LG-Dolby Court Fight Appears to Be Over Disputed Royalty Audit Reports

It appears from the heavily redacted public version of Dolby’s memorandum of law in opposition to LG’s motion for a temporary restraining order and preliminary injunction (see 2201060058) that LG is seeking to enjoin Dolby from terminating its license to the AC-4 audio codec patents for NextGenTVs due to a dispute over royalty audit reports. LG can’t demonstrate “irreparable harm” from Dolby’s threatened license termination, the first prerequisite for a TRO or PI, because any potential harm is “self-inflicted,” said the Dolby memorandum, dated Jan. 31 and posted Tuesday in docket 1:22-cv-42 in U.S. District Court in Manhattan. Case law shows a “failure to comply with a royalty audit is a paradigmatic example of material breach” of a license agreement, said Dolby. Courts have said licensees “materially breached” their license agreements “(permitting termination by licensor) by refusing to provide additional records after the auditor discovered unpaid royalties based on initial samples of the records,” it said. On LG’s complaint that Dolby reneged on its commitments to ATSC to license its AC-4 patents on fair, reasonable and nondiscriminatory terms, said Dolby, a 5th Circuit 2021 opinion in HTC v. Ericsson said FRAND doesn't require giving identical licensing terms to all prospective licensees, giving patent holders some flexibility in coming to reasonable agreements with different potential licensees. Other Dolby filings, including a declaration from Massachusetts Institute of Technology economics professor Jerry Hausman in support of Dolby's memorandum, were redacted in their entirety. LG is scheduled to file its reply on Monday under seal.