1 August 2010Patents

To Infineon and beyond: licensing, litigating and protecting

Technological advances in the semiconductor industry are of inestimable value to Infineon Technologies AG. Infineon employs around 25,000 people on four continents, supporting a company in which IP is paramount. Infineon’s patent portfolios are accessible via crosslicensing, while it develops its own technology in an industry where no one company owns all the IP. Infineon navigates this industry by being technically aware and protective of its assets.

Protect and litigate

Infineon’s main product lines focus on semiconductor devices—miniaturised transistor chips made typically out of silicon—and their applications. Most notably, Infineon has applied its semiconductor expertise to communications technology such as mobile phone products, while it also stretches to energy efficiency, with DC-to-DC power management integrated circuits.

The integrated circuit that constituted the first semiconductor itself was at the centre of a race between two separately accredited inventors to file patents on the inventions. So, historically at least, Infineon is expected to protect its own patents against infringement by others, and the need to protect is strong.

It is Michael Tierney’s role, as a principal intellectual property licensing attorney at Infineon, to actively seek out others that make use of the inventions covered by the company’s patents: “My role as an in-house attorney is primarily to protect the company’s IP against infringement,” he says.

In February this year, Infineon filed a complaint with the United States International Trade Commission (ITC) against Elpida Memory. The complaint alleged that Elpida engaged in unfair trade practices by making for importation into the US, importing into the US and selling after importation certain DRAM semiconductors and products that infringe four of Infineon’s patents covering fundamental processing technology in semiconductor processing and device manufacturing.

In early April, Elpida reacted by filing patent infringement lawsuits against Infineon in the US District Court for the Eastern District of Virginia.

The Elpida situation has now been resolved. The parties have settled the legal battles, with Infineon’s ITC investigation being terminated and the Elpida lawsuits being withdrawn. Tierney says: “We approached Elpida when we first determined that they were infringing our IP, and we later filed our complaint in the ITC when it became clear that negotiations would not lead to a satisfactory result. We are extremely pleased with the outcome.”

Litigation is not the first step in Infineon’s approach. Instead, Tierney and Infineon’s licensing team will always try to sit down with the accused infringer to discuss a viable business solution to the dispute. Infringers should be aware that litigation is always an option, though Tierney stresses that it is usually a last resort after normal business negotiations have failed.

Litigating is nearly always done in the context of the previous negotiations with the suspected infringer. Despite the failure of any negotiations, the company’s objectives typically do not change. “We have an initial goal before we ever sue anyone. It may be monetary or exclusionary.”

Key technologies

Infineon competes in an industry where no single entity owns all the IP to conduct its business, Tierney says. This limits its ability to be the sole developer, because it must share technological innovations: “There are times when we will enter into cross-licence agreements with another company,” he says. “[This enables] both of us to have the freedom to operate in the technology space.”

“Infineon’s research and development network had a budget of $1 billion in 2008. The network spans 28 locations around the world. Infineon’s research and development team—made up of engineers and designers—comes up with new patentable inventions every working day.”

These licences allow both licensor and licensee the freedom to develop technology and to use the inventions of the other company. There is, at times, a monetary incentive too. A standard cross licence often encompasses the broad portfolio of a company’s patents, allowing each company access to the other’s inventions. In some cases, the value of IP is the deciding factor: “It usually results in a cross-licence that includes a balancing payment to one party, depending on the relative value of each party’s intellectual property.”

In November 2008, Infineon and Fairchild Semiconductor filed patent lawsuits against each other in the Maine and Delaware courts. The semiconductor company agreed to a “broad crosslicence” with Infineon, “related to semiconductor technology”, it said. Tierney is pleased with the result: “We initiated litigation after negotiations broke down. We settled on favourable terms, and we look forward to a lasting and co-operative peace,” he says.

Infineon’s research and development network had a budget of $1 billion in 2008. The network spans 28 locations around the world. Infineon’s research and development team—made up of engineers and designers—comes up with new patentable inventions every working day.

Tierney, as the attorney for the group charged with enforcing Infineon’s patent rights, works with a small team. Technical experts work with the business leads to help Tierney become aware of the potential use of Infineon’s patents.

The team establishes infringement from a technical, business and legal point of view. Tierney, who was a NASA engineer for 10 years before going to law school, then takes the lead: “My job is the legal side of it, assessing our patents that potentially read on someone else’s product,” he says. “I develop the legal arguments, determine the viability of a claim read against a product and basically follow the legal argument all the way through to the closing of a licensing deal.”

Invisible infringers

Spotting a potential patent infringement is no small challenge considering that Infineon has over 5,000 patent families, with an additional 3,000 pending. Combined with the company’s broad spectrum of products, Tierney is left with a large portfolio in need of complicated security measures: “There is no one procedure for determining if someone has ventured within the bounds of our IP,” he says.

“It depends on the vigilance of individuals throughout the company, whether in technical, business or legal capacities. Success depends on communication between people within and across organisations.”

Tierney and his team employ a number of methods, relying on internal expertise, external business intelligence, as well as both in-house and external reverse engineering. It is important to know what the competition is producing, first and foremost. More often than not, a new product from a competitor might have a recognisable feature, at which point, Infineon’s technical experts will investigate. “We may have spearheaded development of that feature,” he says. “Then we may dig in further to see if we have a case.”

A new product promising improved performance rather than an entirely new feature is another feasible candidate for patent infringement, Tierney says. Improved performance parameters may be suspicious, particularly if they strike a chord with something pioneered through Infineon’s research and development division. Reliable technical intelligence is a powerful tool in spotting patent infringers.

In addition to relying on the technical experts at his disposal, Tierney has fostered a network of contacts throughout the company’s business units, primarily with seasoned experts in the field. Potential infringers of Infineon’s patents have very few places to hide: “[The experts] don’t have to identify the patents,” he says.

“If they just come to us and suspect that some new product might be something within our patent coverage, or something they know they have worked on and got patents on in the past, that will trigger an investigation for us.”

The prospect of having to decide where to seek protection for an invention is a difficult one due to the length of a patent application’s pendency, and the length of a patent term. It may take years before the industry addresses a problem that Infineon had previously solved through its patented inventions. As such, it may be a long time between invention and infringement, says Tierney.

He says: “Filing in different countries and emerging markets is a growing part of our IP strategy. The trick is to be anticipatory in which countries you choose to file. There may be a considerable time lag—between the filing of an application and the technology maturing—before someone might be infringing.

"It may be years before the rest of the world has started using a key invention that Infineon has patented, which adds to the challenge of anticipating where to file. The semiconductor industry is truly global, with major players all around the world, each with distinct business cultures and legal systems that we must understand. It really is a fascinating field.”

Fruitful patents

The ability to design, develop and produce cuttingedge technology comes with financial incentives as well as pressure.

Patent licensing, enabling Infineon’s inventions to be distributed and used at a cost, is an overall IP goal for the company and something Tierney is working towards: “We have a long track record of investing substantially in research and development, and for obtaining patents that protect our research and development. We are now using our capability to assert patents for the sake of getting a financial return on that research and development investment,” he says.

“It is an important and emerging aspect of the company’s approach to IP.”

Licensing opportunities exist throughout the business, so Infineon is capable of administering a broad spectrum of patents to partners in licensing ventures. According to Tierney, licensing opportunities are in abundance “vertically and horizontally— from very basic semiconductor processing, all the way up”.

Infineon’s chief officers understand the need to produce for the future and develop the bottom line. Today, the company is enjoying its position within the semiconductor industry, providing “three central needs for our modern society”, Infineon says.

Its focus on energy efficiency, communications and security has yielded a strong market share in three of its five global target markets, resulting in revenue of around €3.03 billion ($4.15 billion) in the 2009 fiscal year. It is important for Infineon to continue to focus on financial returns by having one foot in the future, because protecting its own intellectual property will ensure that its healthy bottom line will be sustained.

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