CASE STUDY: Alliacense (TPL group) Juni 2011
V CASE STUDY: Alliacense (TPL group)
The next case study describes the US company Alliacense which accused German end-
producers in the electronic and electrical industry of patent infringement. The following
information is based on an interview with the legal division of the ZVEI (Central Association
of Electrical and Electronic Manufacturers Germany). Alliacense is a wholly owned
subsidiary of the TPL Group, which has been active in developing, marketing and licensing of
intellectual property rights since 1988. The TPL Group also includes the manufacturing
company IntellaSys, which was founded in 2005 and develops and produces processor
solutions. It is believed that the manufacturing subsidiary company was founded to counter
accusations of the TPL Group being a patent troll.
Alliacense holds four IP portfolios and is responsible for the management of the license
rights. The portfolios include technologies from the vast field of electronics. It is striking that
the patents are usually acquired through purchase or merger of the companies that have
invented this technology.
In the case known to us, Alliacense uses one of the four portfolios to proceed against German
end-producers. This is the mmp-portfolio, which was named after its inventor, Charles Moore,
a member of the board of the TPL Group. The patents protect fundamental design techniques
for improved performance of microprocessors that are used in products of many industries
such as mobile phones, home appliances and automotives. The mmp-portfolio includes seven
U.S. patents as well as their German and Japanese equivalents, which are valid until 2015.
The accused German companies are small and large system manufacturers which install these
protected microprocessors into their devices. So far, Alliacense asked only those companies,
which distributed their products on the American market to pay royalties. Alliacense
specifically targets the end-producers on the downstream markets and not the microprocessor
manufacturers. It proceeds cross-industry against infringers and communicates clearly that
those companies which are the first to
their competitors. The procedure of Alliacense can be illustrated by using a simplified sketch
of a possible value chain (graph1)
Graph1:
The potential patent troll, in this case Alliacense, does not address the
manufacturer, whose microprocessors infringe the patent, but the system manufacturer
(OEM), which implements these processors in its
this strategy could firstly be due to the fact that
from an OEM, because the processor is installed in a higher quality product.
built-in microprocessor itself usually has a smaller value. Alliacense also uses the
pressure from retailers and customers
to patent infringements, OEMs are not able to supply,
terminating existing contracts.
Following a first-mover strategy by offering lower royalties, Alliacense
considerable pressure between the competitors. Similar to a prisoner’s dilemma cooperation
i.e. everyone not paying license f
competitors. However due to risk aversion,
first and get favorable licensing terms, one company might choose to free
license. This has the consequence that the others are urged to enter into a license agreement,
especially if the first-mover is an influential company. This way Alliacense can build up and
benefit from additional pressure potentials between the potential licens
Therefore, OEMs are in a position
are grounded on patent law and
patent was not affected by the technology of the accused company.
under such great pressure, the license
9
are the first to pay a license, get significant discounts compared to
their competitors. The procedure of Alliacense can be illustrated by using a simplified sketch
(graph1).
troll strategy to enforce IPR in the value chain
The potential patent troll, in this case Alliacense, does not address the
manufacturer, whose microprocessors infringe the patent, but the system manufacturer
(OEM), which implements these processors in its devices. The reason why Alliacense chooses
this strategy could firstly be due to the fact that higher license fee payments can be demanded
because the processor is installed in a higher quality product.
r itself usually has a smaller value. Alliacense also uses the
customers, since OEMs are bound to deliver their products.
OEMs are not able to supply, retailers could threaten
terminating existing contracts.
mover strategy by offering lower royalties, Alliacense
considerable pressure between the competitors. Similar to a prisoner’s dilemma cooperation
i.e. everyone not paying license fees – would be the best strategy for all patent infringing
risk aversion, pressure from retailers and the possibility to
get favorable licensing terms, one company might choose to free-ride and apply for a
se. This has the consequence that the others are urged to enter into a license agreement,
mover is an influential company. This way Alliacense can build up and
benefit from additional pressure potentials between the potential licensees.
are in a position which only allows few escape options. Allia
law and are non-trivial. However, in some cases the scope of the
patent was not affected by the technology of the accused company. Since the companies were
under such great pressure, the license was paid in many cases without further checking for
pay a license, get significant discounts compared to
their competitors. The procedure of Alliacense can be illustrated by using a simplified sketch
The potential patent troll, in this case Alliacense, does not address the component
manufacturer, whose microprocessors infringe the patent, but the system manufacturer
devices. The reason why Alliacense chooses
higher license fee payments can be demanded
because the processor is installed in a higher quality product. In contrast, the
r itself usually has a smaller value. Alliacense also uses the potential of
, since OEMs are bound to deliver their products. If, due
could threaten them with
is able to build up
considerable pressure between the competitors. Similar to a prisoner’s dilemma cooperation –
would be the best strategy for all patent infringing
and the possibility to be the
ride and apply for a
se. This has the consequence that the others are urged to enter into a license agreement,
mover is an influential company. This way Alliacense can build up and
ees.
few escape options. Alliacense’s patents
trivial. However, in some cases the scope of the
ce the companies were
es without further checking for patent claims. In such cases it is crucial to consider the particular interests of different
departments within a company. Given an infringement charge, the legal departments first wait
and then check carefully whether there are legal ways to bring down the patent or whether the
patent is actually touched by the company’s technology. Sales divisions however fear the
pressure of customers and are therefore interested in a quick solution by means of a payment.
If the OEM does not agree with the royalty requests, Alliacense usually sues these companies
in court. Some German companies are currently involved in litigation in the US. The OEM
will probably try to make the component manufacturer recourse. Thus, on the one hand
transaction costs accrue for the OEM. On the other hand, some microprocessor manufacturers
have already passed over to withdrawing guarantees on their products being free of third party
rights. Based on these observations it can thus be shown that for enforcing its IPR, Alliacense
uses the bargaining power of other actors towards the final manufacturer to promote its
interests.
The extent of the Alliacense case against German OEMs can be illustrated by the fact that the
ZVEI formed, at the suggestion of many affected members, a special task group.
Representatives from affected companies, who are accused of patent infringement by
Alliacense, are thus able to negotiate. The main purpose of this work group is the mutual
exchange of information. Common legal steps have not yet been taken. For antitrust reasons,
agreements and actions compelling to all members are not possible. However, political
influence is being pursued thoroughly. As the automotive industry is also accused of
infringement charges from Alliacense, it is thought to exchange information with the VDA
(Association of the German Automobile Industry).
It is expected that Alliacense will also accuse OEMs manufacturers on the German market. In
a message from 02.02.2009, the German Patent Court in Munich confirmed the validity of a
patent from the MMP portfolio. This suggests that Alliacense is planning to increase its
presence on the German and European Market.
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