Then the examiner points out prior art - a patent application by Ralston, (App #20040054679, Ralston, James, March 18, 2004, "Remotely invoked metaphonic database searching capability") The original Soundex algorithm dates from 1919, the Metaphone algorithm dates from 1990, and Ralston's improvement is on record. Philips' improvement of 2009 just wasn't enough of an advance over the old stuff.
He might have modified the claims to overcome those objections; this was a non-final rejection, and you're allowed another revision cycle with no additional fees. But, for whatever reason, he abandoned the application.
A rejected patent application puts the algorithm into the public domain. Philips has no rights in the algorithm now.
Not so. Metaphone 3 is not a derivative work. Ralston's patent merely uses (original 1990) metaphone as part of its design, and does nothing to improve it.
The patent was abandoned because the U.S. Patent office informed me that it is no longer patenting algorithms.