Dolby v. Roku is a 2024 federal action in which Dolby Laboratories Licensing Corporation and Dolby International AB, which licence audio and video technology, sued the streaming company Roku for breach of two licence agreements, copyright and patent infringement, and misrepresentation. The court describes it as “a dispute between a licensor and its licensee”, and all of the claims stem from Roku’s alleged breach of software licence agreements and efforts to conceal it.[1] The case matters to licence managers because the decision on 18 July 2025 deals with how long a licensor has to act on a suspected breach, and with what a contractual audit right covers.
Dolby is an intellectual-property licensor rather than an enterprise software vendor, but the dispute has the shape of a software audit: a royalty-bearing licence, a reporting obligation, an audit clause and a disagreement about which products it reaches. Every fact below is an allegation taken from the court’s account of Dolby’s first amended complaint; the court accepted them as true only for the purpose of the motion.[1]
Background
Roku sells streaming devices and the Roku OS operating system that runs on them. Dolby generally does not sell products to consumers and licenses its technologies through a network of licensees, including technology companies like Roku, system-on-a-chip (SoC) makers and television manufacturers.[1]
Two agreements are at issue. The Interoperability License Agreement (ILA) of 12 May 2015 gave Roku limited rights to use Dolby technologies to test that Roku OS worked with products received from SoC makers and OEMs. The System License Agreement (SLA) of 8 September 2016 allowed Roku to design, make and sell its own products containing licensed Dolby technologies, required quarterly sales reports and royalty payments, applied only to devices sold to end users and not to middleware such as Roku OS, and gave Dolby a right to audit.[1]
The dispute
The alleged breach. Dolby alleges that from 2015 Roku included copies of Dolby technologies in Roku OS and in updates pushed directly to end users without Dolby’s authorisation, including an audio compression implementation in Roku OS 9.0 that Roku said it received from an unlicensed third-party source.[1]
The audit. According to the order, two Roku product managers told a Dolby employee on 6 March 2020 that Roku was not distributing Dolby technologies in Roku OS. Dolby exercised its audit right for 2016 to 2020 in about early 2021, and alleges that Roku resisted and tried to limit the scope by arguing that Roku OS fell outside any contractual audit requirement. On 18 February 2022 Roku supplied a partial list of third parties to whom it had provided Dolby technologies, which Dolby says showed the March 2020 statement was false. Audit discussions continued until June 2024 and Dolby sued on 1 August 2024.[1]
The audit clause. Section 4.7 of the SLA requires Roku to keep records about “all products that perform or embody Licensor intellectual property”, including but not limited to the information needed for its payment and reporting obligations, and lets Dolby inspect records about the manufacture or sale of those products to verify the quarterly reports and payments. Roku read the clause as limited to the defined term “Licensed Products”, that is its hardware devices, so that it did not reach Roku OS; Dolby read the lower-case “products” as broader.[1]
Decision or outcome
On 18 July 2025 the court granted Roku’s motion to dismiss in part and denied it otherwise. All dismissals were without prejudice and with leave to amend within 21 days.[1]
- Time bar. Dolby’s claim for unpaid royalties and its claim for breach of representation and warranty fell under California’s four-year limitation period and, measured from 2015, would have been out of time. The court applied the discovery rule: Roku OS is encrypted, so the breach was hard for Dolby to detect, Roku was far better placed to understand it, and Roku’s conduct suggested it believed Dolby would stay ignorant. It held that the claims accrued on 18 February 2022. It rejected Roku’s argument that Dolby should have learned of the breach from its upstream and downstream licensees or by auditing them, noting that a licensor “is not charged with regularly auditing its licensees” when it has no reason to suspect a breach. It left equitable estoppel for a fuller record and held that the continuous accrual doctrine did not apply.[1]
- Audit obligation. The court held that both parties’ readings of section 4.7 were reasonable. The lower-case “products” and the words “including but not limited to” suggested a scope wider than the royalty-bearing devices, but the court was reluctant to read in a very broad audit duty between sophisticated parties. Because resolving the ambiguity needs contract interpretation on a fuller record, the claim that Roku breached its audit obligations survived.[1]
- Dismissed claims. The court dismissed the warranty claim because the allegation that Roku’s “primary purpose” was to infringe was conclusory, the implied-covenant claim as duplicative of the express negative covenants not to exceed the licence scope, the claims for induced, contributory and willful patent infringement, and the negligent misrepresentation and fraudulent concealment claims under the economic loss rule.[1]
- Copyright. The court let Dolby add copyrights registered after the original complaint but before the amended one, so the copyright claims on those works were not dismissed.[1]
The order does not decide whether Roku breached the agreements. The later course of the case is not covered here.
Significance for software licensing and SAM practice
The order is a worked example of two recurring questions in licence audits. The first is what an audit clause reaches: the court found a defined term versus a lower-case word enough to make the scope genuinely ambiguous, which is the kind of drafting point licensees and licensors both meet when a vendor asks about products outside the royalty-bearing estate. The second is timing: the court held that a licensor’s right to audit does not make it responsible for finding every breach, and the limitation period ran from when the licensee’s own disclosures revealed the problem.[1]
Because the order is a ruling on a motion to dismiss, it accepts the licensor’s facts as true and is not a finding that any breach occurred.
Lessons learned
- Define the audit scope in the clause. The dispute turned on whether “products” meant only “Licensed Products”, so state which products and records are covered and for which period.[1]
- Do not assume an old breach is time-barred. The court applied the discovery rule where the software was encrypted and the licensee controlled the information, so a licensor’s claim can start later than the date of the conduct.[1]
- Answer informal questions accurately. The alleged statement of March 2020, later contradicted by a list supplied in the audit, became the basis for misrepresentation and estoppel arguments.[1]
- Contesting scope can be a claim of its own. Roku’s position that its operating system was outside the audit was pleaded as a separate breach of the audit obligation, and it survived dismissal.[1]