In one of the more clever spins in the art of the press release, RealD publicly declared on September 28:
“In another decisive legal victory for RealD Inc. (NYSE: RLD), the U.S. Patent Office’s Patent Trial and Appeal Board (PTAB) threw out the final two challenges to RealD patents.”
To those unfamiliar with the spat between RealD and MasterImage, it might sound as if the PTAB decided in favor of RealD in its case against MasterImage for allegedly infringing RealD’s patents. In fact, that’s not what occurred at all.
To better understand the facts, the bullets below review the complex proceedings surrounding this case:
- In March of 2014, RealD filed infringement claims against MasterImage in US Federal Court in regards to RealD’s light doubling patents.
- Later in 2014, MasterImage filed inter partes review (IPR) against the handful of RealD patents in polarized light doubling, based on prior art. It is these IPRs that RealD’s press release is about. IPR, at worst, can result in the complete invalidation of a patent. More typically, it results in the modification of claims in the patent. Modification of claims, and certainly invalidation, would be of benefit to MasterImage in its defense against RealD’s infringement lawsuit. However, the USPTO has already granted RealD its patents, so any decision on behalf of RealD resulting from IPR simply maintains the status quo. Such decisions have no bearing on whether or not MasterImage infringed.
- Following MasterImage’s IPRs against RealD, RealD turned to the US International Trade Commission (ITC) to block US importation of the MasterImage Horizon 3D light doubler. As with the original infringement lawsuit, this action is also under the purview of US Federal Court. In terms of sequencing, the ITC case takes precedence over the original infringement lawsuit, resulting in a hold on the original lawsuit while the ITC case is resolved. The ITC trial took place in Washington DC this month. The decision from the trial is not expected for some months. But for those seeking to learn the outcome of the infringement case, the ITC decision will be of interest.
One might think after reading RealD’s masterful press release that they were now informed of all the facts regarding the IPRs. But there is more to the story. In a decision issued on April 23, 2015, regarding Case IPR2015-00035 for RealD patent 7,857,455, the PTAB wrote:
“…we are persuaded that Petitioner has established a reasonable likelihood of prevailing with respect to claims 1–23 of the ’455 patent. Accordingly, we institute an inter partes review of the ’455 patent as to these claims on the grounds set forth below.”
In a separate decision issued on April 15, 2015, regarding Case IPR2015-00040 for RealD patent 8,220,934, the PTAB wrote:
“Upon consideration of the Petition and the Preliminary Response, we determine that MasterImage has shown a reasonable likelihood of prevailing in showing the unpatentability of claims 1, 6–10, and 18–20 of the ’934 patent. “
The quotes above are taken from PTAB documents posted on the USPTO web site. While these quotes illustrate that the PTAB accepted certain challenges against RealD patents, these cases have yet to go to trial. Until a decision results from trial, there is no outcome to discuss regarding the IPR actions.
There is more in RealD’s press release that deserves scrutiny. It claims to be winning “decisive legal victories.” But it’s not clear what victories it’s referring to. A Google search reveals a few headlines from earlier this year:
“MasterImage 3D Successfully Invalidates RealD’s Russian Utility Model Patent (April 2015).” (http://www.reuters.com/article/2015/04/14/masterimage-3d-idUSnBw136804a+100+BSW20150414)
“MasterImage 3D Successfully Invalidates RealD’s Chinese Utility Model Patent (May 2015).” (http://uk.reuters.com/article/2015/05/18/masterimage-3d-idUKnBw186782a+100+BSW20150518)
Understandably, the PTAB quotes and the patent invalidation headlines aren’t the sort of facts that one would expect a company to include in a press release. Which begs the question: why issue a press release at all?
It can be argued that RealD’s litigative strategy poses unnecessary risk to investors. There are alternative strategies to protecting intellectual property than allowing a judge to decide your market cap. It would seem that even the faithful are a little nervous. On 27 March 2014, when the infringement case was filed, RealD’s shares closed at $10.84. On the day of its press release, its shares closed at $9.27, down 14.5%. RealD could be accused of having a pompous strategy, but surely the king of pompous behavior, Donald Trump, could do better.
In full disclosure, MasterImage is a current, and RealD a past client of MKPE. However, the opinions expressed are solely those of its author.