Court Denies Sirius XM Radio’s Motion to Dismiss After Reversal and Remand

Last week, the District of Delaware issued an order denying Sirius XM Radio’s motion to dismiss a patent infringement suit addressing patented technology for “multicarrier modulation (MCM) for use in satellite radio broadcasting.” The court determined that the issues cannot be determined at this stage, citing a decision in the matter by the Federal Circuit.

Giving background, the order noted that “MCM is the method used to transmit data which splits components and sends them over separate carrier signals.” The court stated that in March 1998 Fraunhofer, the plaintiff, entered into an exclusive licensing agreement with WorldSpace International Network Inc. to license the MCM technology patents. Under the agreement the plaintiff obtained various patents relating to MCM technologies. 

Later, WorldSpace reportedly issued a sublicense to XM Case Satellite. However, according to the court, in 2008 XM merged with Sirius and WorldSpace filed for bankruptcy, after which a settlement was agreed upon under which it rejected the MCM license. The court added that Fraunhofer alleged that Sirius XM infringed four patents, “which are directed to apparatuses and methods used to receive and decode encoded satellite signals, identify ‘channel fading’ effects, and correct for those offsets using a channel decoder.” According to the court, Sirius XM filed a motion to dismiss, which was granted, the plaintiff then appealed to the Federal Circuit, where the decision was reversed and remanded.

The court stated that Sirius XM filed a motion to dismiss the plaintiff’s amended complaint based “on its reading of the recent Opinion by the Federal Circuit.” Specifically, according to the court, Sirius XM claimed that the Opinion “means that ‘Fraunhofer must demonstrate, as a threshold matter, that it properly terminated the License Agreement between Fraunhofer and WorldSpace … in order to contend that SXM’s sublicense terminated.” Sirius XM added that “this means that if Fraunhofer did not properly terminate the (agreement), there can be no termination of the sublicense. Fraunhofer fails to clear this threshold hurdle.” However, the district court disagreed with Sirius XM and denied its motion.

In particular, the court claimed that the Federal Circuit “clearly instructed that SXM’s ‘license defense cannot be resolved on a motion to dismiss’” and “rejected the argument that the amended complaint was futile, particularly given that certain documents could support plaintiff’s version of the case.” The court noted that it will not be looking at these issues because they cannot “be determined in this second motion to dismiss.” The court added that the remaining issues like termination and related evidence will likely be resolved at the summary judgment or trial stages.

The District of Delaware further denied Sirius XM’s request to file a sur-reply and denied the parties’ stipulation as moot.

Sirius XM Radio is represented by Potter Anderson & Corroon LLP and Kramer Levin Naftalis & Frankel LLP. Fraunhofer is represented by Farnan LLP and Irell & Manella LLP.