Philips/CK is alleging that its patents have been infringed by LED Effects, now part of Lighting Science Group Corporation (LSG). This could be an interesting contest: CK was founded and started filing patents in the LED lighting space in 1997. However, LED Effects has been designing, developing and selling custom-designed, pulse-with-modulation (PWM) controlled, color-changing LED fixtures and components since 1994.

On February 19, 2008, Philips Solid-State Lighting Solutions (the former Color Kinetics) filed a civil lawsuit in the US District Court for the District of Massachusetts against LSG, LED Holdings and LED Effects.

The assets of LED Effects, an established LED lighting manufacturer, were acquired by LED Holdings last year, and LED Holdings subsequently merged with LSG (see Related Stories).

The Philips SSLS lawsuit alleges that the defendants have infringed five related patents. The complaint does not name any product that is alleged to infringe and provides no specific facts in support of the claims of infringement.

The lawsuit seeks injunctive relief and unspecified compensatory and treble damages and attorneys' fees for the alleged patent infringement. The subject patents are owned in the name of Color Kinetics.

In response, on March 7, 2008, LSG and LED Effects filed a complaint in Sacramento, California Superior Court against Koninklijke Philips Electronics N.V., Philips Electronics North America Corporation and Philips SSLS (aka Color Kinetics).

The complaint alleges damages, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, intentional interference with economic relationship, negligent interference with economic relationship, violation of Business & Professions Code 17200, and misappropriation of trade secrets against Philips. The complaint requests injunctive and monetary relief.

What's going on?

This is more than a straightforward patent infringement dispute, and there is history between the two companies. Govi Rao, now CEO and chairman of LSG, was the former general manager of the North American Solid State Lighting Luminaries business of Philips. Rao moved from Philips to LED Effects around the time when Philips bought CK.

The above-mentioned Philips SSL Luminaires business did not have the capability to develop or make its own products ¨C this was one of the attractions to Philips of purchasing CK. Instead, Philips teamed with smaller, specialist LED companies such as LED Effects in order to win projects such as the Saks Fifth Avenue snowflakes display and the Times Square New Year's Eve ball.

In the words of LSG, "a Philips affiliate previously contracted with LED Effects to develop and manufacture products in accordance with the Philips affiliate's specifications and using LED Effects' proprietary technology. The Philips affiliate then used such products to compete successfully against CK, before CK was subsequently acquired by Philips."

LSG also says that, prior to Phillips' acquisition of CK, a Philips affiliate conducted extensive due diligence relating to the intellectual property of LED Effects. The Philips affiliate subsequently (i) proposed and consummated a joint development agreement with LED Effects and (ii) proposed a minority investment in LED Effects.