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MPEG LA Sues Apex for Alleged Contract Breach

29 Jan, 2004 By: Holly J. Wagner

MPEG LA has sued DVD player manufacturer Apex Digital Inc., alleging Apex has breached its contractual obligations under the MPEG-2 Patent Portfolio License by undercounting the number of players sold and, as a result, the amount of license fees it owes MPEG LA.

The lawsuit, filed in U.S. District Court in Colorado, alleges that Apex has breached its contract by failing to fully report its use of MPEG-2 patents; failing to pay the royalty payments due for the use of those patents; and failing to provide an auditor with all of the documents the contract requires for a complete audit to independently determine compliance. The suit claims Apex's reports of product sales to MPEG LA are not consistent with public reports of Apex Digital's sales of those products.

An Apex Digital representative did not immediately return calls seeking a comment.

MPEG LA has sued Apex for essentially the same complaints at least once before. In 2002 the standards group sued Apex alleging it had underreported sales and underpaid royalties. Apex DVD players are among the leading sellers in the low-end player space.

Apex also created a stir in August 2001 when a company spokesman announced the company had a 22 percent share of the domestic player market but had not, at that time been reporting its sales figures to the Consumer Electronics Association, which tracks entertainment hardware sales in the United States.

“We are disappointed that this lawsuit has become necessary as a result of Apex Digital's continued refusal to meet its contractual obligations, but Apex Digital must be held accountable not only to the marketplace, but also to the vast majority of its competitors and others throughout the world who are meeting theirs,” MPEG LA CEO Baryn S. Futa said of the instant case.

The lawsuit seeks monetary damages, including interest, an accounting of all Apex products on which royalties are payable, an audit of Apex's books and records, and a court order prohibiting Apex from using MPEG-2 patents in its products until the company pays all royalties it allegedly owes to MPEG LA.

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