HDMI ‘Wrongfully’ Demanding $905,000 in Back Royalties, Says ADB Complaint
HDMI Licensing is “wrongfully” demanding more than $905,000 in back royalties and interest from Advanced Digital Broadcast (ADB), a Swiss-based supplier of HD set-top boxes, residential gateway devices and other products to pay-TV operators throughout the world, ADB alleged in a breach of contract complaint filed Tuesday in U.S. District Court in San Jose.
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ADB seeks a declaratory ruling that it doesn’t owe the money, the complaint said. HDMI Licensing threatened to cancel ADB’s license agreement at the close of business Tuesday and alert customs authorities globally to seize ADB shipments as “unauthorized” goods, the complaint said. The complaint doesn’t seek a preliminary injunction, only a “declaration” that HDMI Licensing “is precluded” from notifying customs that ADB goods “are unauthorized and subject to seizure because they are not.”
The complaint alleged breach of contract because HDMI Licensing lacks the grounds, absent a “material breach” by ADB, to terminate the license agreement. If terminated, “ADB will suffer imminent irreparable harm as its products will be subject wrongfully to seizure for trademark infringement by U.S. law enforcement authorities located at the U.S. border, and ADB will be subject wrongfully to a possible lawsuit for trademark and/or patent infringement” by HDMI Licensing, the complaint said. ADB would suffer additional harm "as it will no longer be able to represent to its customers that it supplies licensed products and products purchased by ADB’s business to business customers will be subject to seizure by law enforcement authorities,” it said. HDMI Licensing spokeswoman Laurie Iwami emailed us Wednesday to decline comment on the complaint "as this is a legal matter."
Under its November 2005 HDMI license agreement, ADB dutifully paid the 4 cents per unit royalty it owed for every licensed “end-user cable, component, connector, repeater, source or sink” it shipped between January 2010 and December 2012, the complaint said. An independent HDMI Licensing auditor found in late 2014 -- incorrectly, ADB alleged -- that ADB had failed to “reasonably incorporate” the HDMI trademarks into the product documentation materials that accompanied those shipments, the complaint said. Under the terms of the license, the complaint said, that failure gives HDMI Licensing the authority to charge an additional 10 cents per unit royalty, and it’s that differential royalty that ADB says it doesn’t owe.
The complaint and a copy of the HDMI licensing agreement that accompanied it were vague on what does or doesn’t constitute a reasonable incorporation of the HDMI trademark on documentation materials. The ADB complaint said HDMI Licensing has had no issues with how ADB has incorporated the HDMI trademarks on the products themselves or in promotional materials. Since January, ADB and HDMI Licensing “engaged in further discussions” but were “unable to resolve the dispute,” the complaint said.
As a result of the discussions, “and solely in an effort to resolve the dispute," ADB "changed the way it reasonably incorporates the HDMI alleged trademark into its related materials,” the complaint said, without saying what those changes were. “Today, ADB licensed products implement any and all changes in marking” that HDMI Licensing has suggested, and yet the licensor still won't relent, it said. “ADB also agreed -- solely to resolve the dispute and avoid these proceedings, and not as an admission of liability -- to pay a portion of the demand,” it said, without saying how much of the disputed $905,000 it has offered to pay. ADB representatives didn’t comment.