Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Technology company sued for using sham patent suits to suppress competition, (May 15, 2014)

By Linda O’Brien, J.D., LL.M.

A technology company maintained its monopoly in the market for antifuse nonvolatile memory intellectual property technology by filing sham lawsuits and legal proceedings, and launching a negative public relations campaign designed to interfere with the business relationships of its competitor, according to a complaint filed in the federal district court of San Francisco (Sidense Corp. v. Kilopass Technology, Inc., May 14, 2014).

Sidense Corp., a provider of one time programmable (OTP) nonvolatile memory (NVM) solutions, develops antifuse NVM intellectual property (IP) technology and licenses it to customers who use those designs to build complementary metal oxide semiconductor (CMOS) integrated circuits with antifuse NVM arrays. Sidense provides its technology to customers in the form of a kit that includes datasheets, application notes, integration guidelines, and all technical models and files needed to integrate its memory array into the customer’s integrated circuit. Kilopass Technology, Inc., a competitor, also develops antifuse NVM IP technology.

The complaint alleges that Kilopass dominates that market for CMOS embedded antifuse OTP NVM IP. After publication of Sidense’s first international patent application, Kilopass moved to block Sidense’s progress with its patent portfolio. Kilopass sought an opinion from an outside patent attorney who advised Kilopass that Sidense did not infringe Kilopass’ claims literally and Sidense’s memory cell was redesigned to avoid patent infringement.

Despite the negative infringement advice, Kilopass filed a lawsuit against Sidense alleging infringement of three of its patents. Simultaneously, Kilopass filed a petition with the U.S. Patent and Trademark Office (PTO) to invalidate a key Sidense patent even though Sidense never asserted the patent against Kilopass. Kilopass’s legal challenges have all failed. Kilopass continued to pursue litigation even after the PTO patent examiner found two of the three asserted patents invalid. The district court grant of SIdense’s motion for summary judgment applicable to all claims on all three patents was affirmed on appeal. Kilopass intended to the baseless lawsuit to chill competition in the market by stifling entry and innovation from Sidense and other competitors, the complaint charged.

According to the complaint, Kilopass launched a negative public relations campaign designed to threaten and bully customers to prevent them from doing business with Sidense. Shortly after filing suit, Kilopass began threatening customers and potential customers of Sidense that it would file patent infringement lawsuits against them in an attempt to dissuade customers from doing business with Sidense. Kilopass never had the serious intention to file the threatened actions and never did so. Kilopass also falsely told customers and potential customers that Sidense was financially unstable and no longer commercially viable. The untrue statements had a chilling effect on customers’ and potential customers’ dealings with Sidense.

According to Sidense, Kilopass was able to scare customers away from doing business with Sidense, and Sidense was forced to divert millions of dollars from its marketplace to defend the litigation and publicity campaign of its monopolist rival. By foreclosing Sidense from the market, Kilopass has captured a dominant market share by locking in customers into Kilopass technology.

Sidense asserts claims for monopolization and attempted monopolization. The action seeks declaratory and injunctive relief, damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:14-cv-02238.

Attorneys: Roger L. Cook and Robert D. Tadlock (Kilpatrick Townsend & Stockton LLP) for Sidense Corp.

Companies: Sidense Corp.; Kilopass Technology, Inc.

News: Antitrust CaliforniaNews