Toshiba Can't Dodge Unpaid Royalties Suit Or Get A Refund
By Dani Kass
Law360 (October 9, 2019, 5:30 PM EDT) -- A California federal judge has granted Tessera the upper hand in a royalty dispute with Toshiba, finding that the Japanese electronics giant must face claims that it dodged payments while also denying a refund request for some royalties it did pay.
U.S. District Judge Beth Freeman on Tuesday worked through summary judgment motions submitted by both sides, largely clearing the way for Tessera Inc.’s suit over a 1999 licensing agreement. That agreement covered integrated circuit technology used in 7,000 Toshiba Corp. products, according to court records.
Xperi Corp. unit Tessera never explicitly indicated in its amended complaint how much it is seeking, and instead only asked for owed royalties plus damages decided at trial. But during a 2017 hearing, Toshiba’s attorney said the ask “dramatically increased” beyond the $100 million Tessera originally sought.
Judge Freeman on Tuesday granted Tessera summary judgment to beat Toshiba’s counterclaims, which requested refunds for certain royalties paid.
Toshiba told Tessera in November 2013 it no longer intended to pay royalties, as its products didn’t require the use of the licensed patents. Additionally, it asked for a refund on royalties it paid dating back to October 2010, saying that’s when the last of the relevant patents expired.
But under Ninth Circuit law, a licensee is only entitled to a refund if the royalties were paid after challenging the validity of a patent, Judge Freeman said. Before the November 2013 letter to Tessera, Toshiba hadn’t challenged the validity of the patents or claimed noninfringement, and in fact made a “conscious business decision” not to challenge the validity, she said. Therefore, the judge said Toshiba can’t get a refund.
Judge Freeman also wasn’t persuaded that the 1999 agreement was rendered unenforceable after two patents expired in 2010, as the agreement still covered other patents that weren’t expired.
This is the second round of summary judgment proceedings in the case. In the first, the court found Toshiba only owes royalties if it infringed a valid, unexpired and licensed patent.
That decision came into play Tuesday when Judge Freeman addressed Toshiba’s motion for summary judgment through which it hoped to escape the unpaid royalty claims. Toshiba had argued there was no evidence of infringement, so Tessera doesn’t deserve royalties. She said this ultimately came down to a question of fact, not suitable for the court to decide at this stage.
She did say Tessera’s claims in the 2015 suit aren’t barred by a four-year statute of limitations, concluding that the clock started when Toshiba refused to pay royalties.
Likewise, she said Toshiba can’t dodge clams that it owes Tessera inflation adjustments.
Toshiba had asked for the right to challenge findings in two audit reports required by the 1999 agreement, and for a ruling that it didn’t breach the agreement’s audit provision by not cooperating with the auditors and not paying royalties based on one of those reports. Judge Freeman said these concerns weren’t fit for resolution on summary judgment.
Toshiba was successful in striking statements from Tessera’s expert reports that contained legal opinions and testimony about intent, motive and state of mind.
She also barred Tessera from offering expert opinions about patent infringement as the company didn’t comply with local rules about practicing patent cases. Tessera had been ordered to identify asserted patents by a certain deadline, which it then failed to do, in violation of those local rules, the judge said.
Attorneys for Tessera and Toshiba declined to comment Wednesday.
The patents-in-suit are U.S. Patent Nos. 5,679,977and 5,852,326.
Tessera is represented by Morgan Chu, Benjamin W. Hattenbach, A. Matthew Ashley and Lisa S. Glasser of Irell & Manella LLP.
Toshiba is represented by G Hopkins Guy III, Michael Hawes, Ali Dhanani, David M. Genender, Theresa Sutton and Sean Y. Lee of Baker Botts LLP.
The case is Tessera Inc. v. Toshiba Corp., case number 5:15-cv-02543, in the U.S. District Court for the Northern District of California.
--Additional reporting by Dorothy Atkins. Editing by Amy Rowe.
