$29 Million Patent Demand for RealPlayer

MANHATTAN (CN) - RealNetworks, whose RealPlayer app has been downloaded nearly 300 million times, owes a patent holder $29 million in license fees, VoiceAge Corp. claims in Federal Court.

VoiceAge claims RealNetworks licensed patents it needs to operate some of its products under the Adaptive Multi-Rate Wideband (AMR-WB) standard, but has failed to pay any royalties under the agreement.

AMR-WB, developed by VoiceAge and Nokia, is a patented speech coding standard that provides better speech quality than narrowband speech coders, VoiceAge say in the complaint.

Wideband speech coding is used in 3G mobile communication systems, audio and video teleconferencing and various Internet applications.

"Significantly, the AMR-WB patents licensed by VoiceAge enable the data compression of digital audio signals containing speech," the complaint states. "Such data compression is crucial to licensees like RealNetworks in order to minimize the bandwidth (or storage capacity) needed to transmit or play a media file on their products.

"Of particular relevance here, the license agreement allowed RealNetworks' hugely popular RealPlayer product, which is an application widely downloaded by users to play audio and video files on their personal computers, to operate under the AMR-WB standard. Although RealNetworks obtained the benefits of utilizing VoiceAge's AMR-WB patents in its RealPlayer product - distributing approximately 291 million downloads of RealPlayer containing the AMR-WB patents licensed from VoiceAge to its customers in the period from January 2010 through April 7, 2011 - RealNetworks has completely reneged on its agreement to pay VoiceAge for the use of those licensed patents. Indeed, RealNetworks has yet to make a single royalty payment to VoiceAge for its use of the licensed AMR-WB patents in the nearly 300 million RealPlayers downloaded by RealNetworks' customers in accordance with the express terms of the license agreement." (Parentheses in complaint).

RealNetworks, of Seattle, makes and distributes software applications that provide access to digital media on various devices. According to the complaint, "RealNetworks is a sophisticated player in the intellectual property arena, having entered into dozens of patent and other licensing agreements covering its products, including RealPlayer, with various third parties like VoiceAge."

VoiceAge claims that in early 2010, RealNetworks agreed to renew its license agreement for the AMR-WB patents used in RealPlayer, after VoiceAge discovered that a previous agreement covering the patents had expired in 2006.

Calling the lapse of the agreement an "oversight" on its part, RealNetworks spent 6 months negotiating the new contract, which it signed in December 2010, VoiceAge says.

It claims that RealNetworks agreed to pay 10 cents per download of its products incorporating the AMR-WB patents, including RealPlayer, for downloads completed before and after the effective date of the agreement.

VoiceAge claims RealNetworks owes it more than $29 million on RealPlayer downloads, but hasn't paid dime one.

"In an effort to justify this refusal to pay the royalties owed to VoiceAge, RealNetworks did not assert that the plain language of the license agreement does not require the payment of royalties to VoiceAge for use of the AMR-WB patents in its RealPlayer product," the complaint states. "Instead, RealNetworks took the position that RealNetworks 'never intended' that it 'would pay ten cents per download, which could amount to tens of millions of dollars per year, for the inclusion of one seldom-used codec in a product that Real broadly distributes for free. Such an arrangement would make no economic sense.' Accordingly, RealNetworks claimed the license agreement was 'subject to reformation on grounds of mistake.'"

But VoiceAge says RealNetworks made no mistake, and that it owes royalties on RealPlayer downloads whether it offers downloads for free or not.

VoiceAge seeks damages for breach of contract.

It is represented by Andrew Gordon with Paul, Weiss, Rifkind, Wharton & Garrison.

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