Time for a Reverse Patent Troll to seek invalidation of Sisvel mp3 patents?

Philips c.s. mp3 patent litigation by Sisvel has mostly come to an end in Europe and the US, as most bigger players in the electronics space have settled with Sisvel (on behalf of the patent holders Philips, France Telecom, IRT and TDF). When Sisvel settled with most vendors of mp3 consumer goods they did that after seizing goods at consumer fairs, starting patent infringement cases, using the European Border Detention Regulation 1383/2003 for blocking incoming mp3 enabled consumer goods from Hong Kong and China and other Asian countries. Many companies were basically forced into license deals, despite the fact that they had very good validity challenges to the patent. This blog has access to prior art that has been found that only a very limited number of companies have been able to get access to. The prior art is extremely powerful and valuable against anyone wanting to challenge the Philips mp3 patents being asserted by Sisvel.

Although many companies agreed to pay substantive royalties for the lifetime of the patent, no one is seeking invalidity. Why would any company not challenge the validity of the patent after signing the license thus saving substantial future royalty fees? The answer is quite simple. In the settlement agreement Sisvel included a clause giving them the right to terminate the license if the licensee challenges the validity of the patent. The clause reads:

“10.03 Audio MPEG and SISVEL shall have the right to jointly or independently terminate this Agreement forthwith or to revoke the license respectively granted under any of the US Patents and Non-US Patents in the event that LICENSEE or any of its Controlled Companies, directly or indirectly (e.g. via its customers and/or suppliers) brings a lawsuit or other proceeding to contest the validity or enforceability of any of the US Patents and/or Non-US Patents.”

Most US companies and those European companies with substantial US exposure refrain from even looking into the possibility of seeking invalidity as this could result in a termination of the license something they do not want to get into, endangering the continuous supply of phones, handheld or other consumer goods with their mp3 functionality. Most US attorneys advise their clients not to be part of any attempt, by whomever, to challenge the Philips/Sisvel patents, despite the very powerful prior art available, wary of the risk of termination and subsequent further business disruption. Besides who cares anymore when everyone pays the license which is in all cases been passed on to the end consumer?

Earlier we pointed out that a direct non-challenge clause is contrary to almost every antitrust legislation in the world. So how come Sisvel can get away with this quasi no-challenge clause? Strictly speaking clause 10.3 above is not a no-challenge clause. The licensee is still allowed to challenge the underlying patents in any court. However, doing so gives Sisvel under this challenge-clause (see above) the right to terminate the license agreement. Under previously held US law, a licensee cannot have it both ways: and getting patent peace by obtaining a license from the patent holder and at the same time challenging the patent’s invalidity while enjoying the license (as that would prevent the patent owner from seeking an injunction to use the patent pending the license) . However the US Supreme Court changed that in MedImmune vs. Genentech. According to the US Supreme Court, language promising to pay royalties on patents that have not been held invalid "does not amount to a promise not to seek a holding of their invalidity."

Although one would expect a challenge to the clause 10.3 in the Sisvel license (settlement) agreement, we do not know of any.

Reverse Patent Troll
Both the public in general as well as al the mp3 electronics consumers that now pay the price for the Sisvel licenses need to have a “Reverse Patent Troll” act against the Sisvel patents, seeking invalidation of the Philips c.s. patents. The Reverse Patent Troll can then use prior art that has only been used by two companies in their EU proceedings (which were subsequently withdrawn after settlement with Sisvel) which is very convincing, very powerful and not yet publicly known, so useful as it cannot be used by everyone to invalidate the Sisvel patents, making the Reverse Patent Troll a very attractive one.

Prior Art
Prior Art has been found that is unique and a powerful tool against the Sisvel patents. For further information, contact bonanza@ipeg.com.