When a well-known patent pool operator slashed Samsung's royalties, while continuing to sublicense Samsung's patents, Samsung turned to Quinn Emanuel. Justice Crane of the New York Supreme Court ruled that the pool operator had breached its contractual obligations to Samsung, rejecting all of the pool operator's arguments to the contrary. The win earns Samsung more than $25 million in damages, tens of millions in future royalties, and a complete victory before trial.
In a patent pool, many different patentees who own patents related to a particular technology standard all contribute their patents and allow other companies to take a single sublicense that covers all the pooled technology. The administrator collects the royalties from those sublicenses and divvies them up among the patentees, after the administrator takes its cut.
In 2014, Samsung and other companies formed a patent pool for the High Efficiency Video Coding ("HEVC") standard that would be administered by MPEG LA. In 2020, Samsung and 13 other licensors terminated their contracts with the MPEG LA pool. Just three months later, the pool administrator engineered a scheme to amend one of the pool agreements to pay terminated licensors only half of their share. The administrator encouraged the remaining licensors to approve the amendment and imposed a rule that any licensor who did not vote would be counted as if they had consented to the amendment. Without the silences, the amendment failed under any standard prescribed by the pool agreements. But the administrator unilaterally declared that the lowest voting threshold applied, counted both the "yes" votes and the silences, and declared victory. It started cutting Samsung's payments in the third quarter of 2020, without even informing Samsung that a vote had been held.
When Samsung discovered the change and could not persuade MPEG LA to honor the parties' contract, it brought suit in 2022, alleging both breach of contract and breach of the implied covenant of good faith and fair dealing. MPEG LA brought its own implied covenant claim, which we successfully moved to dismiss, and tried to have Samsung's implied covenant claim dismissed, which the Court refused to do. The case thus went through all of discovery with all of Samsung's claims intact, and no counterclaims.
At summary judgment, Justice Crane granted Samsung's motion in its entirety and gave Samsung all of its requested relief. The Court ruled that MPEG LA had breached its contract with Samsung by only paying half royalties, as it had no right to treat a vote that failed like one that had passed. The Court awarded Samsung all of its withheld royalties, including more than $5 million that were heavily contested even once liability had been established, and declared that the administrator may not withhold Samsung's royalties due to the purported amendment in the future.
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