Marvell Gets Reduced Damages in $1.17 Billion Patent Verdict

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Marvell Technology Group Ltd. must pay at least $278.4 million for infringing Carnegie Mellon University patents over disk drives, and may have to pay more after a court threw out part of the original $1.17 billion verdict.

The chipmaker infringed the university’s patents, but should only pay royalties on those chips that were imported or sold in America, the U.S. Court of Appeals for the Federal Circuit said in an opinion posted on its electronic docket Tuesday. For the chips brought into the U.S., the court said Marvell should pay $278.4 million in past royalties plus any amount to cover infringement since the verdict.

As to chips made overseas and not imported into the American market, only those in which a “sale” took place in the U.S. can be included in any damage award. A trial judge will have to reconsider that issue, the court ruled.

The ruling will have a broad impact on how technology licensing and negotiations are conducted. A key part of the appeal centered on whether Marvell should have to pay royalties on chips sold overseas because they were designed, tested and marketed in the U.S. Marvell was backed by Google Inc., Microsoft Corp., Broadcom Corp. and other tech companies that said the lower court ruling would encourage companies to move their research and testing activities overseas.

Marvell rose as much as 5.6 percent on the news, before falling 1.8 percent to close at $12.25 in New York trading.

‘$1.25 Billion’

The final judgment was more than $1.54 billion, with interest and additional royalties added. Marvell said it was pleased with the decision, which reduced the damage award by “more than $1.25 billion.”

“The company is studying the specifics of the opinion carefully to determine its options,” it said in a statement.

Carnegie Mellon also was happy with the parts of the decision it won and is studying “the next appropriate steps.”

“Research universities such as Carnegie Mellon University drive innovation and scientific progress,” according to a statement. “The protection of intellectual property rights arising from the cutting edge work of faculty and students is vital to their mission and enables CMU, other universities and their commercial partners to obtain a return on the significant resources invested in that research.”

Settlement Possible

The decision increases the likelihood of a settlement between Marvell and the Pittsburgh-based university since both sides got something in their favor. The jury had awarded royalties of 50 cents each for a chip that sells for less than $5, and the court upheld that rate. The panel completely threw out $287.2 million imposed for willful infringement.

“Marvell might want to run with that and see if they can negotiate a favorable license moving forward,” said Matt Larson, a litigation analyst for Bloomberg Intelligence.

The company needs to limit its exposure to patent litigation if it plans any sale, he said. Marvell Chief Executive Sehat Sutardja in February said he would consider “anything that makes sense to the shareholders” when asked if he would sell the company’s mobile-phone chip business.

For Carnegie Mellon, it’s guaranteed about $300 million with the ongoing royalties, said Gaston Kroub, a member of litigation analyst firm Markman Advisors.

‘No. 3’

“You have to choose -- do you let it ride or take what you have in front of you?” Kroub said. “There may be more money behind door No. 3 for Carnegie Mellon, but they’re looking at a multiyear process to get that money.”

Carnegie Mellon argued that the “sales cycle,” including negotiations with customers in Northern California, was all in the U.S. The Federal Circuit said there was incomplete information to determine if the actual sales occurred stateside.

The ruling may lead companies to be more careful in negotiations to ensure their overseas sales aren’t subject to U.S. patent law, Larson said.

“Contract talks will most likely be outside the U.S.,” he said.

The dispute is over a design for disk drives that can store more information even as they shrink to fit in mobile phones rather than desktop computers. Carnegie Mellon claimed that 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.

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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