Yesterday Arris filed a declaratory judgment action in D. Del. against Rockstar based on Rockstar asserting alleged standard essential patents (SEPs) against cable operators who purchased Arris equipment (recall our Jan. 21, 2014 post about Rockstar lawsuits with cable operators).  Among other things, Arris seeks a declaration of the essentiality of Rockstar patents, what standard setting organization (SSO) obligations attach thereto as well as an unfair competition claim seeking to declare the patents unenforceable based on Rockstar’s patent enforcement activities against Arris’ customers.  Further, Arris is a spin-off of Nortel — from whom Rockstar purchased the patents out of bankruptcy — and Arris asserts that Nortel had granted Arris a license under the patents.

Unfair Competition Claim.  The unfair competition claim is based on Delaware state law and premised on issues recently raised not only with SEPs, but with patent assertion entities asserting large patent portfolios, stating as follows (enumeration and break-out formatting added):

49.  Defendants have engaged in unfair competition and interfered with ARRIS’s current and expected business relationships by, among other things,
[1] wrongfully accusing ARRIS’s customers of infringement,
[2] falsely representing that ARRIS’s customers are not licensed to the Asserted Patents,
[3] pressuring ARRIS’s customers to sign NDA agreements to hamper cooperation with ARRIS and to frustrate Defendants’ FRAND and DOCSIS royalty commitments,
[4] concealing the true owners of patents from the Nortel Patent Portfolio, and
[5] concealing the complete list of patents Defendants believe ARRIS’s customers are infringing.

Storage Wars.  Arris alleges that Rockstar “refused to identify for accused infringers … the full list of patents they are purportedly infringing” but “provided only what [Rockstar] deemed ‘exemplary’ patents” thus “le[aving] accused infringers with no way to meaningfully evaluate Rockstar’s infringement allegations … or to determine the actual value of the relevant patents within Rockstar’s portfolio.”  This seems similar to concerns that patent aggregating patent monetization entities may seek unfair royalties by leveraging the risk and uncertainty that some unidentified-but-valuable-patent might be lurking somewhere within their portfolio of thousands of patents (Rockstar is reported to have over 4,000 patents).

This brings to mind “Storage Wars”.  “Storage Wars” is a reality TV show in which abandoned contents within storage lockers are sold to purchasers who speculate on the contents’ value on the chance that there is more there than meets the eye.  Specifically, the locker door is opened so that prospective purchasers can see whatever is in plain sight from a limited view peering from outside the door.  They then purchase the contents without entering, touching or examining the contents to make a fully informed valuation–e.g., what’s under a blanket, what’s in boxes, what’s in something that appears to be a safe …  Whether or not this is a good analogy, hopefully you’ll appreciate a television show analogy for a case about cable operators.

NDAs.  Arris’ allegations include concerns that Rockstar required prospective licensees to enter non-disclosure agreements (NDAs) that “concealed the scope of Defendants’ assertions” and “has been orchestrated to subvert the FRAND and DOCSIS royalty free obligations.”  Recall from our Jan. 23, 2014 post that Ericsson’s use of NDAs in negotiating licenses for SEPs was one of the reasons cited by the Competition Commission of India to investigate Ericsson’s SEP licensing activity.

Misrepresenting Existing Licenses.  Arris’ allegation includes concern that Rockstar “falsely represent[ed] that ARRIS’s customers are not licensed to the Asserted Patents.”  Recall that a concern raised with Innovatio’s assertion of WiFi SEPs in demand letters to equipment end-users (e.g., coffee shops providing WiFi access) was that Innovatio did not tell the end-users that some WiFi equipment may be licensed based on rights granted to manufacturers or component suppliers of that equipment (see our Feb. 6, 2013 post). The Innovatio case concerned silence as to whether the patents were licensed, which allegations were dismissed, but this case alleges “false[] representations that ARRIS’s customers are not licensed.”