Realtek has notched a win in Texas, where a federal judge ordered discovery on whether 2021 infringement claims by a patent assertion entity rise to the level of “exceptional.” The evidence has major implications for Realtek’s California antitrust case against MediaTek, which stands accused of cementing its dominant market position by bogging a competitor down with sham patent litigation.
US District Judge Alan Albright of the Western District of Texas, on remand, has granted an opposed bid by Realtek for discovery and supplemental briefing on whether a 2021 infringement complaint by Future Link Systems qualifies as exceptional.The ruling, posted earlier this month as an electronic docket entry with a written order to follow, is no mere procedural pitstop on the road to a final tally of attorney fees potentially owed to Realtek under Section 285 of the Patent Act, however.
Just under 1,800 miles away, MediaTek is pushing for an early exit (see here and here) from antitrust claims by Realtek over a $1 million bounty paid to IPValue Management in 2019 to have Future Link — a patent assertion entity, or PAE, and an IPValue subsidiary — sue its rival in the smart TV chips market for patent infringement.
A finding by Albright that those claims rise to the level of “exceptional” could bolster Realtek’s argument that the Texas lawsuit, another like it, and a related complaint by Future Link before the US International Trade Commission qualify as sham litigation — a showing Realtek must make to defeat MediaTek’s invocation of the Noerr-Pennington doctrine in the Northern District of California.
Noerr-Pennington immunity from antitrust liability hinges on findings that patent litigation is neither objectively baseless nor motivated by a subjectively anticompetitive purpose.
Unfortunately for Realtek, half of that winning formula could be off the table: Albright denied its motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure in 2022, in a decision affirmed by the US Court of Appeals for the Federal Circuit this fall.
Fortunately for Realtek, in the same September ruling, the appellate panel revived the possibility of fees under Section 285 when declaring Realtek a prevailing party.
Their Sept. 9 holding thus provided a lifeline of sorts for the Taiwanese fabless semiconductor company to get evidence into the record that it says Future Link wrongly withheld from Albright the first time around.
— 'Non-frivolous' settlement —
In Texas, Future Link voluntarily dismissed its infringement claim over US Patent No. 7,917,680 after executing a license agreement with Realtek’s upstream supplier, ARM Holdings, which it described at the time as “well in excess of $10 million.”
Albright relied on that representation, and sizable sum, when denying Realtek’s Rule 11 request.
Although he converted Future Link’s voluntary dismissal to one with prejudice as a sanction for “improper motive,” the judge found that the agreement between Future Link and ARM rendered the PAE’s infringement allegations against Realtek “plausible” and “not objectively unreasonable.”
Realtek said it was only after Rule 11 briefing was closed that it learned the agreement in question was between Future Link and defensive patent aggregator RPX, which counts ARM among its members. What’s more, the deal covered more than 300 patents — a far cry from the total of three patents asserted by Future Link in its two Texas complaints and before the USITC.
— ‘Inherently flexible’ —
When drilling down on Section 285 in 2014’s Octane Fitness v. ICON, the US Supreme Court stopped short of articulating what does, and does not, render a patent case exceptional.
Instead, the justices said Section 285 is satisfied when litigation “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
The high court rejected as unduly rigid the standard then in place at the Federal Circuit, whereby fees were available only for patent litigation “brought in subjective bad faith” and qualifying as “objectively baseless.”
Such a formulation, the Supreme Court said, “superimposes an inflexible framework onto statutory text that is inherently flexible.” Accordingly, they instructed US courts to assess exceptionality under Section 285 “in the case-by-case exercise of their discretion, considering the totality of the circumstances.”
— Wide berth —
That gives Albright — and other federal judges — wide leeway in the evidence they consider relevant, and prevailing parties under Section 285 with just as wide a berth in the information they seek in discovery.
Realtek, in an exhibit attached to its Oct. 16 notice of a letter to Albright, indicated it will seek documentation from Future Link of “contractual agreements with any counter-party that include a potential payment, obligation, or any other consideration between the parties to the agreement, conditioned on the initiation of litigation against a third-party or licensing of intellectual property to a third-party.”
Additionally, it singles out as discoverable “settlement agreements or patent license agreements” with ARM or RPX related to any of the three patents Realtek was formerly accused of infringing, and “documents and communications related to the negotiation of responsive settlement agreements or license agreements with ARM or RPX, including all drafts of any such agreements.”
The information is necessary, Realtek’s letter maintains, to “correct the misleading and incomplete record that was put before the Court by Future Link.”
Future Link, in response, told the Texas judge he can assess exceptionality based on the record already before him, arguing in its own October letter that “no further briefing of discovery is warranted.”
Albright seemingly disagreed at a hearing on Nov. 14.
Realtek now has a path to get evidence of the alleged $1 million bounty and the true nature of ARM’s agreement with Future Link into the record in Texas — and not a moment too soon, given the procedural posture of its case against MediaTek in California.
— Antitrust claims in California —
On Monday, it sought a temporary adjournment of a planned Jan. 8 hearing in California on MediaTek’s summary judgment bid and supplemental briefing, telling US District Judge P. Casey Pitts that his court “should have a complete picture, including the benefit of the Western District of Texas’s fully informed decision, before ruling on Defendants’ Early Motion for Summary Judgment.”
In their motion, MediaTek and Future Link argue that although Pitts previously found Realtek plausibly alleged baseless patent litigation, subsequent developments make clear that Realtek’s sham theory cannot proceed.
Realtek disagrees, telling the court the defendants are wrong to argue that it is barred from pursuing its antitrust claims because of the collateral sanctions findings by Albright. Realtek says the defense has erroneously argued that the merits of those cases were not objectively baseless.
It remains to be seen if the Trump-led US Department of Justice’s Antitrust Division, which recently weighed in on two patent cases (see here and here), will file a statement of interest in this lawsuit as well.
Recently, Dina Kallay, a top DOJ enforcer, invited patent holders and users to approach the agency if they face sham litigation, saying the Antitrust Division is looking to deepen its understanding of the area (see here).
In Disney’s lawsuit against InterDigital, the DOJ told a US court that it should not deem protected petitioning activity a violation of the antitrust laws. InterDigital’s patent enforcement efforts are exempt from antitrust liability under the Noerr-Pennington doctrine, the DOJ said in a statement of interest (see here), given that the company's First Amendment right "to petition the Government for a redress of grievances" is at stake.
In Realtek’s lawsuit against Mediatek and Future Link, the Biden DOJ told the California court in October 2024 that the $1 million bounty reduced RealTek’s ability to compete (see here).
It is unlikely that the Trump DOJ would take a different view when it comes to an anticompetitive scheme.
Realtek can expect to get favorable treatment from the government should it choose to weigh in again because of the conduct and broader scheme it is challenging, which has private and competitive agreements and the misuse of patent litigation to gain a leg up against rivals. Realtek can expect the DOJ to continue to view that as conduct unprotected by the First Amendment.
Please email editors@mlex.com to contact the editorial staff regarding this story, or to submit the names of lawyers and advisers.