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Victory: September 2018: Appellate Victory For Samsung Reversing $115 Million Judgment and Ending Case

September 2018

Quinn Emanuel recently achieved a complete victory for Samsung Electronics Co. in the New York Appellate Division, First Department, which reversed a $115 million judgment that had been entered against Samsung before we were retained for the appeal. In 2007, Samsung had entered into a series of contracts creating a patent pool for licensing patented digital television transmission technologies. While the pool had a ten-year term, the licensors expressly bargained for the right to leave the pool any time after five years, an option that made business sense given how rapidly television technology changes. Samsung exercised that early termination right in 2015, but MPEG LA, the pool administrator, refused to accept it and sued Samsung for breach of contract and more than $100 million in damages for failure to pay royalties from 2015 to 2017.

The case turned on the interplay of termination provisions in two related contracts, each of which gave Samsung “the right … to terminate with respect to itself all but not less than all” of the relevant contracts. One of the provisions, governing the agreement among the companies in the pool, expressly allowed unilateral voluntary termination after five years, subject to a sliding scale of financial penalties for doing so. The other provision allowed the pool members to fire the MPEG administrator collectively for various reasons, but had no early voluntary unilateral termination provision. The trial court accepted MPEG’s argument that the agreements unambiguously prohibited Samsung’s termination and entered a $115 million judgment against Samsung.

On appeal, the Appellate Division reversed, agreeing with Quinn Emanuel that the contracts unambiguously authorized Samsung to make a voluntary early exit from the pool in any of years 2012 to 2017. In a careful decision that tracked Quinn Emanuel’s arguments, the court held that the two termination provisions are not inconsistent but instead “simply apply to different situations,” and rejected MPEG’s interpretation because it provided no opportunity for a pre-2017 unilateral termination and thus rendered superfluous the early termination provision, and the financial penalties associated with it. The court therefore held Samsung’s 2015 early termination entirely proper and ordered that MPEG’s claims be dismissed in their entirety.

The decision is not only a significant win for Samsung in its long-running battle with MPEG LA, but also reaffirms the power of de novo review of contract interpretation by an appellate court. We aimed in this case for a full reversal, and not merely a remand to the trial court to consider extrinsic evidence about the parties’ expectations. In so doing, we made the contracts speak as simply as possible for themselves, and the result was a stunning reversal in Samsung’s favor.