Alcatel-Lucent, the world’s largest provider of land-line phone networks, may lose rights to as much as $2 billion in patent royalties in a trial over whether it’s wrongly keeping TV and DVD technology to itself.

MPEG LA LLC, the licensing administrator for a pool of patents used by consumer-electronics makers, claims in a 2007 lawsuit that Alcatel-Lucent shouldn’t be allowed to shelter patents for high-definition television and DVDs in a special trust. The Paris-based company broke a promise to share the patents at reasonable royalty rates, MPEG LA said in the Delaware Chancery Court complaint.

“Preventing the patents from being swept into the MPEG LA portfolio was the one and only reason for the transfer of the patents to the trust,” Timothy Dudderar, a lawyer for MPEG LA, told Chancery Court Judge J. Travis Laster in Wilmington in a pretrial brief.

Alcatel-Lucent was formed in Alcatel SA’s 2006 purchase of Lucent Technologies Inc. for $11.6 billion. Alcatel joined MPEG LA in 2003. Lucent, which didn’t belong to MPEG LA, allegedly implemented a “secret plan” two days before the sale, setting up with Alcatel’s help the Multimedia Patent Trust for five patents, according to MPEG LA.

Lucent, not Alcatel, owned the patents held by the trust and Alcatel has never had the right to license or sublicense them, company lawyers said in court papers. A six-day trial is scheduled to begin on March 22.

‘Enforcing Rights’

“Alcatel and Lucent deny any and all allegations of wrongdoing,” Megan Ward Cascio, a lawyer for Alcatel-Lucent, wrote in an answer to the complaint. “Lucent has been enforcing its rights to the Lucent patents for years and well before the merger.”

Lucent knew that Alcatel’s membership in the patent pool would force it to share the technology with all 1,500 members, MPEG lawyers said in court filings. Instead, the Alcatel-Lucent trust has sued companies such as DirectTV and Dish Network Corp., the two largest U.S. satellite-TV providers, for allegedly using its video-compression technology.

In January, the trust claimed Walt Disney Co., News Corp.’s Fox units and NBC Universal Inc. infringed related patents.

“By Lucent’s own estimate, the amount of additional and unjustifiable royalties defendants were seeking from just three of the MPEG-2 Pool licensees amounted to between $240 million and $2.047 billion,” MPEG LA lawyer Richard Horwitz said in a court filing.

Alcatel-Lucent, a 99 percent beneficiary of the trust, has a commitment to the MPEG LA patent pool and should share the Lucent patents, the licensing administrator claims. MPEG LA wants the judge to revoke the Lucent patent transfers, make them part of the patent pool and award damages.

‘Patent Thicket’

The MPEG-2 program began in 1997 after the U.S. Justice Department’s antitrust division concluded it would head off potential anticompetitive behavior and help clear the “patent thicket” created by the need to negotiate multiple licenses for standardized technology, according to court papers.

MPEG LA, which has U.S. offices in Greenwood Village, Colorado, and Chevy Chase, Maryland, obtains sublicenses from patent owners and collects and distributes royalties for an administrative fee, according to MPEG LA’s Web site. About 760 patents from 25 owners are available through a worldwide portfolio license, according to court papers.

The case is MPEG LA LLC v. Alcatel Lucent, CA3317, Delaware Chancery Court (Wilmington).

To see the patents mentioned in the lawsuit, click: 4,958,226; 5,136,377; 5,227,878; 5,500,678; and 5,563,593.

source:bloomberg