Bloomberg News

Intel Wins First Round in Patent Fight That Threatens Chips

December 14, 2012

Intel Corp. (INTC:US) won the first round of a patent-infringement case that some lawmakers said may threaten jobs at the company’s U.S. manufacturing plants.

The world’s largest semiconductor maker didn’t infringe the patents of closely held X2Y Attenuators LLC, U.S. International Trade Commission Judge David Shaw said in a notice posted on the agency’s website. The next step is a possible review of the judge’s findings by the full commission, which has the power to block imports of products if they infringe U.S. patents.

Lawmakers from both U.S. political parties have taken interest in the outcome, saying a loss for Intel could harm U.S. jobs. That’s drawn the case into a broader dispute over whether patent owners that don’t make products should be able to use the ITC’s import-ban power as a cudgel in fights over licensing fees.

After workers in the U.S. do initial manufacturing work, Intel uses plants in other countries for final assembly, leaving its chips and the products that use them vulnerable to an ITC import ban. Hewlett-Packard Co. (HPQ:US) and Apple Inc. (AAPL:US), which use Intel chips, are also named in the ITC complaint.

The X2Y patents cover ways to overcome electromagnetic interference that can damage electronics. The company, which develops methods for improving the performance of circuits, licenses its inventions to Samsung Electronics Co., the world’s biggest maker of computer-memory chips.

No Infringement

Shaw said that Intel didn’t infringe the three patents, and that two of them are invalid. The judge’s full determination will come after both sides have a chance to redact confidential business information.

“X2Y remains confident that the Commission will protect true innovation regardless of the size of the innovator and will continue to vigorously enforce its intellectual property against these infringers,” X2Y said in an e-mailed statement distributed by an outside spokeswoman, Anne Standley.

Civil suits that X2Y filed in federal court in its hometown of Erie, Pennsylvania, are on hold pending the outcome of the ITC case. The commission has set a target date of April 15 to complete the investigation.

“We are gratified with this result and will continue to defend ourselves in the case pending in U.S. district court,” Chuck Mulloy, a spokesman for Santa Clara, California-based Intel, said in an e-mailed statement.

U.S. Plants

Intel has facilities in Arizona, California, Oregon, Massachusetts and New Mexico. Congressional delegations from all those states have written to the ITC. X2Y’s complaint centers on Intel’s activities at test and assembly plants in Costa Rica, Malaysia, the Philippines and China.

“X2Y approached Intel over a decade ago and explained how X2Y’s technology would improve Intel’s products if Intel wished to take a license,” the company said in a statement on its website. “Intel did not take a license, but appears to have adopted X2Y’s technology anyway.”

The ITC, whose job is to protect U.S. markets from unfair competition, has tightened its standards, requiring patent owners to have “significant licensing activities,” weeding out complaints from some with no real business operations. Shaw found that X2Y had met the threshold requirement of having a domestic industry worthy of protection.

The case is In the Matter of Microprocessors, Components Thereof, and Products Containing Same, 337-781, U.S. International Trade Commission (Washington).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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