Patent laws

This article is written by Ansruta Debnath, a student from National Law University Odisha. It is about the patent lawsuit Intel lost, making it liable to pay damages of $2.18 billion.

Introduction 

Intel Corporation is one of the most dominant companies in the market today. In this digital age, almost everyone has heard of Intel. If you are using a personal computer right now, Intel has probably supplied its microprocessor. This mega corporation has now unfortunately gotten wrapped up in strings of litigations with regards to multiple alleged patent violations. The suing party involved is VLSI Technology, Inc. Patents are a type of exclusive right that is given to an inventor on their invention This article is a brief overview of one portion of the legal battle where Intel lost spectacularly and was made liable to pay damages upwards of $2 billion. Consequently, a discussion of the patent laws involved has been done.

Patents: acquired exclusivity

Indian laws describe patents as an exclusive right accorded to an author or inventor over their invention. The right is with regards to extracting profits and benefits from their invention exclusively. According to Section 2(j) of the Indian Patents Act, 1970, invention has been defined as a new product or process which involves an inventive step and has application in the industrial sphere. The objective that this Act aims to fulfill is to encourage inventors to contribute substantially in the scientific field- the Act provides various incentives for this purpose.

It is important to note that not all inventions are patentable. Moreover, inventions can be protected by many other forms of intellectual property other than just patents.

Patents are granted for a duration of 20 years from the date of grant of order by the Controller. However, patents can be renewed.

In general, conditions of novelty, industrial application and the need of inventive steps have to be fulfilled to qualify for the protection granted to patents.

A brief background

VLSI Technology, Inc. was a firm based in the United States that designed and manufactured customized and semi-custom integrated circuits (ICs). The company’s headquarters were located in San Jose, California. VLSI Technology, together with LSI Logic, established the cutting edge technology of the application-specific integrated circuit (ASIC) market, accelerating the push of powerful embedded systems into cheap goods.

VLSI was bought by Philips Electronics in June 1999 for around $1 billion and is now a component of the Philips spin-off NXP Semiconductors.

Intel Corporation is an American multinational Tech Giant headquartered in Santa Clara, California. It is the world’s largest semiconductor chip manufacturer in terms of sales. It is also credited with the creation of the x86 series of microprocessors, which are currently being used in the majority of personal computers. In 2020, Intel brought in revenues close to $77.9 billion. 

However, Intel’s luck has been going in a downward spiral for the last few years. And the reason is VLSI Technology, Inc. VLSI Technology has slapped Intel with patent lawsuits in eight different American states, spanning California, Delaware and Texas. They are suing for estimated total damages of $7.1 billion. Intel has said that in case they lost all the cases, their total costs could go up to $11 billion.  

In March 2021, Intel lost its first jury trial in the U.S. District Court in the Western Division of Texas situated in Waco. In August of the same year, Intel’s request to a Waco District Judge to overturn the order was denied.

In April, however, Intel won a $3 billion patent trial in front of another Waco jury with regards to two other patents.

Before the trials started, Intel along with Apple Inc. had filed antitrust cases against Fortress Investment Group LLC, which is the present parent company of VLSI Technology.

Facts of the case

Plaintiff VLSI is a Delaware limited liability company duly organized and existing under the laws of the State of Delaware. They filed the case in the Western District of Texas Court who had jurisdiction over personal jurisdiction over Intel because Intel manufactured products that are and have been used, offered for sale, sold, and purchased in the Western District of Texas. Defendant Intel is a corporation duly organized and existing under the laws of the State of Delaware, having a regular and established place of business in the Western District of Texas.

The lawsuit involved two patents, one with damages of $1.5 billion and the other $ 675 million. VLSI Technology purchased them from NXP Semiconductors. The patents were originally made by Freescale Semiconductor Inc. and SigmaTel Inc. both of which had been acquired by NXP Semiconductors.

One patent is the ‘373 Patent (U.S. Patent No. 7,523,373) with the name “Minimum memory operating voltage technique”. It was issued on April 21, 2009, and made by Andrew C. Russell, David R. Bearden, Bradford L. Hunter, and Shayan Zhang as co-inventors. This patent is on a method to reduce memory’s operating voltage.

The other patent is the ‘759 Patent (U.S. Patent No. 7,725,759) with the name “System and method of managing clock speed in an electronic device”. It was issued on May 25, 2010, and named Matthew Henson as the inventor. This patent is mainly on clock speed management.

VLSI alleged that both of these technologies were being deliberately used in Intel products thus amounting to patent infringement by the defendants. Intel claimed that there were no patent violations and that their products included technology completely and absolutely developed by Intel employed engineers.

Applicable legal provisions

In the United States, Congress has the power to regulate intellectual property. This power flows from the Commerce Clause which is Clause 3 of Article 1, Section 8 of the US Constitution. The U.S. Patent and Trademark Office (PTO) is responsible for issuing and monitoring federally registered patents and trademarks. Patents are exclusively governed by federal law. Article 1, Section 8, Clause 8 empowers Congress to further scientific innovation by providing exclusive rights to inventors and authors over their creations for a limited period of time.

The law with regards to patents is codified under Title 35 of the United States Code (hereinafter referred to as U.S.C.). This case, for both patents, mainly made use of four provisions under Title 35-

  1. 35 U.S. Code § 271 – Infringement of patent;
  2. 35 U.S. Code § 284 – Damages;
  3. 35 U.S. Code § 285 – Attorney fees;
  4. 35 U.S. Code § 287 – Limitation on damages and other remedies; marking and notice.

Important provisions of the U.S. Patent Law

  • §1-42 of Title 35 (PART I) of the U.S.C. talks of the United States Patent and Trademark Office. 
  • §100-212 of Title 35 (PART II) of the U.S.C. talks about the patentability of inventions and grant of patents.

Under Part II, five basic requirements have been established that need to be fulfilled for work or invention to be granted a patent-

  1. Patentable Subject Matter-  35 U.S.C. § 101

The patentable subject matter requirement tackles the question of which sorts of innovations are eligible for patent protection. The patentable subject matter is generally defined as any process, machine, manufacturing, or materials composition, or improvement thereof. The Supreme Court determined in Diamond v. Chakrabarty 447 U.S. 303 (1980) that Congress intended patentable subject matter to “include anything under the sun that is produced by man”. However, the Court also acknowledged that this wide definition had boundaries and does not encompass every discovery. Natural laws, physical facts, and abstract concepts, according to the Court, are not patentable.

  1. Utility-  35 U.S.C. § 101

A basic requirement that an invention must have to be accorded protection under relevant patent laws is utility. To specify, it should have utility in the industrial sphere. Utility specifications are specified in the Utility Guidelines Training Materials which is published by the U.S. Patent and Trademark Office. 

Credible usefulness necessitates that logic and evidence back up the utility claims, or that a person of ordinary skill in the art would agree that the said invention is now capable of the claimed application. The usefulness must be particular to the claimed subject matter, not a general utility that may apply to a wide range of innovations. Substantial utility necessitates that the invention has a specified real-world application; a claimed usefulness that necessitates or constitutes more study to identify or validate a real-world application is insufficient.

  1. Novelty-  35 U.S.C. § 102

The novelty requirement has a two-pronged approach- novelty and statutory bars to patentability. Novelty imposes the condition that said invention should not have been in use or within the public domain in the United States. It also includes that the invention should not be patented or present in the public domain in any other country other than America. Statutory bar implied that the patented material should not be in use or public knowledge in America, and should not be in the publication or patented in any other country, for more than one year before the application is made for the U.S. patent. 

  1. Non-obviousness-  35 U.S.C. § 103

The test of non-obviousness tests whether the invention was something that is obvious to a person of ordinary skill. Graham v. John Deere Co., 383 U.S. 1 (1983), was the first case in which the Supreme Court applied the nonobviousness standard. The Court decided that nonobviousness may be assessed by conducting simple factual inquiries into the extent and content of previous art, the distinctions between the prior art and the claims at issue, and the level of skill possessed by a practitioner of the relevant art.

  1. Enablement-  35 U.S.C. § 112

The enablement requirement is intimately tied to the specification, or disclosure, which must be submitted as part of every patent application. Every patent application must include a specification outlining the workings of the invention, as well as one or more claims at the conclusion of the specification giving the precise legal meaning of the invention. To fulfil the enablement criterion, the specification must detail the invention with such particularity that a person of ordinary skill in the art would be able to create and utilise the claimed invention without “undue experimentation.”

Types of patents

U.S. PTO has given out the following types of patents-

  1. Utility Patent;
  2. Design Patent;
  3. Reissue Patent;
  4. Plant Patent;
  5. Defensive Publication (DEF);
  6. Statutory Invention Registration (SIR).

Outcome of the trial

As mentioned before, the jury found Intel Corp guilty of patent infringement on both grounds and directed them to pay $ 2.18 billion to VLSI Technology.

Intel, after failing to overturn the judgment will be appealing ensuring that this legal battle might go on for years.

Counsel for VLSI Technology had made a statement during the trial saying VLSI had no products on the market and that damages that were owed to them were their only source of revenue. After the trial verdict was declared, Intel lashed at VLSI stating that their statement (mentioned above) proved that VLSI was nothing but a “patent troll”.

Surprisingly, the stock prices of Intel went up after the outcome of the trial was made known to the public while those of VLSI went down. However, this cannot be a reliable indicator of the confidence of the market in Intel because there are many more suits to come.

Similar American judgments 

There are very few judgments in the United States which have such large patent infringement awards. Intel Corporation v. VLSI Technology (2021) holds second place in the list of largest patent infringement awards. The first position goes to Idenix vs Gilead Sciences Inc (2016) where damages of $2.54 billion were awarded to Idenix, the plaintiffs.

Damages of $2.15 billion were awarded to Pfizer in Pfizer vs Teva Pharmaceuticals (TEVA) & Sun Pharma (2013) while Centocor Inc vs Abbott Laboratories (2009) involved damages up to $1.672 billion.

Litton vs Honeywell (1993) was a very controversial case that was dragged through the courts for 11 years. The case was initially filed by Litton in 1990 for patent violations and antitrust activities by Honeywell. The judgment was given in 2011, with damages of around $1.2 billion being awarded to the petitioner.

Apple Inc. v. Samsung Electronic Co., Ltd. (2012) was a real-life manifestation of the fabled cold-war rivalry of two of the biggest smartphone manufacturers in the world. The legal battle spiralled into more than 50 lawsuits across the globe with damages involving close to $1.04 billion. 

Polaroid vs Kodak (1991) was another of the most famous patent cases of the United States. Polaroid sued Kodak for infringing 12 patents. The latter was asked to pay close to a billion dollars in damages, a huge amount for the 90s.

Conclusion

The ongoing legal battle between Intel and VLSI is not over. With multiple appeals and lawsuits in the future, what is there in Intel’s future is uncertain. One loss, however large it might be, has not affected the goodwill it holds with the public. To what extent it is not clear. It would be better if Intel somehow starts looking towards other avenues like alternate dispute resolution methods before things get out of hand.

References

  1. VLSI Technology LLC’s Complaint for Patent Infringement
  2. Intel ordered to pay $2.2 billion after losing patent lawsuit
  3. Intel Ordered to Pay $2.2 Billion in Damages for Patent Infringement
  4. Patent | Wex | US Law | LII / Legal Information Institute
  5. 10 Largest Initial Patent Infringement Awards in the US
  6. Patents Act, 1970.

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