semiconductor-focus-1
RA2Studio / Shutterstock.com
14 April 2015Patents

Semiconductor focus: Caught in the patent currents

Like horse-racing, it has been called ‘the sport of kings’ due to the rising costs, high stakes, and the difficulty of getting your money back. Patent litigation, particularly on US shores, has become an increasingly lucrative contest.

According to the 2013 edition of the American Intellectual Property Law Association’s (AIPLA) Report of the Economic Survey, a biannual publication that provides figures on US intellectual property litigation, the cost of a patent lawsuit in that year ranged from $970,000 to $5.9 million. The maximum figure from the previous survey (in 2011) stood at $5 million.

Despite the high figure, litigation, particularly in the semiconductor industry, appears to be increasing.

In February of this year, iRunway, a US and India-based technology consulting firm specialising in patent licensing and litigation, released a report revealing the leading patent owners in, and litigation statistics on, the US semiconductor sector.

iRunway’s analysis, called Semiconductor Memory—Patent & Technology Landscape, covered more than 80,000 patents, both granted and applied for, which were assigned to more than 5,000 companies.

The report highlighted a five-fold increase in the number of patents involved in semiconductor litigation since 2007. Licensing companies active in the semiconductor industry, including Rambus and Intellectual Ventures, were among those with the most patents involved in litigation at the time the report was published—17 each.

Carlos Greaves, senior vice president and head of iRunway’s semiconductor vertical, said at the time that as emerging memory technology begins to gain commercial acceptance, IP owners will increasingly explore avenues to “monetise their patent assets”.

Lawyers tell WIPR that those in the semiconductor industry, particularly smaller companies, are starting to feel the effects of the high costs of patent litigation.

Michael Powell, founder of US law firm Powell IP Law, in Atlanta, confirms that patent litigation has “long been known as the sport of kings”.

“This is for good reason,” he says. “Kings don’t need insurance and can handle the huge stakes and fees associated with playing.”

Alexander Hadjis, partner at law firm Cadwalader, Wickersham & Taft in Washington, DC, adds that although many major semiconductor companies with “high margins” have not been damaged by the increase in semiconductor litigation, companies that do not have the ability to afford to initiate or defend against litigation may have felt the effects.

He explains: “These types of companies may end up deciding to forgo the process of trying to protect a product through litigation or defend against a suit brought by another company. The impact that such decisions may have is a general decrease in the incentive to innovate and compete.”  Despite this, Hadjis says, as the years pass, overall revenues in the semiconductor industry have increased and have now been projected to continue rising.

Hadjis notes that “high-margin players” have historically been relatively litigious.  He adds: “They have used their IP, in particular, to protect their positions in markets or market segments from new entrants that arrive.”

"88% of US litigation filed that year was by NPEs and that 68% of that litigation was against companies in the hardware and software industries."

Powell adds that the US is a favoured venue for many plaintiffs because the prospect of facing high costs can sometimes put extra pressure on defendants.

He believes there have been signs of even some of the major technology companies taking measures to avoid litigation. One “notable” example he points to was the decision by technology company IBM to divest its semiconductor-related technology.

In October 2014, the US-headquartered company, which later that year topped the list of companies with the most US patents granted in 2014—the 22nd successive year it came top—announced it would be paying semiconductor manufacturing company Global Foundries $1.5 billion to take control of its semiconductor business and “related patents”.

Tom Rosamilia, IBM’s senior vice president of the systems and technology group, said at the time that the company had “always taken the long view” of its business strategy and that the agreement was “one more step” in the company’s reinvention.

But Powell questions why despite “analysts predicting 2015 to be a strong year” for the semiconductor industry, IBM was “apparently heading in a different direction”.

Referencing the iRunway report, he says IBM’s move could be due the increasing amount of litigation and suggestions that semiconductors could be poised to “fuel the next round of patent wars”.

Dominance of NPEs

With a so-called patent war will inevitably come an increase in lawsuits initiated by non-practising entities (NPEs), sometimes referred to as patent trolls, which can file multiple, speculative lawsuits.

While the earlier quoted figures from the AIPLA provide an overview of litigation costs, analytics company Lex Machina has highlighted the dominance of NPEs specifically.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Patents
14 April 2015   Patentees may want to sell their patents on their own, but care is needed to protect themselves and the assets, says Art Monk.
Patents
1 May 2015   A patent owner is always allowed to cash in on the rights embodied in its patent by either licensing or selling it, says Art Monk of TechInsights.
Patents
13 November 2020   The semiconductor industry’s approach to IP has largely been shaped by the rapidly developing technology. Arabinda Das of TechInsights charts how patent strategies have evolved.