Chip firm says rival paid ‘secret bounty’ to patent troll
Realtek alleges patent hold-up to monopolise market for semiconductors | Defendant likened to ‘robber barons’ with ‘hired henchmen’ | Plaintiff pledges to donate damages to charity to ‘protect public interest’.
Semiconductor firm Realtek has accused its rival MediaTek of paying a “secret litigation bounty” to a so-called patent troll in a bid to disrupt its business and drive it from the market.
Likening MediaTek to the “robber barons of the Industrial Age”, Realtek says that its competitor “resorted to a multifaceted scheme with the aim of destroying competition and securing for itself monopoly spoils in a critical industry…”
MediaTek allegedly conspired with California-based Future Link Systems (FLS), a subsidiary of IPValue Management, “paying it a secret ‘bounty’ 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”.
In its lawsuit, filed at the US District Court for the Northern District of California on Tuesday, June 6, Realtek said “fighting off countless frivolous lawsuits” brought by patent assertion entities (PAEs), also known as patent trolls, was “unfortunately” now par for the course in the semiconductor industry.
“PAEs invent nothing, and instead acquire patents that are often abandoned by their original assignees because the technology is outdated or they otherwise lack value—ie, they are not novel, useful inventions,” said the Taiwanese firm.
According to Realtek, FLS filed three separate patent infringement actions against it, and sought to keep its products off the market. The actions relate to key components and technologies essential to making chips for smart TVs or provide smart TV functionality, “as well as many other types of chips”.
MediaTek owns roughly 60% of the global market for TV chips, said the lawsuit.
ITC weighs in
The plaintiff said that upon being made aware of the secret agreement, an Administrative Law Judge at the International Trade Commission (ITC) last year called the secret bounty “alarming”, such that it is “difficult to imagine how it could possibly be lawful”.
It also said that a federal district judge at the US District Court for the Western District of Texas called the scheme “improper” and said it “should be discouraged as a matter of public policy”.
Realtek said that it “seeks to stop a modern robber baron and its hired henchmen, protect itself from ongoing injury, and guard against the destruction of competition in the critical semiconductor industry by holding defendants accountable for their conspiracy”.
It added that it will donate the amount of damages that it recovers to charity in a bid to “protect the public interest”.
Cost of PAE infringement
Lawsuits brought by PAEs were associated with half a trillion dollars of lost wealth between 1990 and 2010, according to the lawsuit.
It added that the most litigated PAE patents, defined as those asserted a minimum of eight times or more, lose in court more than 90% of the time.
Back in December 2021, Future Link Systems filed a complaint with the ITC to initiate an investigation against 17 companies, alleging infringement of two patents relating to advances in power-saving techniques for processor integrated circuits.
Defendants included semiconductor vendors such as AMD, Amlogic, Broadcom, Qualcomm, and Realtek, as well as end-device manufacturers of mobile phones, tablets, personal computers, smart home devices, and other devices.
At the time, its parent company IPValue said it had generated more than $2 billion in cash from patent licences. In 2012, FLS acquired a portfolio of more than 600 “computer architecture-related” patents and said that at the time, it owned and managed the commercialisation of more than 9,000 patents.
WIPR has contacted legal representatives for the plaintiff and defendants, without immediate response.
