Bloomberg News

Marvell Said to Deserve It as $1.2 Billion Verdict Upheld (3)

September 23, 2013

Marvell Technology Group Ltd. (MRVL:US) failed to overturn a $1.17 billion verdict it lost last year to Carnegie Mellon University after a judge said it deserved to pay for deliberately infringing patents for hard-disk drives.

U.S. District Judge Nora Barry Fischer in Pittsburgh today denied Marvell’s request for a new trial on either liability or damages, and agreed with Carnegie Mellon’s argument that the jury’s award should be increased because it found willful infringement. The judge said she would issue a further opinion later. The verdict was the fourth-biggest patent decision in U.S. history, according to data compiled by Bloomberg.

The jury said Marvell intentionally infringed two Carnegie Mellon patents for a way to more accurately detect data from computer hard-disk drives. The university claimed Marvell knew of its inventions and intentionally incorporated the technology in its chips for computers and mobile phones for more than a decade.

“There was adequate evidence upon which a reasonable jury could properly find a verdict in favor of CMU” on infringement, Fischer said. She also rejected Marvell’s invalidity arguments and said the damage award, while large, isn’t disproportionate because it was based on more than $10.3 billion in Marvell sales.

Marvell fell 43 cents, or 3.4 percent, to $12.03 at 4:30 p.m. Sukhi Nagesh, a spokesman for Marvell, said in an e-mail the company had no comment on the ruling and repeated prior statements that it doesn’t infringe the patents. He said in the e-mail that “we are disappointed with the jury verdict and Marvell will be appealing to the federal courts.”

‘Bad Facts’

Fischer also upheld the finding that Marvell knew about the university patents and went ahead with its designs anyway. The company’s “bad facts and even worse litigation strategy were fatal to its cause,” the judge said.

“Marvell is in its current predicament because it deliberately undertook a series of strategic risks,” the judge said. “Now, Marvell looks to the courts to relieve it from the damages award it faces from taking those risks.”

Of the $1.67 billion verdict, $535 million was based on sales from the time the suit was filed in 2009 to July 29, 2012, the judge said. That, as well as $181.9 million in additional royalties incurred between July 2012 and Aug. 2, could have been avoided had the two sides reached a settlement or agreement, such as establishing “the Marvell Hall of Engineering at CMU” in 2009, the judge said.

Marvell told the jury that a reasonable royalty would have been $250,000 and presented no alternative to the royalty rate argued by Carnegie Mellon, leaving jurors to choose between $250,000 and $1.67 billion, Fischer said.

‘Sound Asleep’

“At one point in trial, the court observed two out of Marvell’s three experts sound asleep for a period of time,” the judge said. “In all likelihood, the jury made the same observation.”

The judge has yet to rule on Marvell’s argument that the university took too long to file the suit, which could lower the damage award, or on Carnegie Mellon’s request for either an order blocking further use of its inventions or a payment schedule for future royalties.

Marvell, which reported $3.17 billion in sales for the year ending Feb. 2, 2013, said in an April 12 court filing that the verdict should be no more than $164.6 million. The Hamilton, Bermuda-based company argued it shouldn’t be held liable for chips that aren’t used in the U.S., an argument Fischer rejected.

Carnegie Mellon in Pittsburgh asked that the jury award be increased based on the finding of intentional infringement, and that Marvell be ordered to pay ongoing royalties of as much as $1.50 for each chip sold. The jury award was based on a royalty of 50 cents per chip.

University Invention

Carnegie Mellon said Marvell performs research and development in the U.S., and then uses simulators to test designs and maintains a “golden unit” -- a master version --in California.

University researchers in the 1990s developed a way to reduce unwanted electrical signals, known as media noise, that made it harder to detect data on a disk. The invention, according to the university, is used throughout the industry.

Marvell was experiencing falling sales in the late 1990s and “was desperate to satisfy its customers’ persistent demands to combat the ever-increasing media noise,” so began incorporating the invention in its chips, Carnegie Mellon told the court.

Marvell said the industry doesn’t use the technology because it’s too complex. It said its chips “include hundreds of features, built from millions of transistors, using Marvell’s own proprietary and innovative designs.”

Bermuda Incorporation

The university said Marvell has increased its share buyback program and began paying a quarterly dividend in an effort to reduce its ability to pay any judgment in the case, and incorporated in Bermuda to limit exposure in U.S. courts. The company hasn’t set aside reserves to pay for the verdict.

In a Sept. 5 regulatory filing, Marvell said it doesn’t believe a material loss is probable, and that “there are strong grounds for appeal.”

Among all jury verdicts, it was the largest in a patent case in 2012, ahead of the $1.05 billion won by Apple Inc. against Samsung Electronics Co., in which a new trial has been ordered for half the damages, and a $1 billion verdict won by Monsanto Co. (MON:US) against DuPont Co. that was later settled.

The case is Carnegie Mellon University v. Marvell Technology Group Ltd., 09cv290, U.S. District Court for the Western District of Pennsylvania (Pittsburgh).

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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Companies Mentioned

  • MRVL
    (Marvell Technology Group Ltd)
    • $13.96 USD
    • 0.01
    • 0.07%
  • MON
    (Monsanto Co)
    • $116.19 USD
    • -0.08
    • -0.07%
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