RIM to Pay Dolby Royalties to End Lawsuits Over Audio Patents

Research In Motion Ltd. (RIM), maker of the BlackBerry smartphone and Playbook tablet computer, agreed to pay patent royalties to Dolby Laboratories Inc. (DLB) to end a legal battle over technology to improve audio quality.

RIM will pay “standard terms,” San Francisco-based Dolby said in a statement today, settling patent-infringement lawsuits filed in June in the U.S. and Germany. While financial terms weren’t disclosed, Dolby told analysts on a conference call last month it was counting on $15 million in back royalties from RIM in the fiscal fourth quarter, as well as interest income.

Dolby, inventor of surround sound, said the patents cover ways to compress digital audio files using less storage while maintaining quality. The technology has been incorporated into an industry standard for audio coding, and Dolby said it sued when Waterloo, Ontario-based RIM refused to sign a licensing agreement even though it used the standard in the BlackBerry Storm, Tour, Pearl, Curve and Torch models, and the Playbook.

“We are pleased to welcome RIM into Dolby’s family of mobile-technology licensees,” Dolby General Counsel Andy Sherman said in the statement. “We believe in and will continue to protect the value of our intellectual property.”

Dolby and RIM filed to dismiss the case in federal court in San Francisco today.

Dolby reported $228 million in revenue in its fourth quarter ended in September 2010, with about 78 percent of the total coming from licensing revenue. Dolby shares dropped 53 percent this year prior to today.

Stereo Sound

RIM signed a license agreement with Via Licensing Corp., a company designated to handle Dolby patents, shortly after the lawsuits were filed, Dolby said. The agreement covers the implementation of the industry standard, the company said.

According to the lawsuit filed in federal court in San Francisco, Dolby invented technology known as “spectral band replication” and “parametric stereo” that “represented a quantum leap forward in compression efficiency, and which were perfected only after years of research and development.”

Apple Inc. (AAPL), HTC Corp. (2498), LG Electronics Inc. (066570) Nokia Oyj (NOK1V) and Samsung Electronics Co. are among smartphone makers that license the Dolby technology.

Via and RIM had been in talks since 2007, according to court filings by Dolby and RIM. Dolby had argued that by complying with the industry standard known as High-Efficiency Advanced Audio Coding, RIM was using the patented inventions and should compensate Dolby.

The case is Dolby International AB v. Research In Motion Ltd. (RIMM), 11cv2931, U.S. District Court for the Northern District of California (San Francisco).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net

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