'The new oil’: how an Asian semiconductor firm won a chip battle on US soil—and why it matters
The ‘brains of electronics’, the ‘new oil’ and ‘the lifeblood of our digital lives’: these are just some of the epithets used to describe the critically important semiconductor industry in recent years.
Semiconductors—sometimes referred to as integrated circuits (ICs) or microchips—are at the heart of a multitude of devices essential to our daily lives, from transportation and healthcare to entertainment, clean energy and defence.
And as their importance grows, the global race to take pole position in this rapidly advancing sector is also gathering pace.
In addition to countless technologies, including artificial intelligence and wireless communications, semiconductors power much of the current hostility between the US and China. In October 2022, the Biden administration unveiled a swathe of restrictions on the sale of advanced microchips to China.
Multi-billion dollar tech race
It is easy to see why the US, once the undisputed leader in semiconductor manufacturing, is worried.
In 2022, China garnered the largest share of worldwide semiconductor sales with nearly 186 billion US dollars, according to data provider, Statista.
While the rest of the Asia Pacific region recorded $153 billion in semiconductor sales last year, the Americas trailed behind with sales in the region of $143 billion.
Keenly aware that the US is potentially losing its foothold in this vital market, the US Patent and Trademark Office ( USPTO) has taken action.
To encourage research, development, and innovation in semiconductor manufacturing, the office launched a Semiconductor Technology Pilot Program this month.
Commenting on the move, Kathi Vidal, director of the USPTO, said: “From innovations in phones to cars to other everyday devices, our goal with this programme is to get more cutting-edge technologies into the hands of consumers faster while reducing our dependence on the foreign supply of semiconductor chips.”
Against this backdrop, patent disputes involving this critical technology are being watched more closely than ever—especially when US companies lose a suit on home turf.
In a series in which attorneys explore notable brand victories, McKool Smith Principal Steve Rizzi met with WIPR to outline his team’s route to success in Bell Semiconductor v Advanced Semiconductor Engineering, which was heard before the US Court of Appeals for the Federal Circuit in November.
WIPR: Why have semiconductors and the IP safeguarding them become so important?
Steve Rizzi: Semiconductors are the lifeblood of our digital lives. Their ubiquity was highlighted recently by supply chain issues during the COVID-19 pandemic that shut down automotive production due to a shortage of chips for cars.
And their importance in maintaining a competitive edge in technology is emphasised by the CHIPS and Science Act which provides billions in federal support for the domestic semiconductor industry; and recent export restrictions imposed on certain chip technology in China.
Enforcing the IP surrounding chips is necessary to maintain a competitive edge.
You were recently on the legal team that secured a win for a semiconductor company in a patent dispute. Can you tell us more?
Chicago-based Bell Semiconductor asserted infringement of the US patent number 6,624,007 in multiple federal district court cases against Taiwan-based Advanced Semiconductor Engineering (ASE).
The patent covers a method of making a certain type of semiconductor package, referred to as a ‘leadframe’ package, where the leads that connect the package to a printed circuit board are cut from a metal frame during the manufacturing process.
In particular, the patent is focused on a two-step cutting process intended to reduce metal burrs that can interfere with package mounting. ASE performs contract semiconductor packaging services for its customers, including for lead frame packages.
ASE decided to initiate an inter partes review (IPR) at the USPTO in 2020, obtaining a final written decision that the claims of the patent are invalid based on an earlier Japanese patent publication in 2022.
Bell appealed the decision at the Federal Circuit.
What led to this decision?
ASE’s IPR petition demonstrated that under the plain meaning of independent claim 1, all of the steps of the method were disclosed in the Japanese reference. The petition also challenged dependent claims 2-7, and independent claim 8, which concerned different subject matter—a method of forming the lead frame itself.
In its preliminary response to the petition, Bell disclaimed claim 8, and challenged ASE’s contentions regarding claims 1-7. The PTAB agreed that ASE had demonstrated a reasonable likelihood of proving at least one of the challenged claims was invalid, and instituted IPR proceedings on claims 1-7, accepting Bell’s disclaimer of claim 8.
After further written exchanges, expert depositions, and a hearing, the PTAB issued its decision, finding claims 1-7 invalid. Bell challenged this finding based on the construction of three terms in claim 1 of the patent. Bell did not dispute that the claim was invalid based on the constructions applied in the final written decision. The Federal Circuit rejected Bell’s claim construction arguments and affirmed the final written decision.
How did your strategy secure success?
I have worked on patent litigation matters involving semiconductor packaging for most of my career, and have developed a good working knowledge of the technology space and IP landscape.
My experience helped me to develop compelling arguments concerning the teachings of the ‘007 patent to a person of ordinary skill in the art, and expose the weaknesses in Bell’s positions.
Both the PTAB and the Federal Circuit agreed that the plain language of claim 1, which was confirmed by the specification of the patent, did not support Bell’s arguments that the claimed method was limited to processing multiple semiconductor chips. This was Bell’s main argument as to why the claimed method was not taught by the prior art patent.
What is the impact of this order?
Assuming that no further appeals are filed by Bell, all claims of the patent have been invalidated, and thus the patent can no longer be enforced. I believe there is one district court case remaining where the patent (and others) had been asserted. That case, against NXP Semiconductor, remains pending the resolution of Bell’s Federal Circuit appeal, as well as appeals of PTAB decisions concerning other patents in the case.
If and when the stay is lifted, all claims relating to infringement of the ‘007 patent will be dismissed. The other cases where the ‘007 patent had been asserted were settled before the patent was invalidated.
Do you envisage more patent litigation in this space?
Absolutely. Semiconductor patents can be very valuable. Just look at the $1 billion jury verdicts in the VLSI v Intel (now reversed by the Federal Circuit) and Caltech v Apple cases. There is no shortage of entities seeking to enforce semiconductor patents, as well as sources of capital to fund litigation.
Depending on the subject matter, semiconductor patents can cover a wide range of different products.
Patents may cover functional aspects of the chip, the composition/fabrication of the semiconductor wafer itself, as well as techniques for packaging the chips in some sort of enclosure so they can then be incorporated into a device. Patents in the last two categories can potentially cover many different products across different suppliers.
The patent at issue in this case pertains to semiconductor packaging, and specifically lead frame packages that have wide-ranging high volume applications.
High volume products can sell in the hundreds of millions or billions, and thus a very small per unit royalty can still result in very substantial damages awards. Semiconductor patents are also less vulnerable than, eg, software patents to challenges under section 101 for lack of patentable subject matter.
For these reasons, I expect patent litigation in the semiconductor space to continue to proliferate.
