** Update: Broadcom did well on appeal October 10th see below** Tessera patent case pushes dozens of Broadcom chips out of the country. U.S. could be next. The German court upheld a Tessera patent “for smoothing the planes of semiconductor chips.” The court ruling resulted in this notice on the Broadcom website:
A June 5 German ruling allows Tessera, “to begin enforcing the district court’s judgment, which enjoined Broadcom and the other defendants from offering, putting on the market, using, or importing (or possessing for such reasons) the infringing products in Germany. The judgment also requires Broadcom to recall infringing products from the German market, to destroy or have destroyed infringing products in their possession in Germany,” (Tessera releases below.)
Broadcom has maintained throughout they would be happy to pay a reasonable royalty. Unfortunately, the U.S. legal system can yield damages many times higher than any common sense definition of “reasonable.” That gives the patent holder extreme negotiating power. Broadcom probably will have little choice but to pay an amount I would consider absurd, possibly well into the hundreds of millions. Royalties at such levels could easily double the price of mobile phones or DSL modems. I have long had an editorial policy of supporting truly reasonable royalties.
I’ll be happy to include comments from the parties, but I don’t expect anything substantive from Broadcom. They rarely say anything publicly. So let’s assume they will say, “We feel our position is justified and will assert all our legal rights.” I’m sure they won’t say, “We’ve been fighting totally unreasonable demands but may lose. Courts far too often set royalties that have no bearing on reality.
U.S. courts until recently have defined “reasonable royalty” as though we were in the nineteenth century. Today’s chips are incredibly complicated and have hundreds of millions of transistors. Literally hundreds of patents could be asserted. U.S. courts often calculate damages as though each one of those hundred patents deserves royalties as though it was the unique contributor to the product.
Apple recently lost a $506M patent suit over a method of ordering instructions in the iPhone. An iPhone probably relates to over a thousand similar patents. The judge calculated royalties of $1.61 to $2.74 per unit.
Fearing similar, Apple just agreed to a $2B patent settlement with Nokia/Alcatel. Ericsson, Huawei, MediaTek and a dozen others have claims similar to Nokia’s. Qualcomm’s are probably stronger. Royalties at these levels could easily push the iPhone price over $1,000. Less expensive units, like the $15-$50 phones now connecting billions to the Internet, would more than double in price. Stanford Professor Mark Lemley has written eloquently on related topics.
I expect U.S. patent policy will change when D.C. realizes the U.S. is about to massively pay out on patents. ZTE and Huawei were #1 & #2 in patent filings last year. Huawei’s research budget is now larger than Ericsson’s & Nokia’s combined. They are among the most advanced in almost every area of telecom and Internet innovation. They are not shy about asserting their patents, being active in the German and Indian courts.
Japan has proposed arbitration to set royalties because they are getting out of hand.
A recent article, NPE patent litigation in Germany: recent trends and strategies, discusses the Tessera/Broadcom case and others in Germany.
"Traditionally, patent litigation initiated by non-practising entities (NPE) has focused predominantly on the US market. However, in view of recent changes in the US patent system (eg, inter partes reviews) and case law, the balance has shifted in favour of defendants and has made NPEs’ lives much harder, with many no longer having the deep pockets that they used to have. Therefore, many NPEs have started to change their strategy, and the German patent system – with its procedural and economic strengths – has emerged as a new hotspot on the map of NPE activity. ,,,
The German system does not differentiate between plaintiffs and grants permanent injunctions as standard if infringement is found. While damages awards do not reach the eye-watering figures that have been seen in some famous US cases, they can still be substantial and are set at least at the level of reasonable ..royalties. . In most cases the first-instance infringement decision is issued within eight to 15 months, while on the validity side the average timeframe is 25 months. ... Even non-final infringement decisions are usually immediately enforceable if the requisite security is provided. Once the court has confirmed infringement, the period leading up to the (typically later) validity ruling is often the best time to negotiate a settlement. The costs of patent litigation in Germany are usually much lower than those in the United States or the United Kingdom. In particular, there is no US-style pre-trial discovery or jury trials, and inspection proceedings are neither mandatory nor frequently used. Oral hearings (in comparison to trials) typically last only a few hours, rather than several days."
NEWS RELEASE
Patent Court Preliminary Opinion Rules in Favor of Broadcom
SAN JOSE, Calif., and SINGAPORE, October 10, 2017 – Broadcom Limited (NASDAQ: AVGO), announced today that the German Federal Patent Court (“GFPC”) issued a preliminary opinion that all claims of an Invensas Corporation patent asserted against Broadcom in Germany should be null and void.
In May 2016, Invensas Corporation, an affiliate of Xperi Corporation (formerly Tessera Holding Corporation), filed two infringement actions concerning the German part of European Patent number 1 186 034 B1 (“’034 Patent”) against Broadcom and certain of its distributors before the Regional Court of Mannheim, Germany. In November 2016, Broadcom filed a nullity action against the ‘034 patent in the GFPC. In March 2017, the Regional Court of Mannheim ruled that Broadcom had infringed the ‘034 Patent and ordered an injunction preventing the commercialization of certain Broadcom products in Germany. On October 5, 2017, the GFPC issued its preliminary opinion in the nullity action that all claims of the ‘034 Patent asserted against Broadcom should be null and void based on prior art submitted by Broadcom. An oral hearing will be held by the GFPC on January 25, 2018, and a final decision will be issued at that hearing or shortly thereafter.
“From the start of this litigation, Broadcom maintained that the ‘034 Patent is invalid and therefore filed a nullity action before the GFPC challenging its validity,” said Mark Terrano, vice president and general manager, Intellectual Property and Licensing at Broadcom. “We are very pleased with the GFPC’s preliminary opinion, and are confident the GFPC will find the ‘034 Patent invalid in January.”
Enforcement of the injunction is suspended until after the GFPC’s final ruling in January and will continue to be suspended if the GFPC ultimately finds the patent invalid.
KEY TESSERA PATENT INFRINGED ACROSS BROADCOM PRODUCT LINES
ITC Win is Tessera’s Third Major Favorable Decision Against Broadcom in Four Months
SAN JOSE, Calif.–(BUSINESS WIRE)– Tessera Technologies, Inc. and certain of its subsidiaries (collectively, “Tessera,” a subsidiary of Xperi Corporation (NASDAQ: XPER) (the “Company”)), confirmed more details today on its significant win against Broadcom Corporation (“Broadcom”) and certain of its customers in the U.S. International Trade Commission (“ITC”). Administrative Law Judge (“ALJ”) Sandra Dee Lord issued a notice of initial determination (“ID”) on June 30, 2017, and the Company’s counsel has now received the full ID and confirmed the broad scope of Tessera’s victory.
“We are very pleased with this result, which our counsel has confirmed is a complete victory on the ‘946 Patent,” said Jon Kirchner, the Company’s CEO, referring to U.S. Patent No. 6,849,946 (the “‘946 Patent”). “The ALJ found that the ‘946 Patent is infringed, valid, and has a domestic industry in the United States. This is a key patent on a fundamental manufacturing process technology that is not only very broadly infringed across all of Broadcom’s significant product lines, but, we believe, is used by many others in the semiconductor industry.”
The infringing Broadcom products are semiconductor chips that fall into one of seven technology nodes: 16nm, 20nm, 28nm, 45/40nm, 65/60/55nm, 90nm, and 130nm. The ‘946 Patent covers the largest number of Broadcom products of all three patents at issue in the ITC investigation.
This is the second time that the ‘946 Patent’s validity has been confirmed in the past four months – first by the Patent Trial and Appeals Board when it denied Broadcom’s petition for Inter Partes Review (“IPR”) in March, and now by the ITC. This patent is also at issue in the Company’s parallel lawsuits against Broadcom and Avago in Delaware federal district court, where the Company is seeking damages.
The ALJ also recommended that the ITC issue its standard remedies that would bar Broadcom and its customers Arista Networks, ARRIS/Pace, ASUSTeK/ASUS, Comcast Cable, HTC, NETGEAR, and Technicolor from importing, selling, and engaging in a variety of related domestic activity in connection with infringing imported products. The infringing products include a very wide array of Broadcom chips and the products that incorporate them, such as set-top boxes, routers, modems, gateways, cell phones and other mobile devices, as well as Ethernet switches and other chips designed for data centers, enterprises, and cloud computing servers. The case is now subject to review by the ITC Commissioners.
“We are also pleased by the ALJ’s ruling that the ‘136 Patent is infringed and valid,” Kirchner added, referring to U.S. Patent No. 6,133,136 (the “‘136 Patent”). “This is the second time this patented technology has been found to be infringed by Broadcom – first by a court in Germany and now by the ITC. And now the validity of the patent has also been confirmed. Although the ALJ found that the ‘136 lacked a domestic industry, that is a special requirement unique to the ITC that does not apply in federal district court or in Europe, where the Company has parallel cases against Broadcom.”
“Broadcom has now been found to infringe multiple patents in multiple jurisdictions – two of our U.S. patents and one of our E.U. patents. The ITC decision is our third major favorable decision against Broadcom in the past four months, along with the German infringement ruling and the IPR decision on the ‘946 Patent. We remain interested in negotiating a fair and reasonable license with Broadcom, but absent a satisfactory resolution, we will continue to defend our IP rights and enforce these decisions to the fullest extent of the law,” Kirchner concluded.
INVENSAS WINS GERMAN PATENT INFRINGEMENT CASES AGAINST BROADCOM
Court Bars Sales and Distribution of Infringing Broadcom Chips in Germany
SAN JOSE, Calif.–(BUSINESS WIRE)– Invensas Corporation (“Invensas” or “the Company”), announced today that it has prevailed in two German patent infringement actions against Broadcom Ltd. and certain of its subsidiaries and distributors. Invensas is a subsidiary of Xperi Corporation (Nasdaq:XPER). On March 17, 2017, the District Court of Mannheim issued a judgment in each of the cases finding that Broadcom, Ltd., Broadcom Corporation, and Broadcom Germany GmbH (collectively “Broadcom”), as well as its German distributors Mouser Electronics Inc., EBV Elektronik GmbH & Co KG, and Arrow Central Europe GmbH, infringe the German designation of Invensas’ European Patent No. 1 186 034 B1 (the “‘034 Patent”).
The Mannheim court enjoined Broadcom and the other defendants from offering, putting on the market, using, or importing (or possessing for such reasons) the infringing products in Germany. The court also ordered them to recall infringing products from the German market, to destroy or have destroyed infringing products in their possession in Germany, and to provide an accounting of their infringing activities. The patented technology relates to an interconnect structure for use in flip-chip semiconductor products. The enjoined products include Broadcom chips used in consumer products such as cell phones and other mobile devices, set-top boxes, routers, modems, and gateways, as well as Ethernet switches and other chips designed for data centers, enterprises, and cloud computing servers.
“The court confirmed that Broadcom is infringing our intellectual property, and rejected Broadcom’s arguments that it does not infringe,” said Paul Davis, the Company’s senior vice president and general counsel. “The court’s judgment validates the applicability of our intellectual property across multiple semiconductor segments,” he added. “While we remain willing to continue discussions and negotiate a fair and reasonable license agreement with Broadcom, if Broadcom continues to use our patented technology without authorization, we will take all measures at our disposal to enforce the court’s judgments.”
The court also refused the defendants’ request to stay the infringement cases pending the outcome of a Broadcom affiliate’s nullity action against the patent, which is scheduled for hearing in January 2018. Accordingly, the court’s judgments will become enforceable once they are served on Broadcom and the other defendants and bonds are posted, which the Company expects will occur within approximately one week. The defendants have the right to appeal the Mannheim court’s decisions.
The U.S. counterpart to the ‘034 Patent is at issue in proceedings filed by the Company and its affiliates Tessera Technologies, Inc., Tessera, Inc., and Tessera Advanced Technologies, Inc. against certain Broadcom affiliates and customers in the U.S. International Trade Commission and in the U.S. District Court for the District of Delaware. The Dutch designation of the same European patent is at issue in parallel proceedings in the Netherlands. The ITC trial is scheduled for March 27-31, 2017, and the Dutch trial is scheduled for November 3, 2017.
GERMAN COURT DENIES BROADCOM BID TO STAY INVENSAS PATENT INFRINGEMENT INJUNCTION
SAN JOSE, Calif.–(BUSINESS WIRE)– Invensas Corporation (“Invensas” or “the Company”) announced today that a German appellate court denied Broadcom Ltd. and Broadcom Corp.’s (collectively, “Broadcom”) motion to stay enforcement of a patent infringement judgment that a German district court recently entered against Broadcom. Invensas is a subsidiary of Xperi Corporation (Nasdaq: XPER).
The appellate court’s ruling allows the Company to begin enforcing the district court’s judgment, which enjoined Broadcom and the other defendants from offering, putting on the market, using, or importing (or possessing for such reasons) the infringing products in Germany. The judgment also requires Broadcom to recall infringing products from the German market, to destroy or have destroyed infringing products in their possession in Germany, and to provide an accounting of their infringing activities. The patented technology relates to an interconnect structure for use in flip-chip semiconductor products. The enjoined products include Broadcom chips used in consumer products such as cell phones and other mobile devices, set-top boxes, routers, modems, and gateways, as well as Ethernet switches and other chips designed for data centers, enterprises, and cloud computing servers.
“We are very pleased with the appellate court’s ruling and we intend to begin taking steps to enforce the judgment, including the provisions enjoining Broadcom from selling or distributing the infringing chips destined for the German market, and requiring that Broadcom recall and destroy infringing chips,” said Paul Davis, the Company’s senior vice president and general counsel. “Additionally, we intend to notify certain Broadcom customers, suppliers and distributors of the court’s judgment over the next two weeks to ensure that the infringing products are not shipped into the German market.”
Broadcom filed a motion seeking to increase the bonds that Invensas posted to make the judgment enforceable to at least €505 million. The appellate court has not yet ruled on the bond motion and the Company anticipates that it will be several months before the appellate court holds a hearing and rules on the motion. The judgment is enforceable while the bond motion is pending.
The parties are involved in several parallel proceedings involving the patent-in-suit. Broadcom’s affiliate Avago Technologies GmbH filed a nullity proceeding against the patent-in-suit with the German Federal Patent Court. The Federal Patent Court may issue a preliminary ruling in the Fall of 2017, and a hearing is scheduled for January 2018. Broadcom also appealed the substantive ruling of whether it infringes Invensas’ patent. The Company expects that issue to be heard and decided sometime in 2018. In addition, the U.S. counterpart to the patent-in-suit is at issue in proceedings filed by the Company and its affiliates Tessera Technologies, Inc., Tessera, Inc., and Tessera Advanced Technologies, Inc. against certain Broadcom affiliates and customers in the U.S. International Trade Commission and in the U.S. District Court for the District of Delaware. The Dutch designation of the same European patent is also at issue in parallel proceedings in the Netherlands. The ITC’s initial determination is due on or before June 26, 2017, and the Dutch trial is scheduled for November 3, 2017.