IP Law Daily, PATENT—Fed. Cir.: Jury award of $2.18B against Intel over chipmaking patents vacated, (Dec 4, 2023)

By Brian Craig, J.D.

Substantial evidence supports the jury’s verdict of infringement of one patent in suit, but the Federal Circuit ordered a new trial on damages.

The U.S. Court of Appeals for the Federal Circuit has concluded that a damages award of $2.18 billion following a jury trial in Waco, Texas, against Intel Corp. for infringing two semiconductor patents held by VLSI Technology LLC must be set aside. While the Federal Circuit held that substantial evidence supports the jury’s finding of infringement for one of the two asserted patents, the panel held that a new trial on damages must be held to determine the reasonable royalty rate. The Federal Circuit also held that the district court erred by failing to consider whether Intel had a license to use the patents (VLSI Technology LLC v. Intel Corp., December 4, 2023, Taranto, R.).

VLSI sued Intel for infringement of U.S. Patent No. 7,523,373 (the ’373 patent) and U.S. Patent No. 7,725,759 (’the 759 patent) both relating to semiconductors. The ’373 patent is titled “Minimum memory operating voltage technique.” The ’759 patent is entitled “System and method of managing clock speed in an electronic device.” After a trial, the jury concluded that Intel’s past infringement caused damages of $1.5 billion as to the ’373 patent and $675 million as to the ’759 patent, with the total amount constituting a lump sum for all damages. The district court then denied Intel’s post-trial motions on various issues concerning infringement and damages. The district court simultaneously denied Intel’s pre-trial motion seeking to add a license defense to the case and to sever that defense from the rest of the case and stay its adjudication. Intel appealed.

Infringement. The Federal Circuit concluded that substantial evidence supports the jury’s finding of infringement of the ’373 patent but reversed judgment of infringement for the ’759 patent. The panel found substantial evidence supports the judgment of infringement of the ’373 patent. As to the ’759, the appeals court found that VLSI’s doctrine of equivalents theory fails as a matter of law. The doctrine of equivalents provides a limited exception to the principle that claim meaning defines the scope of the exclusivity right in the patent system. VLSI had to prove—with particularized testimony and linking argument—that the elements of the Intel arrangement were substantially the same as the elements of the claimed arrangement. But VLSI offered no meaningful testimony doing so. Thus, the Federal Circuit vacated the finding that Intel infringed the ’759 patent.

Damages. The Federal Circuit held that a new trial must be held on damages for infringement of the ’373 patent and that the damages award be set aside. A reasonable royalty must seek to measure the value of the patented technology by separating out and excluding other value in economic products or practices. An economical approach for the royalty is the hypothetical royalty that the parties would have agreed had they successfully negotiated an agreement just before infringement began. In this case, the Federal Circuit found errors in calculating a reasonable royalty that undermine the reliability of the results as a calculation of power savings from use of the infringing functionality. On the record, the panel could not deem this step in the damages calculation harmless as to the bottom-line amount of damages. The difference between the date on its face significant. The Federal Circuit found no sound basis, given the nature of the error found, for denying VLSI an opportunity to provide a corrected damages case.

License defense. Finally, the Federal Circuit concluded that the district court erred by failing to consider whether Intel had a license to use the patents. Intel argued that it entered into an agreement in 2012 with Finjan, in which Finjan granted Intel a perpetual and irrevocable license to patents owned and controlled by Finjan’s “affiliates.” In 2020, Intel argued Fortress acquired control of Finjan, making VLSI and Finjan “affiliates” under the license agreement. The Federal Circuit found the district court’s conclusion that Intel unduly delayed filing its motion was an abuse of discretion. Intel was required by the 2012 license agreement to follow certain procedures, and Intel acted with diligence in doing so. Thus, the district court must consider the license defense on remand.

Accordingly, the Federal Circuit affirmed the judgment of infringement of the ?373 patent but reversed the judgment of infringement of the ?759 patent. The Federal Circuit also ordered a new trial on damages for the ?373 patent.

The Case is No. 22-1906.

Attorneys: Jeffrey A. Lamken (MoloLamken LLP) and Morgan Chu (Irell & Manella LLP) for VLSI Technology LLC. William F. Lee (Wilmer Cutler Pickering Hale and Dorr LLP) for Intel Corp.

Companies: VLSI Technology, Inc.; Intel Corporation; Finjan Software, Inc.; Finjan, Inc.

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