As reported in Radio World late last week http://www.radioworld.com/article/ibiquity-continental-fight-over-licensing/270557 , an interesting little snit has developed between iBiquity and one of their receiver licensees. Since Radio World only skimmed the surface of the story, I'm posting some source material so that you can better understand some of the issues in more depth.
It seems that there is a longstanding difference of opinion between Continental Automotive and iBiquity, the details of which are mostly not public. This led to the filing of a lawsuit in State court in Maryland earlier this year. But, because it was filed under seal, the complaint and the reply are also not public.
The first public document was a lawsuit filed in Federal court in Illinois, which you can read here: http://members.wap.org/jhardis/20140319_Continental_Complaint.pdf . Continental has a several complaints (and you can read them all yourself), but I'll focus on two of them.
First, Continental complains that iBiquity's standard license agreement for receiver manufacturers requires a royalty payment that's a percentage of the entire price of the head-end unit, including all other functions in addition to HD Radio. That is, if the head-end unit also has a navigation system, iBiquity demands a royalty on the navigation system. If the head-end unit also has a back-up camera, iBiquity demands a royalty on the backup camera. Same with Bluetooth, WiFi, telematics, cellular connectivity ... anything. If it's in the same device along with the HD Radio receiver, iBiquity demands a royalty on entire cost of the device. Continental complains that this is not "reasonable," in keeping with iBiquity's commitment and responsibility to license on "reasonable and non-discriminatory" (RAND) terms.
Second, Continental complains about something called Patent Exhaustion. This goes back to a 2007/2008 Supreme Court case, Quanta Computer Inc. v. LG Electronics. "Patent Exhaustion" is a legal doctrine that a patent holder only has rights over the first sale of an item covered by a patent. So, what happens when the patent is embodied in an electronic chip (or subassembly) that is properly licensed, and then used as a component in a larger product? Does the patent also apply to the maker of the larger product—like the radio itself that contains an HDR integrated circuit?
In the Supreme Court case, iBiquity filed an Amicus Curiae brief in support of LG Electronics. https://www.eff.org/files/filenode/quanta_v_lg/06-937bsaciBiquityDigitalCorporation.pdf The brief explains their business model, and how they count on getting IP licenses from both the chip company and the radio company—and how this was important to them. They also explain how they structure their licenses to try to avoid patent exhaustion. However, in the underlying case, the Supreme Court came down hard—in a unanimous ruling—in support of the principle of patent exhaustion. http://www.supremecourt.gov/opinions/07pdf/06-937.pdf (While this case involved computer chips, the precedent cited involved eyeglass lenses.)
In the initial complaint, Continental does not lay out in detail what their "patent exhaustion" argument might be. Nonetheless, depending on how far they might want to push this, it potentially can get very interesting.
By the way, iBiquity, in their first bite at the apple in response to Continental's suit, asked that the court throw it out on technicalities. http://members.wap.org/jhardis/20140519_Motion_to_Dismiss.pdf They have not yet answered (given their arguments) on the merits Continental's complaints.
It seems that there is a longstanding difference of opinion between Continental Automotive and iBiquity, the details of which are mostly not public. This led to the filing of a lawsuit in State court in Maryland earlier this year. But, because it was filed under seal, the complaint and the reply are also not public.
The first public document was a lawsuit filed in Federal court in Illinois, which you can read here: http://members.wap.org/jhardis/20140319_Continental_Complaint.pdf . Continental has a several complaints (and you can read them all yourself), but I'll focus on two of them.
First, Continental complains that iBiquity's standard license agreement for receiver manufacturers requires a royalty payment that's a percentage of the entire price of the head-end unit, including all other functions in addition to HD Radio. That is, if the head-end unit also has a navigation system, iBiquity demands a royalty on the navigation system. If the head-end unit also has a back-up camera, iBiquity demands a royalty on the backup camera. Same with Bluetooth, WiFi, telematics, cellular connectivity ... anything. If it's in the same device along with the HD Radio receiver, iBiquity demands a royalty on entire cost of the device. Continental complains that this is not "reasonable," in keeping with iBiquity's commitment and responsibility to license on "reasonable and non-discriminatory" (RAND) terms.
Second, Continental complains about something called Patent Exhaustion. This goes back to a 2007/2008 Supreme Court case, Quanta Computer Inc. v. LG Electronics. "Patent Exhaustion" is a legal doctrine that a patent holder only has rights over the first sale of an item covered by a patent. So, what happens when the patent is embodied in an electronic chip (or subassembly) that is properly licensed, and then used as a component in a larger product? Does the patent also apply to the maker of the larger product—like the radio itself that contains an HDR integrated circuit?
In the Supreme Court case, iBiquity filed an Amicus Curiae brief in support of LG Electronics. https://www.eff.org/files/filenode/quanta_v_lg/06-937bsaciBiquityDigitalCorporation.pdf The brief explains their business model, and how they count on getting IP licenses from both the chip company and the radio company—and how this was important to them. They also explain how they structure their licenses to try to avoid patent exhaustion. However, in the underlying case, the Supreme Court came down hard—in a unanimous ruling—in support of the principle of patent exhaustion. http://www.supremecourt.gov/opinions/07pdf/06-937.pdf (While this case involved computer chips, the precedent cited involved eyeglass lenses.)
In the initial complaint, Continental does not lay out in detail what their "patent exhaustion" argument might be. Nonetheless, depending on how far they might want to push this, it potentially can get very interesting.
By the way, iBiquity, in their first bite at the apple in response to Continental's suit, asked that the court throw it out on technicalities. http://members.wap.org/jhardis/20140519_Motion_to_Dismiss.pdf They have not yet answered (given their arguments) on the merits Continental's complaints.
