Federal Circuit Vacates VLSI’s $2.2 Billion Damage Award Against Intel | Weintraub Tobin
On December 4, 2023, the Court of Appeals for the Federal Circuit vacated a $2.18 billion damage award against defendant Intel Corporation because it found plaintiff VLSI Technology LLC had erred on its damages calculation, that one of the asserted patents was not infringed, and that Intel was wrongly barred from raising a defense that it had a newly acquired license to the asserted patents.
On April 11, 2019, VLSI sued Intel, alleging infringement of two patents. After a trial in March 2021, a jury found infringement of both patents and awarded separate damages for each. The verdict was for $1.5 billion for literal infringement of one patent and $675 million for infringement under the doctrine of equivalents of a second patent.
The court also ruled, after the trial, on a motion that Intel had filed in the fall of 2020, a few months before trial, in which Intel sought to amend its answer to assert a defense that it was licensed to practice both VLSI patents. The motion was based on a recent change in ownership of Finjan, Inc., which had a license agreement with Intel. Intel argued that the license now covered VLSI’s patents because VLSI and Finjan were now both under the control of Fortress Investment Group LLC. The district court denied the motion.
On appeal, the Federal Circuit affirmed the judgment of infringement on one of the asserted patents but reversed the judgment of infringement on the other patent. Specifically, the Federal Circuit found, based on the evidence presented, that VLSI’s doctrine of equivalents theory failed as a matter of law, and therefore, the judgment of infringement was reversed on that patent.
As to damages, the Federal Circuit remanded the case for a new trial on the issue of damages. The Federal Circuit found VLSI’s expert had used inputs that he chose by trying to match data from the use of non-infringing functionality, which undermines the reliability of the results as a calculation of power savings from the use of the infringing functionality. And the Federal Circuit reasoned it could not deem this step in the damages calculation harmless as to the bottom-line amount of damages such that the error “could not have changed the result,” namely, the precise amount of damages.
But, the Federal Circuit also found no sound basis, given the nature of the error found or of the other errors alleged, for denying VLSI an opportunity to provide a corrected damages case, and found no sound basis, in the error found or the other errors alleged, for setting aside the liability verdict as infected by the damages verdict. Thus, the Federal Circuit remained the case for a new trial on the issue of damages.
As to the license defense raised by Intel, the Federal Circuit found that the district court’s conclusion that Intel unduly delayed filing its motion—between the time of the July 24 acquisition and the filing of the November 10 motion—was an abuse of discretion. Intel was required by the 2012 license agreement to follow certain procedures, and the Federal Circuit found Intel acted with diligence in doing so. Specifically, on August 17, 2020, in accordance with the process requirements, Intel sent a letter to Finjan, VLSI, and Fortress stating that Intel holds a license to VLSI’s patents under the 2012 Intel-Finjan license agreement and that Intel would like to begin the dispute resolution process. Then, on September 2, 2020, Intel filed its motion to stay in light of the new license defense. When the district court had not ruled by early November, Intel filed the motion now at issue on November 10, 2020, stating that it moved to amend its answer “[t]o avoid any doubt that Intel has preserved its defense of license in this case.” Thus, the Federal Circuit did not see any reasonable basis for a determination of undue delay.
The Federal Circuit also does not find any basis on which prejudice alone could support the denial of the motion. Intel requested severance of the defense from the rest of the case and a stay of its adjudication so a trial of the other issues was not to be delayed.
However, the Federal Circuit stated that it was only holding that it was an error to deny the motion to add the license defense to the case, which it said “is a very narrow holding.” The Federal Circuit made clear that it did not conclude that the license defense was meritorious. It only found that the governing law is such that the defense requires additional litigation of the sort that begins once it is added to the case, whether that process is a fully developed motion to dismiss, with a fuller analysis of the governing law than has yet occurred, or more fact-based litigation.
The Federal Circuit then remanded the case back to the district court for further proceedings consistent with its opinion.
