Marvell Urges Appeals Court to Toss $1.2 Billion Patent Verdict

Marvell Technology Group Ltd. told a U.S. appeals court that the $1.17 billion patent-infringement verdict it lost to Carnegie Mellon University threatens to alter how all technology is licensed.

“This would have sweeping consequences” if upheld because the damage award included sales outside the U.S., Marvell’s lawyer, Kathleen Sullivan of Quinn Emanuel in New York, told the U.S. Court of Appeals for the Federal Circuit in Washington on Tuesday.

The patent verdict -- the fourth biggest in U.S. history -- won by the Pittsburgh school was over university-designed technology to detect data on disk drives as the amount of information grew and chip size got smaller. Carnegie Mellon claimed that chipmaker Marvell, in danger of losing business in the 1990s, copied the school’s inventions in its chips for computers and mobile phones without paying royalties for more than a decade.

“You almost never see copying as blatant or as reckless as this,” Josh Rosenkranz of Orrick Herrington in New York, arguing for Carnegie Mellon, told the three-judge panel. “You never see such a stark picture of a company struggling and about to run out of business and then rising to the top.”

The verdict has since climbed to more than $1.54 billion after the trial judge tacked on $287.2 million for willful infringement plus interest.

Marvell is contesting the verdict with pretty much every legal theory available, from the validity of the patents to the judge adding to the jury’s damage award. Google Inc., Microsoft Corp., Broadcom Corp. and other tech companies filed court papers supporting Marvell on the inclusion of overseas chip sales in the damages simply because they were designed in the U.S. They say the lower court ruling would encourage companies to move their research and testing activities overseas.

50 Cents

Arguments centered on the interpretation of what the patents cover and the damages. Sullivan said that, even if the court upholds the liability part of the case, it should toss the damage award and order a new trial. The 50-cents-a-chip royalty is excessive considering chips cost less than $5 each and the size of the award is a violation of federal law that limits royalties to sales within the U.S., Marvell argued.

“No reasonable jury could have found 50-cents-a-chip on worldwide sales is a reasonable royalty,” Sullivan told the judges.

Rosenkranz said the entire “sales cycle,” which included Marvell’s design and testing of the patented method, as well as negotiations with its customers in Northern California, was all done in the U.S.

“It was not only necessary for Marvel to infringe to save its life, it was necessary to infringe in Silicon Valley,” he said.

‘Disastrous Policy’

The tech companies filing on behalf of Marvell said the ruling would encourage companies to move their research and testing activities overseas.

“The district court’s ruling was wrong as a matter of law and would be disastrous as a matter of policy,” they said in a filing with the court. “The intrusion on foreign sovereignty would both encourage other nations to retaliate and discourage them from cooperating with U.S. intellectual property initiatives.”

The timing of the decision could be important for the Hamilton, Bermuda-based Marvell. Investors and analysts are projecting a rising number of acquisitions in the chip sector this year, particularly after NXP Semiconductors NV agreed to buy Freescale Semiconductor Ltd. last month for $11.8 billion.

The $1.54 billion patent verdict equals about 42 percent of the company’s $3.7 billion in revenue for the year ended Jan. 31.

The appeal is Carnegie Mellon University v. Marvell Technology Group Ltd., 14-1492, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Carnegie Mellon University v. Marvell Technology Group Ltd., 09cv290, U.S. District Court for the Western District of Pennsylvania (Pittsburgh).

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