After a weeklong trial, a federal jury in Marshall ordered modem maker CommScope Holding Company to pay TQ Delta an $11.1 million lump sum for the infringement of a series of patents related to DSL (digital subscriber line) technologies.
TQ Delta, an Austin-based patent licensing company, was seeking a reasonable royalty of $89 million in the case. The jury, on Friday, ordered CommScope to pay an $11,125,000 one-time lump sum for past and future sales, for infringing six of the seven patents-in-suit.
Because the jury found that the infringement was willful, presiding U.S. District Chief Judge Rodney Gilstrap could increase the amount by as much as three times the amount set by the jurors.
In the case, TQ Delta accused CommScope, a network infrastructure provider, of refusing to agree to a license on fair and reasonable terms for the use of DSL technology in infringing products.
“These patents originate from groundbreaking innovations in the DSL field, including innovations that the International Telecommunication Union (“ITU”) adopted in various DSL-related standards,” the lawsuit states.
“CommScope infringes TQ Delta’s patents. CommScope provides DSL equipment, and TQ Delta has attempted to license its patents to CommScope on a worldwide, nondiscriminatory basis and on reasonable terms and conditions. CommScope has refused to obtain such a license or cease its infringement. It has continued to willfully infringe upon TQ Delta’s patents, taking substantial benefits from TQ Delta’s inventions and harming TQ Delta. This case is to redress that harm.”
CommScope argued that the plaintiff refused to negotiate a contract that offered a rate under fair, reasonable, and non-discriminatory (FRAND) terms.
“Ultimately, they filed a lawsuit because we didn’t agree to the [proposed rate for each unit sold],” said attorney Deron Dacus, of The Dacus Firm PC in Tyler, representing the defendant. “That’s not FRAND.”
“They can’t charge us more than other people in the industry,” Dacus told the jury in closing arguments. “Because damages in this case are constrained by the FRAND obligation, you’re going to be asked if TQ Delta grants licenses on a fair, reasonable and nondiscriminatory term. We’ll also ask what money will compensate us for a breach.”
“These claims are in absolute breach of the FRAN obligation,” Dacus insisted. “It is important to us that you find TQ Delta breached this agreement. The only obligation under FRAND is for TQ Delta to provide us a rate that’s nondiscriminatory. They’ve never done that.”
The jury, however, determined in their decision last week that the defendant did not prove its claim that TQ Delta breached its contractual duty to grant licenses regarding its standard essential patents to CommScope on FRAND terms.
“We put CommScope on notice in [2014],” attorney, Bo Davis, of The Davis Firm PC in Longview, representing TQ Delta said of the plaintiff’s efforts to inform CommScope of the infringement claims.
“What happened? They refused to negotiate in good faith,” said Davis, listing several other companies in the industry that did begin to participate in negotiations and license the technology. More recently, Nokia took a license in 2022.
According to the lawsuit, CommScope makes, uses, sells, offers for sale, and/or imports customer premise equipment (“CPE”) products, including without limitation gateways, modems, and service managers, that operate in accordance with one or more of the DSL standards.
“CommScope provides DSL CPE products to telephone/broadband carriers and such carriers’ subscribers/customers knowing that its DSL CPE products will be deployed and used in a DSL network to provide DSL service by operating in accordance with the DSL standards,” the lawsuit states.
“CommScope also provides instructions and support (including, for example, providing upgrades, troubleshooting, and warranty support) to its Customers to ensure that its DSL CPE products operate as intended (in accordance with the DSL standards).”
Giving a history of the plaintiff’s credibility as a pioneer in the industry, the lawsuit notes that TQ Delta is the successor-in-interest of Aware Inc.’s portfolio of DSL-related patents.
“Aware was a world-leading innovator and provider of DSL technologies,” the lawsuit states.
The lawsuit notes that the primary inventor of the patents, Marcos Tzannes, worked diligently on the DSL-related technologies for nearly 30 years.
“Mr. Tzannes was the head of the DSL technology group at Aware, and major semiconductor companies purchased Aware’s chip designs. Mr. Tzannes also had significant involvement in developing industry standards for DSL technology,” the lawsuit indicated.
The lawsuit goes on to note that Tzannes attended the DSL standard group meetings on behalf of Aware as well as TQ Delta, and has been an active participant in International Telecommunication Union (ITU) meetings, serving as chair of several of the ITU standards committees.
“Those include committees relating to DSL,” the lawsuit states. “In 2012, the ITU recognized Mr. Tzannes for his contributions on eight different standards. On information and belief, representatives of CommScope also attended these ITU standards meetings at the time Mr. Tzannes attended them.”
Closing Arguments
At trial, Davis, representing the plaintiff, told jurors that throughout the attempts of licensing negotiations, CommScope never tried to show any reason why they didn’t infringe TQ Delta’s patents.
“We want CommScope to pay for the use of our patented technology,” said Davis. “They’ve delayed 10 years from negotiating with us. That’s not fair.”
Representing the defendant, Dacus told jurors that the case is not about the progression of science. He contended that DSL standards were not novel or new concepts.
“These standards are all around us,” he said, noting they are in wall jacks, phones, etcetera.
Dacus said TQ Delta decided to buy the patents-in-suit during a time the DSL industry was declining. Dacus said CommScope makes a CPE (customer premise equipment) modem device, but TQ Delta sued the company over a semiconductor chip made by Broadcom.
He further argued that TQ Delta wanted $89 million in damages related to savings that AT&T had — not savings of CommScope.
Dacus further contended that in 2017, TQ Delta sent CommScope a demand letter, asking the defendant to pay the standard rates for the technology but gave discounts to other competitors.
“They can’t discriminate,” said Dacus. “Our largest competitor paid ten times less than what’s asked in this lawsuit.”
Dacus said, in 2020, CommScope sent a letter to the plaintiff trying to negotiate a business solution to resolve the issue.
Dacus noted that according to the defendant’s damages expert, the jury is supposed to assess damages on the seven patents-in-suit and not the entire family or portfolio of patents. When that formula is applied, the damages, according to CommScope’s expert, should equate to about $5.7 million.
“And that’s all for seven as a reasonable royalty,” said Dacus.
“Our biggest competitor paid $8.9 million for 100 patents, including these seven,” Dacus pointed out. “To me, that should be the absolute sealant of what we should pay.”
During final closing statements for the plaintiff, Davis contended that the competitor CommScope keeps referring to paid less to license the patents because that particular company used less.
“That’s how a royalty works,” said Davis. “It’s the rate times the number of units. We adjusted the total number of units sold over the life of the patents. As those patents expire, rates fall off. It’s an adjustment. It’s not a discount.”
Davis said CommScope, who has sold 36 million units, has been using the patented technology for years without paying.
“They’re the ones who are using our technology,” he said. “Our rates are fair to DSL modem makers.”
“These are the guys that have sold more than anybody,” said Dacus. “These are the guys that have had the competitive vantage, that have sold 90 percent of their products to AT&T. These patents are standard essential. These patents are valid.”
