News

Operators, Vendors Accuse Patent Firm of Modem 'Sham'

5/30/2008 8:00 PM Eastern

The five largest cable operators and six DOCSIS equipment manufacturers have launched a new legal counterattack against a so-called “patent troll” trying to wrest millions of dollars in licensing fees from the industry.

Comcast, Time Warner Cable, Cox Communications, Charter Communications and Cablevision Systems — and, separately, cable-modem vendors — asserted in federal court documents that Rembrandt IP Management set up a shell company to resell another vendor's cable modems with the intent of “hijacking” the DOCSIS specification.

According to the cable companies, Rembrandt is peddling a cherry-red DOCSIS 2.0 cable modem under the brand name “Remstream” simply to bolster its claims that operators are violating eight patents it acquired from a former AT&T subsidiary.

PROFIT MOTIVE

“Rembrandt has endeavored to become a supposed market participant or direct competitor of the MSOs and/or DOCSIS-compliant equipment manufacturers for the sole purpose of seeking injunctive relief and/or lost profits in its infringement suits,” Comcast said in a filing dated May 7.

In court filings, Rembrandt denied any wrongdoing.

Based in Bala Cynwyd, Pa., the company acquires intellectual property and then files lawsuits or seeks licensing fees based on those holdings. Such firms are disparagingly called “patent trolls.” Rembrandt, on its Web site, said it is justly defending the rights of individual inventors and patent holders.

In December 2004, Rembrandt acquired a patent used in the ATSC digital-television transmission specification and eight others allegedly pertaining to DOCSIS for a reported $1 million from communications-equipment maker Paradyne. Paradyne, once owned by AT&T, is now part of Zhone Technologies.

Over the course of the last two years, Rembrandt sued the cable operators for allegedly infringing the DOCSIS-related patents, as well as the one used in the ATSC spec (see “Suits Target Digital TV, Net,” Feb. 18, 2008, page 3).

Rembrandt is also suing ABC, CBS, NBC Universal, Fox and Sharp Electronics over the ATSC patent.

Rembrandt has sought to collect 0.5% of all revenue generated from TV and Internet services that it claims infringe the Paradyne patents.

For cable's broadband services, the fees would run into the tens of millions of dollars annually.

Last November, Cisco Systems, Motorola, Arris Group, Thomson, Ambit Microsystems and Netgear — seeking to protect their cable operator customers — asked a federal court to affirm that their cable-modem products don't infringe on the patents in question, asserting that those patents are invalid.

The Rembrandt lawsuits against cable companies and broadcasters, originally filed in Delaware, New York and Texas courts, have been consolidated in U.S. District Court for Delaware.

In the last two months, cable-industry lawyers in court filings have described Rembrandt's plan to sell DOCSIS modems through Remstream in a bad-faith effort to lay the groundwork for claiming monetary damages or “coerce” operators and manufacturers into paying patent royalties.

The six DOCSIS equipment vendors filed an amended complaint on April 11, asserting that Rembrandt's “sham” attempts to portray itself as a cable-modem vendor violated antitrust regulations.

“Rembrandt is, by its own admission, a nonpracticing entity … that does not make or sell anything,” Motorola, Cisco and the other vendors said.

DOCSIS LICENSE

According to Cablevision's May 2 filing with the Delaware court, Rembrandt's bid to sell cable modems is designed to secure rights under the CableLabs DOCSIS license agreement “while attempting to avoid its corresponding obligation to grant a royalty-free license under its own patents.”

Only companies that have participated in the development of DOCSIS — which include neither Rembrandt nor Paradyne — are eligible to receive the royalty-free license to the DOCSIS patent pool.

By trying to appear as if it were a real player in the cable-modem market, the DOCSIS equipment vendors argued, Rembrandt is trying to “coerce an industry into yielding to its demands, thereby attaining the power to exclude competition through unlawful and unfair business practices.”

The name of the cable-modem manufacturer that has a licensing deal with Remstream is redacted from most of the publicly available court documents.

However, one of the operators' filings refers to Taiwanese manufacturer TurboComm Tech as licensing DOCSIS-related products to Remstream. TurboComm did not respond to a request for comment.

CableLabs certified Remstream's REM-8100 cable modem as part of Certification Wave 52 in mid-2007, CableLabs documents show.

Remstream now is supplying the REM-8100 to a small Internet service provider in Tacoma, Wash., Multichannel News has confirmed.

HarborNet, which provides broadband service over the cable network operated by Tacoma Power's Click Network, received a shipment of Remstream modems in early May, according to a HarborNet customer service representative.

The representative deferred additional questions to HarborNet's general manager, who did not return phone calls.

Asked to comment on the allegations by cable operators and DOCSIS equipment vendors, Rembrandt executive vice president Barry Ungar referred to the firm's court responses.

In a May 5 filing, Rembrandt said the cable companies have not suggested that Remstream does not intend to compete as a cable equipment vendor. And, citing what it said are legal precedents, the firm said “Remstream's motive is irrelevant” if a patent-infringement suit is not “objectively baseless.”

Rembrandt also said it has no legal obligation to provide a royalty-free license to the DOCSIS patent pool: “To the contrary, patent pools are an object of antitrust suspicion,” it said.

Responding to the manufacturers' antitrust charge, Rembrandt argued that its agreement to distribute DOCSIS equipment would potentially be unlawful only if it caused harm to competition.

“When neither party to the type of distribution agreement at issue here has actual market power, there can be no implication to harm to competition,” Rembrandt said.

Remstream is listed as a member of the Consumer Electronics Association with an address in Beverly Hills, Calif.

Mark Presser, who identified himself as Remstream's director of operations, responded via e-mail to a request for more information. He declined to provide information related to the ongoing litigation or Remstream's customers.

Presser did say that the REM-8100 “is the proprietary product of Remstream.” And, he added, Remstream “is the only cable modem provider that is licensed to certain core patented technology owned by Rembrandt.”

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