meritless and the few that have merit in a formalistic, legalistic sense are still unimpressive from a technical/commercial point of view, transaction costs are totally out of proportion and the value of most of those patents is not in the "innovation" they allegedly protect but in the ability to force someone to spend money on legal defense and in the off-chance that one of the asserted patents may beat the odds and have some real impact in the end.

Most right holders and IP professionals still claim that patents, even smartphone-related patents, should be treated like real property, but Congress wouldn't be looking at the reform proposals that are currently on the table if lawmakers truly believed that the patent system was all about the legitimate protection of innovation. No one would seriously make similar proposals with respect to real property. It's just for political reasons that even those favoring far-reaching reform frequently repeat the mantra of how beneficial the patent system is to innovation. Saying the opposite would be unwise with a view to international trade negotiations and would draw massive protest from various large organizations. But when even the largest and most well-known companies in the smartphone industry fail with most of their patent assertions, something is fundamentally wrong, the system is increasingly detached from the notion of protecting true innovators, and more reform is needed.

Just like patent enforcement is structurally different from the enforcement of real property rights, it also makes sense to treat (at least in this field of technology) patent transfers differently from other asset sales.

Nokia and Ericsson have issued statements to IAM (cited in the blog post I linked to in the first paragraph) on their patent transfers to patent assertion entities (PAEs). They basically told IAM that those deals are beneficial, but they don't explain why companies with such vast resources and enormous sophistication (in-house and externally, in legal and in technical respects) need help from little guys with a controversial business model to do license deals with the very same licensees with which they've already done deals before and do deals with all the time.

They also fail to explain why a number of major right holders generally don't sell patents to PAEs. For example, I'm not aware of Qualcomm doing this. Or IBM (all the IBM patent sales I know about were to operating companies such as Google and Twitter). Or even Microsoft. While Microsoft has been criticized by some for providing funding for the Nokia-Mosaid deal, for the way it structured its acquisition of Nokia's wireless devices business (sort of a "reverse privateering" deal) and for funding Intellectual Ventures even at a time when almost everyone else in the industry didn't want to be associated with it anymore, even Microsoft's critics can't deny that it has built an enormously successful licensing business with well over 1,000 licensees--and it runs this business itself, without having to transfer patents to trolls.

Privateering is a huge and important issue, and there's no way to discuss all of its aspects in one post. For the remainder of this post I just want to comment quickly on a few things Nokia and Ericsson said in their statements:

• Both companies say the acquirers of their SEPs (to the extent that SEPs are involved) have to fulfill their FRAND licensing commitments. The problem is not that the acquirers would claim the patents weren't encumbered. The key issue is that those companies have previously taken positions on the royalty rate for their portfolios. For example, on page 3 of this American Bar Association Document you can see that Nokia and Ericsson publicly announced a 4G (LTE) royalty rate of 1.5% each. But when such right holders sell parts of their portfolio to third parties, there's no longer a guarantee that the collective royalty demand implementers of the standard will face about the patents presently and formerly held by the respective right holder would still not exceed that limit. If a plurality of patent holders of what used to be a single portfolio makes a collective demand that is not FRAND, privateering becomes a means of circumventing or vitiating FRAND licensing obligations.

• Nokia touts its "relatively young portfolio" and continuing innovation but it has far fewer engineers on staff than it had a few years ago and in its dispute with HTC I saw it assert mostly very old patents.

• Nokia claims that "the majority [of its patent divestments in recent years] have been to operating companies." That means they must have sold patents to many operating companies since at least ten deals with PAEs are documented. But the only Nokia patent sale to an operating company that I can find on Google is that certain design (not technical) patents were given to Microsoft along with the handset business. So the other deals are either secretive or they aren't talked about because it's the deals with PAEs that raise issues. Even if Nokia had publicly announced patent tranfers to hundreds of operating companies, that fact still wouldn't justify privateering in the slighest.

  (As for transparency, IAM says Nokia and Ericsson have been more transparent than, for example, BT. I don't see any indication for that. It's just that BT transferred patents to privately held entities, which don't have to make SEC filings, unlike Unwired Planet or Mosaid. And some of the transferred patents showed up in litigation or prosecution before any announcement had been made by anyone.)

• Ericsson says transferring patents to PAEs "is a way for innovators to get a fair return faster on their significant investment and contribution to the eco system." I could see an acceleration of a licensing business in a case where an acquirer makes a substantial upfront payment. But Unwired Planet received thousands of Ericsson patents without having to pay anything initially. Ericsson can't seriously say that this is a faster road to revenues. For example, Unwired Planet sued Samsung after Ericsson had agreed with Samsung on a new license deal. It would undoubtedly have been faster to include those patents in the deal Ericsson did with Samsung directly than to have Unwired Planet assert those patents against Samsung later.

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Ericsson's pseudo-sale of patents to Unwired Planet and the rampant problem of privateering

In the first half of this decade, the biggest and most divisive issue in the information and communications technology (ICT) was FRAND: fair, reasonable and non-discriminatory licensing of standard-essential patents (SEPs). That issue hasn't gone away completely. Courts and regulators provided some clarification (in Microsoft v. Motorola, for example). Still, companies will continue to disagree on what constitutes a FRAND offer, on the proper royalty base, on the extent to which standard-setting organizations (SSOs) such as the IEEE should provide guidance, and on circumstances that may or may not warrant an injunction over SEPs. But all of this has a lower profile now.

The biggest ICT patent issue in the second half of this decade is "privateering": the act of large companies feeding trolls with patents in order to maximize their patent monetization income and/or drive up their competitors' total cost of defense. Quite often this raises FRAND issues as well. Many privateering deals involve SEPs and are part of a scheme to circumvent FRAND licensing obligations.

Centuries ago, privateers were pirates who colluded with governments. I recommend two articles, a Bloomberg story from 2013 and a more recent blog post by the von Mises economic institute, that discuss the problem and start with how Queen Elizabeth I of England commissioned Francis Drake to plunder Spanish merchant vessels. Privateers had to share their booty with the governments that backed them.

Today's patent-based privateering is a rampant problem plaguing the industry. The Bloomberg article I just linked to mentioned transactions involving patents held by Alcatel-Lucent, BT, Ericsson, and Nokia--and those are just a few examples. Furthermore, privateering is one of the issues the U.S. Federal Trade Commission is investigating in connection with patent assertion entities (PAEs).

Patents are transferable assets. There are good-faith, genuine patent transfers--and there are transactions of the kind that is styled as a sale but in commercial terms comes down to an arrangement under which a patent assertion entity is essentially a licensing and litigation service provider to the operating company.

Let's start with what a genuine asset sale looks like. If a company or private person sells a used car, it ceases to have any ongoing interest in the car. Such an agreement doesn't restrict the ways in which the purchaser uses the car; it doesn't even prevent the purchaser from selling it to a third party; and the buyer has to pay a (specific) price.

Naturally, a patent transfer has certain additional aspects. If third parties have already been extended a license to a patent or a portfolio, the acquirer must know about and respect those licenses. Also, the seller may want to continue to use the patented inventions. And the purchase price may have a variable component that gives the seller some upside if the patents prove more valuable than originally expected. But apart from that, the structure of a genuine patent sale resembles that of a genuine car sale.

On the website of the Security Exchange Commission (SEC) of the United States I have found a filing--a redacted version of a "Master Sale Agreement" between Ericsson and Unwired Planet over more than 2,000 wireless patents--that is essentially a privateering case study. I looked this up since Unwired Planet's German lawsuits against Google, HTC, Huawei and Samsung over six of the related patents will go to trial in the coming months. It was much easier than I thought to google the deal terms.

I wish to point out that it's not my objective to engage in "Ericsson bashing." Just like last year, when I wrote about an Ericsson slide deck that explains the (bad) reasons for which the Swedish company doesn't extend patent licenses to chipset makers, it's about behavior that is by no means unique to Ericsson. Ericsson (or, in this case, Unwired Planet) just happens to be particularly transparent about it. Even Apple once sold patents to a non-practicing entity (which I believe Apple wouldn't do again since it has meanwhile had to defend itself against at least one privateer). The undisputed number one patent troll feeder in the world is not Ericsson but another Northern European company: Nokia has engaged in various such transactions, and if I were an antitrust regulator, I'd want to ensure that Nokia won't sell any of Alcatel-Lucent's patents to patent assertion entities after the closing of that acquisition. I'll talk some more about Nokia's privateering on another occasion.

I've read the redacted version of the Ericsson-Unwired Planet deal in detail. A couple of structural elements are clearly very different from a traditional sale.

Section 3, Purchase Price, does not state any amount Unwired Planet had to pay upfront. Instead, Ericsson receives a percentage of whatever revenue Unwired Planet will generate with those patents:

(i) 20% of the amount of Cumulative Gross Revenue, until the Cumulative Gross Revenue equals $100,000,000; plus

(ii) 50% of the amount of Cumulative Gross Revenue in excess of $100,000,000, until the Cumulative Gross Revenue equals $500,000,000; plus

(iii) 70% of the amount of Cumulative Gross Revenue in excess of $500,000,000.

The relatively low percentage Ericsson receives on the first $100 million makes it easier for Unwired Planet to recuperate its litigation expenses. Then the percentage goes up to 50%, and above $500 million (i.e., in the event of a significant licensing success), Ericsson receives the lion's share: 70%.

Percentages like that remind me of what I've read about agency deals. For example, when sports bodies commercialize the broadcasting rights related to their events through agencies, this kind of revenue sharing is normal. But this is just not the way a "sale" in the traditional sense works.

The agreement also comes with all sorts of restrictions on the acquirer's business, a right of first refusal on any sale of the patents to a third party, and a "poison pill" for the event of an acquisition: in the event of a change of control of Unwired Planet, Section 3.3 allows Ericsson to terminate the agreement and to demand a "Sale Payment" for its patents, which according to 3.3(c) shall "in no event [...] be less than an amount equal to (x) $1,050,000,000 minus (y) the aggregate amount of all Quarterly Payments actually received by [Ericsson before]." It can be even more based on a valuation of those patents at the relevant time.

Let's connect the dots: Ericsson is convinced that the patents transferred under that agreement are worth, at a minimum, more than $1 billion, but it "sells" them to Unwired Planet based purely on a percentage of future revenues.

If Ericsson had kept those patents, it would have licensed them to other companies as part of its portfolio. That would have been most efficient for everyone, but Ericsson doesn't want to optimize efficiency: it seeks to maximize its patent monetization income, and it apparently believes that even a substantial de facto "agency fee" it pays to Unwired Planet is more than offset by the incremental bottom-line licensing cost to the likes of Google, HTC, Huawei, and Samsung. Ericsson may even think that its portfolio is so large that 2,000 patents more or less don't make any difference for the royalties Ericsson can obtain from licensees, but it's a large enough portfolio that Unwired Planet can go out and demand some additional percentage that is then shared with Ericsson.

Schemes like that give patent licensing--and patent transfers--a bad name.

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Alcatel-Lucent subsidiary Multimedia Patent Trust sues Apple, LG, Canon and TiVo: AT&T video codec patents rear their ugly head again

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).

Priorsmart newsletter invitation

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

Accused products

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.

Litigation history

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.

On 29 March 2010 MPEG LA proudly announced a settlement of the case, following two days of trial that didn't appear to have gone too well for Alcatel-Lucent. MPEG LA said:

"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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