Exclusive: Realtek and IPValue on their ‘patent troll’ dispute
“Robber barons and their hired henchmen” securing “monopoly spoils” as part of a “secret bounty”. You could easily be forgiven for thinking this was taken from a film script.
But this is the language of a complaint filed this week by a major Taiwanese semiconductor firm to a rival, in a dispute that centres upon the issue of ‘patent trolling’.
Realtek has accused its rival MediaTek of paying a “secret litigation bounty” to a so-called patent troll in a bid to disrupt Realtek’s business and drive it from the market.
In the complaint filed in a California court this week, June 6, MediaTek is alleged to have conspired with Future Link Systems (FLS), a subsidiary of IPValue Management, paying it to “file meritless patent claims to harass Realtek, manipulating the court system to increase Realtek’s costs and divert Realtek’s attention away from product development and innovation”.
Even the International Trade Commission (ITC) weighed in last year, with an Administrative Law Judge calling the “secret bounty” “alarming”, such that it is “difficult to imagine how it could possibly be lawful”.
A Texas federal judge also gave his two penneth, labelling the scheme “improper” and said it “should be discouraged as a matter of public policy”.
But IPValue, a co-defendant, has hit back by calling Realtek’s complaint “misleading”.
Among the background to the dispute, IPValue's subsidiary Future Link Systems (FLS) first filed a patent infringement complaint with the ITC against 17 semiconductor companies, including Realtek, AMD and Qualcomm. This feud between it and and Realtek is just the latest in the saga.
Litigation transparency
The row between Realtek and MediaTek is an important one since it highlights the divisive subject of litigation action by patent assertion entities (PAEs) such as IPValue and FLS—or patent ‘trolls’ depending on your viewpoint.
Last year, Chief Judge Colm Connolly at the US District of Delaware ordered that all plaintiffs before his court declare any third-party funders involved in cases, alongside the identity of the funder and its relationship to the plaintiff.
This was followed by another order requiring the same where any party is a “non-governmental joint venture, limited liability corporation, partnership, or limited liability partnership”. Patent plaintiff Nimitz Technologies has so far vehemently objected to the judge’s orders.
The row between Realtek and MediaTek et al raises the issue of transparency in litigation that also forms part of Realtek’s complaint.
WIPR asked George Park, vice president of development at IPValue, and Rudy Kim, partner in the litigation department at Paul Hastings and counsel for Realtek, to share their sides of the story.
George Park, vice president of development at IPValue
“Realtek’s complaint is full of misleading statements, and IPValue looks forward to vigorously defending itself.
“The IPValue Management Group is committed to promoting innovation by helping major innovators realise value for their patented inventions. IPValue works with a select number of the top innovators in the world. To date, IPValue’s work has resulted in over $1 billion being paid to original patent owners who continue to innovate.
“Currently, the IPValue Management Group, which includes IPValue Management and Future Link Systems, owns more than 10,000 patents. IPValue is widely known as a licensor who treats licensees with respect. That is why the vast majority of IPValue’s revenue is generated without litigation.
“Realtek, in contrast to leaders in the semiconductor industry, has refused and continues to refuse to engage in even a single discussion with IPValue. Instead, all of their communications have been through legal proceedings.
“IPValue first approached Realtek in 2019 to begin an amicable discussion. Realtek never responded and subsequently refused to accept delivery of multiple follow-up communications. This left Future Link with no choice but to initiate litigation.
'Pure fantasy'
“The Future Link portfolio has been widely licensed in the semiconductor industry. The list of licensees includes many of the world’s largest semiconductor companies. The patents in suit against Realtek were included in litigation against Intel and survived all of Intel’s motions to dismiss and other challenges, in a case that was widely reported.
“Realtek was one of several companies against whom Future Link brought an action in 2021. Realtek was in no way singled out. Future Link dismissed the cases against Realtek for the sole reason that Realtek’s products became licensed under the patents through a deal that Future Link did involving a Realtek supplier.
"Realtek’s notion that this dismissal has anything to do with claims by Realtek is pure fantasy. Realtek’s counsel is fully aware that Realtek’s infringement had ended and that the case was over.
“Despite this awareness, Realtek had no qualms in pursuing an endless stream of meritless claims against Future Link and now IPValue.
Court and patent office resources
“The patents in suit against Realtek have now been licensed to every company that needed a licence. In such a circumstance, there is no reason to waste court and patent office resources. Future Link therefore elected to abandon IPR defences and even dedicated one patent to the public.
“IPValue is not permitted to comment about the agreement with MediaTek.
“Realtek quotes extensively from ALJ Elliot’s order dated April 12, 2022. Unfortunately for Realtek, his view on the licence agreement was found to be incorrect by the full ITC Commission. The ITC Commission issued the following statement in its ruling: ‘Realtek did not establish that any portion of the licence agreement is unlawful…’
“And yet, Realtek continues to litigate the issue.”
Rudy Kim, partner at Paul Hastings, representing Realtek
“The real impact of the illicit, unprecedented ‘bounty’ agreement with the patent assertion entities alleged in the complaint goes far beyond Realtek: it hurts the industry, other companies, and everyday consumers. It also adds to the existing problem of court congestion by encouraging non-meritorious litigation.
“Realtek believes this anti-competitive behaviour is improper and should not be encouraged as it limits innovation and raises prices for products around the world, notably chips that are core to virtually every single new smart television on the market.
“Realtek is suing to prevent further harm, hold defendants accountable for their illegal conspiracy, and protect free and fair competition.
PAEs 'harmful' to innovation
“Patent assertion entities are harmful to innovation and competition: many drag innocent businesses into meritless and costly litigation and take company resources away from investments in their business and R&D.
“Further, entering into a secret litigation ‘bounty’ agreement with a patent troll is not the type of business practice that should be condoned or encouraged.
“It is important for the technology sector, customers, and the public at large, that innovative companies have a fair playing field that is unobstructed by illegal, anti-competitive tactics.”
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