During the pandemic, the demand for smart TVs dwindled as the supply chain for critical TV components became unreliable and consumers began tightening up on frivolous spending. Amid this smart TV demand slump, one of the world's top TV chipmakers, Taiwan-based Realtek, was hit with multiple meritless lawsuits by an alleged patent troll, Future Link Systems. These actions, Realtek said, drained its resources, made Realtek appear unreliable as a TV-chip supplier, and created "the harmful illusion of supply chain uncertainties in an already constrained industry."
Determined to defend its reputation and maintain its dominant place in the market, Realtek filed a lawsuit this week in a US district court in California. In it, the TV chipmaker alleged that Future Link launched "an unprecedented and unseemly conspiracy" with the world's leading TV-chip supplier, Taiwan-based MediaTek, and was allegedly paid a "bounty" to file frivolous patent infringement claims intended to drive Realtek out of the TV-chip market.
The scheme allegedly worked like this: Future Link "intentionally and knowingly" asked a US district court in Texas and the US International Trade Commission "for injunctions prohibiting importation of Realtek TV Chips and devices containing the same into the United States," Realtek alleged. This allowed MediaTek to reap the benefits of diminished competition in that market, Realtek claimed.
Today, Reuters reported that MediaTek has officially responded to Realtek's allegations, vowing to defend itself against the lawsuit and claiming that MediaTek will supply evidence to dispute Realtek's claims.
Realtek's lawsuit seeks a jury trial to fight back against MediaTek and Future Link, as well as IPValue Management, which the complaint said owns and operates Future Link. The TV chipmaker alleged that defendants violated unfair competition laws in California, as well as federal laws. Any damages won from the lawsuit will be donated to charity, Realtek said. Realtek's complaint likens MediaTek to "robber barons of the Industrial Age," allegedly seeking to destroy competition and secure a monopoly in the TV-chip market.
"With this action, Realtek seeks to stop a modern robber baron and its hired henchmen, protect itself from ongoing injury, and guard against the destruction of competition in the critical semiconductor industry by holding defendants accountable for their conspiracy," the complaint said.
MediaTek, Realtek, Future Link, and IPValue did not immediately respond to Ars' request for comment.
Uncovering the alleged conspiracy
Realtek claims that "MediaTek conspired with Future Link, paying it a secret 'bounty' to file meritless patent claims to harass Realtek, manipulating the court system to increase Realtek’s costs and divert Realtek’s attention away from product development and innovation." This, the complaint said, resulted in a "net loss to society and everyday consumers," who missed out on potential cost savings while TV brands viewed the TV-chip supply chain as less stable and MediaTek allegedly monopolized the market.
The alleged conspiracy first came to light in April 2021 when Future Link sued Realtek "in the midst of the global semiconductor shortage triggered by the pandemic," Realtek's complaint said. That lawsuit sought to "take Realtek products off the market," including the "vast majority of Realtek’s products that include chips essential for providing smart TV functionality."
After Future Link's case "quickly unraveled," Future Link continued fighting Realtek, amending the complaint and then launching two additional actions against Realtek. The purpose of these complaints was not to enforce valid patent infringement claims, Realtek contends, but to force Realtek to "incur substantial legal costs," while MediaTek allegedly began casting doubt on Realtek's reliability as a chips supplier to shared customers.
"MediaTek coerced at least one TV Chip customer not to incorporate Realtek TV Chips into its products due to Realtek’s involvement in patent litigation," Realtek's complaint said.
It was during these lawsuits' discovery processes that Realtek began connecting the dots, realizing that IPValue announced in 2019 that MediaTek had "entered into a patent license agreement" with Future Link. Upon further probing, in April 2022, Realtek said "there was a shocking revelation regarding that seemingly innocuous agreement."
"Discovery revealed that before the litigation against Realtek began, the license agreement among MediaTek, IPValue, and Future Link included a secret litigation 'bounty' provision previously hidden from the public and Realtek," Realtek's complaint said, alleging that specific details of this "scheme" remain "hidden" today because of trade secret claims.
An administrative law judge at the International Trade Commission described this provision in 2022 as "alarming," Realtek's complaint said. That judge wrote, "[I]t is difficult to imagine how it could possibly be lawful or enforceable." As a result, Realtek pushed to declassify other confidential business documents between MediaTek and Future Link, arguing that an "improper contract" "cannot constitute trade secret business information.”
In October 2022, the district court suggested that the improper contract could "warrant sanctions," and as the alleged conspiracy began to be revealed, Future Link suddenly resolved pending patent infringement litigation against Realtek and other TV-chip competitors, like Amlogic. Realtek alleged this sudden withdrawal was Future Link's attempt "to avoid further disclosure of the illegal conspiracy."
MediaTek plans to defend itself against these allegations, providing a statement to the Taiwan stock exchange that it will submit evidence disputing Realtek's claims, Reuters reported. Realtek said in its complaint that it "remains undeterred" in bringing this "improper conduct to light."
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