Intel to pay US$2.18b after losing patent trial

Santa Clara, California

INTEL Corporation was told to pay VLSI Technology US$2.18 billion by a federal jury in Texas, after losing a patent-infringement trial over technology related to chip-making, one of the largest patent-damages award in US history. Intel pledged to appeal.

Intel infringed two patents owned by closely held VLSI, the jury in Waco, Texas, said on Tuesday. The jury found US$1.5 billion for infringement of one patent and US$675 million for infringement of the second.

The jury rejected Intel's denial of infringing either of the patents and its argument that one patent was invalid because it claimed to cover work done by Intel engineers.

The patents had been owned by Dutch chipmaker NXP Semiconductors, which would get a cut of any damage award, Intel lawyer William Lee of WilmerHale told jurors in closing arguments on Monday. VLSI, founded four years ago, has no products and its only potential revenue is this lawsuit, he said.

VLSI "took two patents off the shelf that hadn't been used for 10 years and said, 'We'd like US$2 billion,'" Mr Lee told the jury.

The "outrageous" demand by VLSI "would tax the true innovators". He had argued that VLSI was entitled to no more than US$2.2 million.

"Intel strongly disagrees with today's jury verdict", the company said in a statement.

"We intend to appeal and are confident that we will prevail."

Intel fell 2.6 per cent to US$61.24 in New York trading. The stock is up 23 per cent since the beginning of the year.

One of the patents was originally issued in 2012 to Freescale Semiconductor and the other in 2010 to SigmaTel. Freescale bought SigmaTel and was in turn bought by NXP in 2015. The two patents in this case were transferred to VLSI in 2019, data compiled by Bloomberg Law showed.

VLSI lawyer Morgan Chu of Irell & Manella said the patents cover inventions that increase the power and speed of processors, a key issue for competition.

Federal law does not require someone to know of a patent to be found to have infringed it, and Intel purposely did not look to see if it was using someone else's inventions, he said.

He accused the Santa Clara, California-based company of "wilful blindness". The jury said there was no willful infringement. A finding otherwise would have enabled District Court Judge Alan Albright to increase the award even further, to up to three times the amount set by the jury.

"We are very pleased that the jury recognised the value of the innovations as reflected in the patents and are extremely happy with the jury verdict," Michael Stolarski, chief executive of VLSI, said in an e-mailed statement.

Officials with NXP could not immediately be reached for comment. The damage request is not so high when the billions of chips sold by Intel are taken into account, Mr Chu said.

Intel paid MicroUnity Systems Engineering US$300 million 2005 and in 2011 paid Nvidia US$1.5 billion, even though a settlement in that case involved a cross license of technology, he said.

"Operating companies are going to be disturbed by not only the size of the award but also the damages theory," said Michael Tomasulo, a Winston Strawn lawyer who attended the trial.

"They more or less seemed to have bought the entire VLSI case."

The damage award is about half of Intel's fourth-quarter profit. The company has dominated the US$400 billion chip industry for most of the past 30 years, though it is struggling to maintain that position.

The verdict is smaller than the US$2.5 billion verdict won by Merck & Co over a hepatitis C treatment. It was later thrown out. Last year, Cisco Systems was told by a federal judge in Virginia to pay US$1.9 billion to a small cybersecurity company that accused it of copying a feature to steal away government contracts. Cisco has asked the judge for a new trial.

The case is among the few in-person patent trials in recent months, with many courts pressing pause amid the coronavirus pandemic. It was delayed a week because of the winter storm that wreaked havoc across much of Texas.

Intel had sought to postpone the case because of the pandemic, but was rejected by Judge Albright, a former patent litigator and magistrate who was sworn in as a federal judge in 2018, and has quickly turned his courtroom into one of the most popular for patent owners to file suit. BLOOMBERG