RPX settlement deal ends latest Creative assertion campaign while $100 million ‘Zen patent’ awaits Alice fate 11 Jul 17
UPDATE - This article was updated on 12th June with further details about the ITC case involving the Zen patent
RPX Corporation yesterday announced a deal with Singapore’s ZiiLabs that will see the Creative Technology subsidiary assign certain patent rights to the defensive aggregator while ending a US litigation campaign with at least seven defendants. The deal appears to end ZiiLabs’ campaign to enforce patents it obtained through a 2002 takeover of 3DLabs. It will not affect Creative’s other major assertion effort, a series of cases based on the so-called ‘Zen patent’ which once compelled a $100 million settlement from Apple and is now awaiting an IPR decision.
According to RPX, “all existing disputes” involving ZiiLabs patents in the ITC and district courts will be resolved by the settlement. That means Eastern District of Texas cases targeting Sony, Qualcomm, LG Electronics, MediaTek, Lenovo and Advanced Micro Devices (AMD) will come to an end, according to Lex Machina records, as well as a parallel ITC investigation of the same defendants. Of those six alleged infringers, all except for MediaTek and Lenovo have previously been identified as clients of RPX’s patent risk management services.
Creative, which is publicly traded, said in a regulatory filing that the payment from RPX would contribute approximately US$0.44 of earnings per share for its current quarter. As of today, the company has about 70.33 million shares outstanding on the Singapore Exchange. What is not clear is whether that is a one-off payment - in which case the deal has an overall value of around $31 million - or whether that is the first tranche of a series of payments, in which case we are clearly looking at a much larger transaction.
Another ZiiLabs case, against British chip designer ARM, was dismissed without prejudice in April of this year. Creative's statement suggests that this, too, was a result of its settlement deal with RPX. That dispute involved a different set of former 3DLabs patents.
The eight patents asserted by ZiiLabs against ARM and the other companies were originally assigned to UK-based fabless semiconductor designer 3DLabs. Creative acquired 3DLabs in a 2002 M&A transaction; ten years later, it sold the operating units of ZiiLabs off to Intel for $30 million, but held onto its patents, including the portfolios acquired from 3DLabs. Intel paid another $20 million for a license to ZiiLabs’ IP, and the subsidiary went on to assert those rights against other companies. ZiiLabs settled lawsuits based on the 3DLabs portfolio with Apple and Samsung in late 2015.
Both short press releases are vague on the exact contours of the deal. Both companies say ZiiLabs will “assign certain rights in its patent portfolio to RPX”, but that could mean many things.
If it covers an outright acquisition then it is unclear whether it extends just to the patents asserted against Sony et al, or also to the patents asserted against ARM, or to a larger chunk of the 3DLabs portfolio (perhaps all of it). Of the 10 patents ZiiLabs asserted to get settlements out of Apple and Samsung, just one was involved in its more recent campaigns. So it may be that even after the settlement, it has some more options when it comes to monetising the patents it has left.
On the other hand, if ZiiLabs is not transferring outright ownership of the patents to RPX – in other words, if it has agreed some kind of licence deal instead – then that is very big news indeed for the Singapore company. With an RPX-validated licence agreement in place, it would have a great mandate to go out and license non-members of the organisation.
It’s also possible that the deal is more complicated than either of those scenarios, so hopefully more details will emerge further down the line. Regardless, it seems that both sides have found a relatively efficient way to wind down their dispute. ZiiLabs can claim a lot of big-name scalps after its multi-year effort to monetise the 3DLabs portfolio, while the accused infringers have likely benefitted from having RPX use resources on their behalves to negotiate as a bloc.
Moreover, the RPX press release mentions only ZiiLabs-linked litigation, meaning the pending cases filed by parent Creative Technology are not affected. Creative is seeking to re-assert its so-called ‘Zen patent’, on navigation of music menus on MP3 and other audio players. After a $100 million settlement with Apple back in 2006, the company waited almost 10 years to file another case based on US Patent 6,928,433. In March 2016, it filed East Texas lawsuits against seven companies – Blackberry, HTC, Lenovo, LG Electronics, Samsung, Sony and ZTE. Those cases are techincally still active, alongside a parallel ITC case and an IPR instituted on Section 103 grounds.
In the ITC case, however, an administrative law judge struck down the 'Zen patent' on Alice grounds, the first such invalidation as part of a 100-day pilot programme trialling early validity rulings in Section 337 investigations. Creative appealed that decision to the Court of Appeals for the Federal Circuit; oral arguments have not yet been held. If the invalidation stands, it will mean an early end to the patent's second act.
In February, we reported that Creative’s longtime head of legal Anan Sivananthan had departed the company for private practice at Bird & Bird at what was a pivotal time in the company’s litigation efforts. Sivananthan has confirmed to IAM that he acted for Creative in the settlement with RPX.
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