Fed Circ throws out $2.18bn damages verdict against Intel in microprocessor patent dispute
Judges upheld infringement of one patent and reversed another | Case remanded for new damages trial | Intel’s challenge to damages analysis also affirmed.
A US appeals court has overturned a $2.18 billion damages award against Intel in its ongoing patent battle with VLSI Technology, affirming one count of infringement but reversing another worth $675 million.
Yesterday, December 4, the US Court of Appeals for the Federal Circuit remanded the high-stakes case for a new trial to determine damages based on Intel’s infringement of one patent belonging to VLSI, throwing out a multibillion-dollar jury award based on two patents.
Judges also reversed the Western District of Texas court’s denial of Intel’s motion to stay the litigation on the basis of a newly acquired licence defence to the alleged infringement.
Intel: Remaining VLSI patent ‘of little value’
Patent holding company VLSI sued Intel in 2019 for infringing two patents, US patent numbers 7,523,373 and 7,725,759, through the sale of various microprocessors.
A jury found that Intel had literally infringed all asserted claims of the ‘373 patent, and had infringed the ‘759 patent but only under the doctrine of equivalents. VLSI was awarded $1.5 billion and $675 million respectively as lump sum payments for all past and future infringements of the patents.
Intel appealed, arguing that the evidence that it had infringed the ‘373 patent was lacking, and that VLSI’s evidence of equivalents regarding the ‘759 patent was legally insufficient. It also challenged the analysis behind the calculation of the damages award.
In June this year, a US Patent Trial and Appeal Board (PTAB) tribunal declared the ‘373 patent to be invalid, following a successful challenge to the ‘759 patent a month before.
Commenting on yesterday’s decision, Intel said in a statement: “Intel is pleased the appeals court vacated the judgment, ruling Intel does not infringe one of VLSI’s low-quality patents and sending the case back to the Texas trial court for further proceedings on the other patent.
“The patent office has already found both patents invalid. Intel looks forward to making its case to a jury that the VLSI patent sent back to the trial court is also of little value.”
Proof of equivalence ‘insufficient’
Judges rejected Intel’s argument regarding the ‘373 patent, which related to whether the minimum operating voltage in its accused microprocessors came within VLSI’s claim limitations.
“Substantial evidence supports the jury’s verdict in favour of VLSI on this point,” they said.
However, they upheld Intel’s challenge to VLSI’s reliance on the doctrine of equivalents regarding infringement of the ‘759 patent.
VLSI had to prove that the elements of Intel’s arrangement in its microprocessors were substantially the same as the elements of the claimed arrangement, they said.
“But VLSI offered no meaningful testimony doing so.”
Judges deemed the testimony from VLSI’s expert to be “insufficient”, and that the doctrine of equivalents theory failed “as a matter of law”.
Timothy Getzoff, partner at Holland & Hart, said: “This decision, while not marking a change in the law, provides strong support for accused infringers who are defending against a doctrine of equivalents claim, as it held the plaintiff to a strict standard for meeting its burden.”
Error in damages award
Intel also succeeded in convincing the appeals court that the damages award for infringement of the ‘373 patent was based on faulty analysis.
Judges pointed out “a readily identifiable error” made by one of VLSI’s experts, which “departed from the essential logic of the value-of-the-patented-technology assessment”.
The solution was a new trial to decide the damages as it could not be said that this error did not affect the amount awarded by the jury, the court said.
Ian DiBernardo, partner in Brown Rudnick’s IP litigation practice group, said: “Importantly, notwithstanding VLSI’s damages award being vacated, the court emphasised that VLSI’s error is not fatal to its case. Instead, the court explicitly noted that VLSI should be given ‘an opportunity to provide a corrected damages case’.
“This may be a signal to district courts of the court’s view to more leniently allow claimants to correct errors in damages methodologies.”
Abuse of discretion
The final point that judges found fault with the district court’s reasoning on was the denial of Intel’s motion to stay, which they declared to be “an abuse of discretion”.
In September 2020, as the case was approaching trial, Intel filed a motion to stay the litigation arguing it had newly acquired a licence defence to the alleged infringement.
This was because in 2012, Intel had entered into an agreement with IP licensing firm Finjan in which it was granted “a perpetual and irrevocable license to patents owned and controlled by Finjan’s ‘affiliates’” and in July 2020, Fortress Investment Group—which manages investment funds that own VLSI—acquired control of Finjan, making VLSI and Finjan associated under the license agreement.
The district court denied the motion on the basis of untimeliness, prejudice and “unimportance because of the futility of the defence”, a view that the appeals court declared to be “a very narrow holding”.
“Intel might well fail to sustain the defence, but we do not see failure as foreordained on the material supplied to date,” judges said.
The case is VLSI Technologies v Intel. Counsel for VLSI was MoloLamken and Irell & Manella. Intel was represented by WilmerHale.
A representative of VLSI has been approached for comment.
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