Jim,
from the Yahoo thread via Wi_zard
Something afterall to the TechSearch stuff.
news.excite.com
Intel Loses Key Ruling In $8B TechSearch Suit
Updated 4:09 AM ET November 10, 1999
WASHINGTON (Dow Jones)--TechSearch LLC's patent- infringement suit against Intel Corp. (INTC) just got a little more troublesome to the giant semiconductor maker.
Intel lost a key ruling regarding interpretation of the patent claims last week and the damages sought were recently pegged at $2 billion to $8 billion, considerably more than initial estimates, according to TechSearch attorney Raymond Niro.
The patent at issue covers the "heart and soul" of Intel's business, including the Pentium Pro, Pentium II, Pentium III and MERCED microprocessors, Niro said.
Intel had urged U.S. District Senior Judge William H. Orrick to adopt a very narrow interpretation of words used in the patent, but the judge rejected that approach during a so-called "Markman" hearing on Nov. 1, Niro said, accepting the broader definition sought by TechSearch.
"This is a big hurdle for plaintiffs in patent litigation," according to Niro. "To get an interpretation of claims that doesn't lead to a finding of non-infringement is a big issue."
Downplaying TechSearch's characterization of the ruling, an Intel spokesman said a Markman hearing is only a procedural matter.
"Without claiming victory or defeat with respect to the Markman hearing," Intel spokesman Chuck Mulloy said, "as a result of the judge's ruling, we filed a motion for summary judgment to invalidate the patents."
Mulloy declined to comment on specifics of the judge's ruling, stating that he wasn't present at the hearing.
"The case is without merit, the patents are not valid and we're continuing to prepare for trial," Mulloy reiterated. The trial is scheduled to begin Jan. 10.
But a patent litigation expert, without commenting on the specifics of this case, said that the Markman hearing, named after the U.S. Supreme Court case that determined claim construction is the judge's rather than the jury's job, can be "very, very significant," but he cautioned it is a double edged sword.
Mark Banner, partner in Washington, D.C.-based firm Banner & Witcoff Ltd., and adjunct professor for patent litigation at Georgetown University Law Center, said while a broad claim construction may be beneficial to the patent owner, the broader the claim, the more likely it is to be invalid.
"It's a bit of careful line drawing that a patent owner has to go through when he drafts his claims and litigates them in a Markman hearing," Banner said.
"If the court accepts the claim description that the patent owner was shooting for, it's more likely that there will be infringement," Banner said.
However, Banner cautioned that a favorable Markman construction for a patent owner doesn't always result in infringement because there is a dispute over where the accused device fits within the claim.
The judge has certified the decision for immediate appeal to the U.S. Court of Appeals for the Federal Circuit, however, that court rarely accepts these types of appeals, preferring to wait and decide the issue at the end of the case, according to Niro.
Banner added that the Federal Circuit has never taken a Markman ruling as a certified appeal.
Intel has not yet decided whether it will appeal the ruling, according to Mulloy.
Intel disclosed in its quarterly report filed Tuesday with the Securities and Exchange Commission that in October TechSearch's expert claimed that the company is entitled to damages ranging from $2 billion to $8 billion.
Intel said in the filing that it disputes the claims and intends to defend the lawsuit vigorously.
Intel's expert has said damages range from $1 million to $5 million, according to Niro. "The debate is what would be reasonable -- what would a willing buyer and seller agree to in an arm's length agreement? That's the issue that goes to the jury," Niro said.
Niro said TechSearch's estimated damages are based on a 5% royalty of Intel's $40 billion in sales through December of the P6 microprocessors at issue. The low end of the range represents the 5% royalty calculation, while the high end represents half of Intel's operating profit -- both acceptable methods of calculating damages in patent-infringement suits.
Damages had previously been estimated at $500 million to $1 billion based on estimated sales, but after TechSearch took a look at Intel's actual sales, Niro said, the damage amount rose. "It is really based on the success of the invention," Niro noted.
In August 1998, TechSearch filed the patent-infringement suit against Intel in Chicago, and a month later the suit was transferred to the Northern District of California.
In January 1998, TechSearch purchased the patent from International Meta Systems Inc. (MESQ), which filed for bankruptcy shortly after selling the patent. TechSearch paid $50,000 plus 10% of whatever the net recovery might be from the Intel suit, according to Tony Brown, TechSearch president and chief executive.
International Meta's shareholders tried unsuccessfully to void the sale through the bankruptcy proceeding. However, in July the U.S. Bankruptcy Court in Austin, Texas, approved a settlement that definitively solved the disputed patent ownership and reworks the purchase agreement.
Under terms of the settlement, according to Brown, TechSearch will pay the bankruptcy estate $150,000 of the first $300,000 of any recovery from the Intel suit plus 12.5% of the gross amount of recovery over $300,000 (up to $6 million) and then 5% of gross or 10% of net recovery over $6 million.
Intel became embarrassingly embroiled in International Meta's bankruptcy proceedings when it came to light last spring that Intel owned a Cayman company that sought to buy the patent through the bankruptcy proceeding. Intel failed to disclose its ownership and the judge overseeing the proceedings described the maneuver as "totally inappropriate" because Intel was attempting to use the bankruptcy estate to bring leverage upon TechSearch in the patent litigation.
Although the patent-infringement trial is set to begin Jan. 10, Intel has two chances to win the case before proceeding to a full-blown trial. Intel has motions pending for the court to invalidate TechSearch's patent on various grounds. One hearing is set for Nov. 23 and another in December to decide the issue, according to Niro. If the case survives these motions, the trial will start on schedule, according to Niro, because Judge Orrick has told the parties that the trial date is "cast in concrete."
Intel's Mulloy originally said in an April Wall Street Journal article that the TechSearch suit was without merit and characterized TechSearch as a "company that exists solely for the purpose of purchasing patents and extorting funds from another company."
This comment spawned a defamation suit by TechSearch, filed in Chicago but later transferred to the Northern District of California. That case has been stayed while the patent litigation goes forward, Niro said.
-Patti Dennis; Dow Jones Newswires; Federal Filings Business News; 202-628-7698
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