15 May 2014

Earlier this year the world-famous audio specialists, bose, have filed a claim in federal court alleging that beats electronics (made famous by dr dre and recently sold to global giant, apple) have infringed several of their ‘noise-cancelling’ patents.

What are bose claiming for?

The claim, filed by bose at delaware district court, alleges that technology used in beats headphones infringes five separate patents owned by bose. All five of the patents relate to a technology used in bose headphones called active noise reduction, or anr. Bose claim that the technology used in beats headphones, which beats have named adaptive noise cancellation, or anc, infringes the existing anr patents owned by bose.

Bose are seeking ‘unspecified damages’ based on loss of sales, loss of reputation and various other factors. If the case does go to trial and is decided in bose’s favour, the damages are likely to run into tens, if not hundreds, of millions of dollars.

Have beats done anything wrong?

It’s difficult to say at the moment. The claim essentially comes down to whether beats noise cancelling technology (anc) infringes, by copying, elements of bose’s existing patents relating to anr. Bose is claiming infringement of five specific patents – though, interestingly, the current bose ‘noise-cancelling’ headphones “embody inventions protected by at least 36 u.S patents – 22 patents and 14 pending applications”.

It’s also worth considering that apple, when purchasing beats, would likely have had specialist patent lawyers look at the technology used in beats headphones. The fact that apple still proceeded with the acquisition of beats indicates that apple were either unaware of the patent ‘issue’ or that they examined the technology but didn’t see any real basis for an infringement claim by bose or any other patent-holder. Ultimately, it seems hard to imagine that apple would splash out $3.2 billion on acquiring a new company without conducting a thorough investigation into the intellectual property of the company!

How’s it likely to play out in court?

Unfortunately it’s really too early to speculate at the moment. There is a good chance that the issue may not even reach federal court if beats and bose can reach a settlement out of court. It’s also important to consider that most companies, before pressing ahead with legal action, will send a ‘cease and desist’ letter – to the company accused of infringing the intellectual property, effectively warning them to stop their infringement or face legal action. At the moment it has not been documented whether apple did, in fact, receive one of these letters but it’s likely they did, and, if they’ve willingly ignored it, it indicates that they’re probably not too concerned with the allegations made by bose.

If the case does reach federal court, it could be an interesting one. On their claim, bose have requested that the issue is tried by a jury (the option for a civil jury is still available in the u.S but resigned to the history books for the uk). These type of patent infringement cases can be incredibly technical and difficult for jury members to understand (other than for the few with phd’s in physics and engineering) so there’s always a risk that the jury may not fully understand the legal and technical issues, making it even more tricky to predict the outcome of the trial.

What does this mean for your ordinary business?

There are really two things to take away from this case:

  1. If you’re contemplating acquiring an existing business, it’s vital to ensure that you arrange for your lawyers to review all intellectual property in the new company, including any potential liabilities – this is something apple will undoubtedly have considered, prior to purchasing beats.
  2. If you’ve developed a new product or process that you’re thinking of using or patenting, it’s imperative that you have a patent attorney properly examine your product/process – they will be able to advise whether the idea is a) patentable and b) likely to infringe any existing patents.

The contents of this article are intended solely for information purposes only and should not be construed as legal advice or financial advice or opinion in any specific facts or circumstances.

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Ryan Lisk

Ryan has helped a vast number of businesses protect and control their intellectual property as well as drafting and advising on consumer and commercial contracts.

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