Patent Litigation Weekly: MobileMedia's Unusual Patent Infringement Campaign

This week: A closer at the holding company behind recent suits against smartphone makers Research in Motion, HTC, and, most interestingly, Apple.

MobileMedia Ideas LLC didn't create a big stir when it launched in January. Instead, the holding company simply issued a press release in which it let the world know that it would "make available" its innovations, (which is, of course, generally considered to be patent-speak for, "We will be suing people shortly"). MobileMedia, which holds 122 patents it acquired from Sony and Nokia, was even quieter when it acted on its euphemistic pledge in March by filing separate infringement suits against three leading smartphone makers.

There's nothing new or unusual about a patent-holding company tossing a few lawsuits against the wall to try to wring some cash out of the smartphone industry, which has lately become crowded with lawsuits filed by holding companies and competing companies alike. 

What is unusual is who owns MobileMedia: MPEG-LA, the private company that oversees a total of eight patent pools covering important digital video standards—MPEG-2 and MPEG-4 being the most common—used in DVD players and pretty much every other device that supports digital video. Contributors to those pools, whose contents MPEG-LA has licensed to literally hundreds of companies, include Hewlett-Packard, Panasonic, Sony, and Cisco subsidiary Scientific Atlanta (see full list). MPEG-LA's CEO Larry Horn also heads MobileMedia. 

Even more unusual is that one of the companies targeted in MobileMedia's initial batch of suits is Apple (the others were BlackBerry maker Research in Motion and HTC).  Apple happens to be among the companies that has contributed patents to MPEG-LA patent pools, including those covering the MPEG-4 and the IEEE 1394 (Firewire) standards. That puts Horn in the position of collecting money for Apple on behalf of MPEG-LA while at the same time trying to wring money out of the company on behalf of MobileMedia. Considering the breadth of MobileMedia's patent claims—the company claims to hold patents relating to all the central functions of "call handling, speed dial functions, database searches, audio download and playback, and still picture and video processing"—it's easy to imagine that Apple won't be the last company to wind up on both sides of Larry Horn.

In an interview, Horn told The Prior Art that said he doesn't see a problem with his dual roles. "We've been threading that needle for 14 years," he says. "[At MPEG-LA], we've run eight patent pools. Some companies are owners of patents in one pool and not in another. Some are users—licensees—in one pool, and not in another. Our mission in each pool is to proactively and vigorously license the patents to the market, on behalf of our licensors."

"At MPEG-LA, we've always gone after anybody in need of a license, to offer them one," Horn adds. "You get no favoritism just because you happen to be a licensor in one program. If somebody gives us the right to license their IP in one context, they have to expect we're going to license someone else's IP in another context. Our credibility is based on that."

In other words, MPEG-LA is already in a position in which it sees that some companies getting paid because of their patent rights while it "encouages" other companies to pay up in exchange for those rights. It's always possible, Horn says, for some overlap to occur.

But there are big differences between the MPEG-LA licensing operation and the nascent MobileMedia campaign. First of all, MPEG-LA's patent pools are widely recognized as vital to digital video technology throughout the industry. And they're accepted as covering industry standards. MobileMedia, on the other hand, holds patents that cover phone features but not industry standards.

Second, MPEG-LA's licensing rates are relatively low—$2.50 per device for those that want to make a DVD player using MPEG-2 standards, for example, down from $4 back in 2002. And the pool is controlled by a large group of competitors with a shared incentive to keep those rates low (lower licensing costs means more devices made means more revenue for pool contributors). 

Finally, MPEG-LA doesn't file enforcement lawsuits on its own. If a user of the MPEG-2 standard, for example, refuses to pay to license patents from the company's pools, MPEG-LA notifies the patent-holders that they may want to file suit. MPEG-LA simply plays an administrative role. 

By contrast, MobileMedia owns its 122 U.S. patents (and related foreign patents) outright, and so can enforce them directly. And its majority owner is a pure patent-licensing company that doesn't make products. That gives it an incentive structure more like those of typical "non-practicing entities"—also known as "patent trolls"—that use the threat of litigation to collect settlement cash without concern for the actual market in question. (Of course, the typical non-practicing entity doesn't often throw out 10 patents that originated in Sony and Nokia research and development operations).

Horn says he'd prefer not to file suit. "We're attempting to have very cordial discussions with the parties about taking a license," he says. "These are not marginal patents, these are extraordinarily valuable patents. And the law is, those who use it, should be licensed for it."

And, he says, rather than being a problem, the overlap between MPEG-LA and MobileMedia is a major advantage. MPEG-LA has experience putting together useful patent pools into "one-stop shopping" patent licenses, and has taken less than 40 enforcement actions while licensing patents to thousands of companies over the years. (The MPEG-2 standard alone has been licensed to more than 1,500 companies.)

One attorney familiar with MPEG-LA that TPA spoke to suggested that MobileMedia's sudden move could have been prompted by the recent spate of patent suits between competing smartphone makers. Most notably, Nokia sued Apple for patent infringement in September, and was countersued late last year. Now Nokia is, indirectly at least, enforcing patents again against Apple, as part owner of MobileMedia.

But Horn says his operation isn't a part of any patent "proxy war." MobileMedia, he maintains, owns its patents outright, and makes its own decisions about how to enforce them. 

MobileMedia investor Sony Corp.—which, like Nokia, owns a minority stake of at least 10 percent in the holding company—is typically on the receiving end of so-called troll suits. Contacted about MobileMedia's suits against RIM, HTC, and Apple, Sony provided an e-mailed statement saying that the new venture was just a hum-drum part of patent management: "Sony has a long history of successfully managing its large patent portfolio, which was developed through years of product innovation and R&D. We have done this alone, jointly with other companies and through third parties... In this instance, we have a significant number of patents for portable and mobile device technologies, and this is another example of managing our patent portfolio and making it more broadly available in an efficient manner."

In the future, look for more of that technology to be "made available" in East Texas courts.

• MobileMedia Ideas, LLC v. HTC Corp. 10-cv-112, filed 3/31/10, E.D. Texas (Marshall). [PDF]

• MobileMedia IDeas, LLC v. Research in Motion, Ltd. 10-cv-113, filed 3/31/10, E.D. Texas (Marshall). [PDF]

• MobileMedia Ideas, LLC v. Apple Inc.  10-cv-258, filed 3/31/10, D. Delaware. [PDF]

Photo: flickr / Incase Designs

Comments

[Richard]

Wow, this is a great big, tangled ball of stupidity that is hampering innovation. Personally speaking, I feel that the patent system needs to be eliminated as soon as possible for real innovation to occur.

Rather than wasting time with lawsuits, companies would be using their resources to try and out-innovate other companies