Samsung Electronics Co., Ltd. v MPEG LA, L.L.C.
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Attorneys and Parties
Brief Summary
This contract dispute arose in the patent licensing and royalty-distribution industry and concerned whether a 2024 amendment to an agreement among licensors (AAL) validly changed how post-termination royalties would be allocated among licensors.
The lower court granted MPEG LA leave to renew its summary judgment motion and, on renewal, dismissed Samsung's breach of contract claim to the extent it sought royalties collected after the 2024 amendment.
The Appellate Division overturned the renewed grant of summary judgment dismissing that portion of Samsung's breach of contract claim, but otherwise affirmed, including the grant of leave to renew.
The court held that section 6.1(1) of the agreement among licensors (AAL) [contract provision requiring two separate 80% supermajority approvals for amendments affecting revenue allocations] governed because the amendment changed revenue allocations. Although the amendment may have satisfied the vote of 80% of current licensors under section 6.1(1)(i), it failed section 6.1(1)(ii) because only entities receiving 58.6% of royalty distributions in the preceding 12 months voted yes. The term "Licensors" in section 6.1(1)(ii) included terminated licensors such as Samsung if they had received royalty distributions during the relevant period.
Background
Samsung and MPEG LA were parties to an agreement among licensors governing royalty allocations. A 2024 amendment introduced a going-forward provision that would reduce by 50% the apportioned share of revenues to terminated licensors and reallocate those shares to remaining licensors. Samsung challenged the collection and allocation of royalties after that amendment, asserting breach of contract. The key dispute was whether the amendment received the approvals required by section 6.1(1) of the AAL.
Lower Court Decision
Supreme Court, New York County, granted MPEG LA leave to renew its prior summary judgment motion. Upon renewal, it granted summary judgment to MPEG LA dismissing Samsung's breach of contract claim insofar as it concerned royalties collected after the 2024 amendment.
Appellate Division Reversal
The Appellate Division held that leave to renew was properly granted, but that the lower court should have adhered to its prior determination and denied summary judgment. Because the 2024 amendment altered revenue allocations, it triggered both supermajority voting requirements in section 6.1(1). The record showed that only licensors receiving 58.6% of royalty distributions during the prior 12 months approved the amendment, so section 6.1(1)(ii) was not satisfied. The court rejected MPEG LA's argument that "Licensors" in section 6.1(1)(ii) excluded terminated licensors, emphasizing that section 6.1(1)(i) uses the narrower phrase "current Licensors," so the two terms must mean different things. It also rejected the argument that terminated licensors were no longer parties under the AAL, concluding that Samsung remained a signatory and therefore a "Party" and a "Licensor" under the agreement's plain terms.
Legal Significance
The decision reinforces New York contract-interpretation principles requiring courts to give different contractual terms different meanings and to avoid constructions that render words superfluous. It also confirms that where a contract ties voting rights to royalty distributions during a specified prior period, terminated licensors may still count toward a voting threshold if the agreement's language includes them. The temporal 12-month lookback prevented any perpetual veto concern.
An amendment that changes royalty allocations must satisfy every voting threshold stated in the contract. If a provision requires approval by both current licensors and by licensors receiving 80% of recent royalty distributions, failure to meet either requirement invalidates the amendment.