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Federal Circuit Tunes In to Patent Infringement Suit Involving Sirius XM

LOS ANGELES, CA - OCTOBER 09:  SiriusXM hosts Julia Cunningham and Jess Cagle interview Jay Leno at The SiriusXM Hollywood Studios on October 9, 2019 in Los Angeles, California.  (Photo by Vivien Killilea/Getty Images for SiriusXM)
By Laura Temme, Esq. on October 23, 2019 7:25 AM

A German tech developer's patent infringement suit against Sirius XM Radio was revived in the Federal Circuit this month. Fraunhofer-Gesellschaft claims Sirius XM's reliance on a possibly-defunct licensing agreement means the satellite radio provider is infringing on Fraunhofer's patents.

The decision vacates a 2018 ruling in Delaware district court, where Sirius XM's motion to dismiss was granted based on a finding that it had a license to use Fraunhofer's technology. Decisions in the Federal Circuit are notoriously complicated, but this one really comes down to timing.

Background Noise

Fraunhofer, a German state-funded non-profit research organization, created and patented several "multi-carrier modulation" technologies in the late 1990s. Multi-carrier modulation transmits data streams over multiple carriers to increase the signal quality of satellite radio channels. So, naturally, it was an eye-catching piece of tech for Sirius XM, which was developing its digital satellite radio services around the same time. 

Fraunhofer entered into an exclusive licensing agreement with WorldSpace International Network Inc. in 1998, which gave WorldSpace the right to sub-license the multi-carrier modulation tech. Soon after, Sirius XM obtained an "irrevocable" sub-license from WorldSpace.

WorldSpace filed for bankruptcy in 2008, leaving Sirius XM in a bit of a lurch.

Right Argument, Wrong Time

During WorldSpace's Chapter 7 proceedings, WorldSpace rejected the Master Agreement that had governed its sub-license with Sirius XM. However, a recent Supreme Court decision held that when the licensor of a trademark files for bankruptcy, rejection of the agreement does not terminate a licensee's rights. The District Court found the same logic applied to Fraunhofer's patents, meaning Fraunhofer would have needed to terminate the Master Agreement to stop Sirius XM from using its technology.

However, the Federal Circuit held that Sirius's license defense could not be resolved on a motion to dismiss. Although the court held that although Fraunhofer had three plausible arguments that it had a right to terminate the Master Agreement, it was unclear if it had actually done so.

The case has been remanded for further proceedings.

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