Published Monday, October 23, 2000, in the San Jose Mercury News
Chip tools maker probed in patent fight
Mercury News Staff and Wire Reports
A recently disclosed Justice Department antitrust probe of chip-equipment giant Applied Materials Inc. of Santa Clara involves the company's past patent dispute with rival Novellus Systems Inc. of San Jose, USA Today reported.
The newspaper, citing people familiar with the investigation, reported that government officials are probing whether the leading maker of chip-making equipment has improperly used its leverage in patent disputes to stifle competition.
Applied disclosed earlier this month that it had been notified that the Justice Department was investigating the company's licensing of technology and said it was cooperating fully and expected the government would not take action against the company.
The inquiry is narrowly focused on licensing and doesn't involve Applied's general sales and business practices, company spokesman Jeff Lettes said Sunday. Licensing -- the practice by which one company grants another the right to use it proprietary technology -- accounts for only a small part of Applied's revenues, he said.
Lettes said the company did not know what sparked the inquiry, although USA Today reported it was touched off by a 1997 settlement of a patent-infringement suit between competitors Applied and Novellus. Under the agreement, Novellus agreed to pay Applied an $80 million licensing fee after a jury said Novellus had violated Applied's patent on a chip-making technology called chemical vapor deposition. Novellus and Applied are currently involved in separate litigation involving different technology.
The 1997 agreement included a provision addressing what would happen if Novellus were acquired, according to USA Today. The newspaper quotes Applied's lawyer, Joe Sweeney, as saying the provision gives Applied the right to end Novellus' license if it were acquired. The reason: Applied would not want the technology to go to a new firm, possibly a rival. ``We believe our licensing practices are in full compliance with the law,'' he said.
``This is something we had to accept to maintain any growth at all,'' the newspaper quotes Novellus spokesman Bob Climo as saying. He said Sunday he did not know what had sparked the Justice Department probe.
``Somebody obviously had complained to the Department of Justice,'' securities analyst Sue Billat said Sunday. ``Could it be Novellus? I don't know. An awful lot of time has passed,'' the analyst for Robertson Stephens said. ``But it's certainly within the realm of possibility. . . . They're direct competitors.''
In addition to the Novellus matter, the Justice Department also is probing whether Applied generally has used patent settlements to hamper rivals, USA Today reported.
Regulators are increasingly scrutinizing companies' use of intellectual property to put competitors at a disadvantage, said Pamela Samuelson, an intellectual property expert at the University of California-Berkeley.
Mercury News Staff Writer Evelyn Richards contributed to this report.
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