Dec. 23 (Bloomberg) -- Chip companies are turning to armies of patent lawyers to bolster revenue amid the worst market for semiconductors since 2001.

Qimonda AG, LSI Corp. and Spansion Inc. are among the chip companies using the U.S. International Trade Commission in Washington to try and block imports of rival products or garner patent royalties. The government agency has started investigating 42 intellectual-property complaints this year, the most since 1983.

“Lawyers are expensive, particularly patent lawyers in Silicon Valley, but it’s a great area to get money,” said Hans Mosesmann, a semiconductor analyst for Raymond James & Associates in New York. “You’re going to see more litigation and more aggressive maneuvering.”

Chipmakers, already reeling from plunging prices caused by overproduction, now face falling demand. Chip sales slid 4.4 percent this year, and will slump 16 percent in 2009, the first back-to-back decline on record, according to research firm Gartner Inc. in Stamford, Connecticut.

Qimonda, LSI and Spansion, which make chips for mobile phones and computers, brought cases to the ITC because the agency typically completes investigations in half the time of a U.S. court and has the power to stop imports at the U.S. border. That’s an incentive for companies to sign patent licensing agreements, increasing the patent owner’s revenue.

“Jerry Sanders, the founder of AMD, used to say, ‘Real men own fabs,’” said Craig Berger, an analyst at Friedman Billings Ramsey & Co., referring to the chip-fabrication plants run by Advanced Micro Devices Inc. “That’s kind of changed. Now it’s, ‘Real men have huge armies of lawyers.’”

Licensing Fees

Spansion could bring in “hundreds of millions of dollars a year” in licensing revenue from patents, Chief Executive Officer Bertrand Cambou said. The company, which hasn’t made a profit since going public in 2005 and doesn’t reveal how much it collects in licensing, filed a patent-infringement complaint last month against South Korea’s Samsung Electronics Co. after licensing talks failed. Spansion claims its patents cover flash- memory chips made by Samsung, which are used in phones and music players.

If Sunnyvale, California-based Spansion succeeds, the ITC could ban products using Samsung’s chips, including Research In Motion Ltd.’s BlackBerry and Apple Inc.’s iPod.

Qimonda, the memory-chip unit of Neubiberg, Germany-based Infineon Technologies AG, filed a complaint in November to block chips made by LSI for Seagate Technology. This week, Infineon said Qimonda will get a loan of 325 million euros ($452 million) from Infineon, the German state of Saxony and a Portuguese bank.

LSI Battle

LSI, based in Milpitas, California, is in the midst of a battle with rivals Freescale Semiconductor Inc., Cypress Semiconductor Corp. and Elpida Memory Inc. LSI says the companies violated its patent for making semiconductors using tungsten metal.

Officials with Qimonda, LSI and Samsung declined to comment on the litigation.

An ITC case can be more expensive than a civil suit because of the tight deadlines for filing paperwork, questioning witnesses and holding hearings, so patent owners have to weigh whether it’s worth the $5 million or more in legal costs. Meanwhile, those targeted by the complaints must decide if paying a licensing fee is cheaper than fighting for the right to sell their products in the U.S., said Robert Krupka, co-head of the intellectual property group at law firm Kirkland & Ellis.

‘Like a Toll’

“No one in an economic downturn wants to be excluded from the biggest market in the world,” Los Angeles-based Krupka said. “It’s like a toll. I’m willing to pay a royalty if the total royalty still leaves me with a profit and is less than the litigation.”

While the ITC can’t force royalty payments, its power to bar imports is a strong incentive to reach an agreement, Krupka said.

“These complaints are filed not simply to get competitors excluded, but to ratchet up the pressure for a licensing deal,” said James Adduci, a lawyer at Adduci, Mastriani & Schaumberg in Washington, who specializes in ITC patent cases. “In tough economic times, you are likely to see an increase in that kind of activity.”

The ITC, which had four judges two years ago, hired its sixth earlier this month. The agency handled 43 claims in 1983, when the U.S. had its worst recession since World War II, spokeswoman Margaret O’Laughlin said.

Eastman Kodak

Not all of its cases involve computer chips. Eastman Kodak Co., the 128-year-old photography company, has a pending case against Samsung and LG Electronics Inc. over camera-phone technology. Microsoft Corp., the world’s biggest software maker, went to the ITC to push a licensing agreement with Taiwan’s Primax Electronics Ltd. over technology used in computer mice. The case was settled Dec. 17.

“The ITC is a very important and very effective mechanism to address intellectual property situations,” said Horacio Gutierrez, Redmond, Washington-based Microsoft’s general counsel for intellectual property licensing. “It’s clearly an important approach because of the efficiency and speed and the sophistication they’ve developed on the patent legal questions.”

Technology companies will continue to turn to the ITC because “there is not a bigger club around” when it comes to enforcing patent rights, Adduci said.

Spansion’s Cambou said that’s why they chose the ITC to go after Samsung.

“The ITC is a forum that’s going to be powerful enough for those people to talk to us, and that’s what we want,” Cambou said. “Samsung respecting our IP is going to send the right message -- people are going to work with us or they are not going to access the market freely.”

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net

Last Updated: December 23, 2008 00:01 EST