Jack Ellis

Motorola Solutions (MSI) filed suit for declaratory judgment against Round Rock Research in the Federal District of Delaware last week. Reading the complaint, we learn that the NPE had hit several MSI customers with patent infringement suits during 2011.

Round Rock claims that some companies which are supplied radio frequency identification (RFID) technology by MSI are infringing a number of RFID-related patents in a portfolio that primarily comprises rights that it obtained from Micron Technologies. The companies in question – including Amazon, PepsiCo and Macy’s Retail Holdings – have indemnity clauses in their contracts with MSI. As a result, MSI has moved to obtain a declaratory judgment from the Delaware district court.

We still don’t know the nitty-gritty of the deal which saw Micron transfer over 20% of its entire patent portfolio to Round Rock Research, the NPE owned by John Desmarais. But we do know that the sale was Micron’s idea. However, it has never been formally notified to the company’s shareholders, while Micron states that it doesn’t have any ongoing stake in Round Rock (though it does have a licence to the patents). Given all that, it is probably fair to conclude that Micron does not now have any say in how the patents are managed, asserted and/or licensed.

The MSI DJ is a good example of why Micron felt it would be in its interests to assign these patents to Round Rock. A monetisation programme is great when companies agree to licences, it is less attractive when they resist – either by refusing to negotiate or by going to court for a DJ. That’s when it all becomes a lot more time-consuming and risky. Who needs that hassle when your core competences lie elsewhere? If MSI does get its DJ, it will be Round Rock, not Micron, which takes the hit. The privateer model has effectively enabled Micron to hand licensing headaches to a third party. As such, it remains at arm’s length from any pre-emptive or retaliatory action taken by MSI.

But it’s not all positive, of course: if the court eventually finds in Round Rock’s favour, or if there is a favourable settlement, the NPE will doubtless reap a healthy reward. As has been shown already, the patents in the Round Rock portfolio are valuable. Prevailing in the current case will only emphasise that point. Micron has a licence to the patents in question, but what else did it get when they were handed over? There surely was a financial kickback, but was it enough? Given the prominence that patents have assumed since the original transfer to Round Rock back in 2009, you do wonder whether at some stage at least one prominent Micron shareholder might start asking public questions in order to find out.