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Frequently Asked Questions Concerning the Status of the CMU Litigation


Introduction

On December 26, 2012, a jury in Pittsburgh delivered a verdict in a lawsuit brought by Carnegie Mellon University (“CMU”) against Marvell Technology Group Ltd. (“Marvell”) in the United States District Court for the Western District of Pennsylvania (the “District Court”). The jury found that the two CMU patents at issue were literally and willfully infringed and not invalid, and awarded damages in the amount of $1.17 billion. Marvell believes that the evidence and the law do not support the jury’s findings and the award of damages. As a result, Marvell sought to overturn the verdict in post-trial motions before the District Court and in view of the District Court’s rulings, as discussed in more details below, on May 14, 2014, Marvell filed a notice of appeal. The appeal is ongoing, before the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.

Marvell is providing the following FAQs to provide additional information to Marvell stakeholders and partners regarding the current status of the CMU litigation. Marvell has compiled the following from publicly available sources including the proceedings of the litigation. Marvell believes that additional details regarding Marvell’s position regarding the jury verdict, the District Court’s rulings, and the litigation may further clarify the status of the CMU litigation.

Appeal

What is the status of the appeal?

On May 14, 2014, Marvell filed a notice of appeal in order to file an appeal to the Federal Circuit Court of Appeals. The Federal Circuit is a specialized appellate court that has jurisdiction over all appeals in patent cases. On August 4, Marvell filed its opening appeal brief (“Marvell’s Opening Brief”). On August 11, fifteen distinguished law professors and nine leading high-tech companies joined in support with two amici curiae (friends of the court) briefs on the issue of foreign sales (“the Professor Brief” and “the Tech Company Brief”). All these briefs are downloadable from the links below.

Marvell's Opening Brief argued that the underlying patent claims were plainly invalid, were never infringed, that the award of damages for foreign chips was entirely unprecedented and the royalty rate was not supported by any reliable evidence. No verdict of such proportion has ever been affirmed by the Federal Circuit, much less one where CMU offered licenses to the patents for less that 0.02% of this verdict. The preliminary statement of Marvell’s opening brief appears below:

"No patent infringement judgment for more than a billion dollars has ever received this Court’s imprimatur, and the $1.535 billion judgment here should not be the first. That judgment […] involves two method-patent claims relating to microchips used to improve the accuracy of data read from hard-disk drives. But CMU’s patents were incapable of commercial implementation in a semiconductor chip. Thus, when CMU sent letters in 2003 to ten companies inquiring about interest in licensing its patents, not one nibbled. And in 2005, when CMU offered to license one of the two patents as part of a group of patents to Intel for a flat fee of $200,000, Intel declined. Yet upon finding that Marvell’s commercially-successful chips infringed CMU’s patent on a theoretical algorithm, the district court awarded a running royalty of fifty cents per chip on the more than 2 billion chips that Marvell sold worldwide over nearly a decade. In short, the largest extant judgment in patent history, resting on hypothetical per-unit royalties on worldwide sales, was awarded for infringement of two patents that no one has ever paid a penny in per-unit royalties to license in the commercial marketplace.

How did this happen? The district court itself doubted that this could be a billion-dollar case. See A42659:2-3 (doubting that “there’s going to be a billion dollar judgment myself”). The answer turns on a series of legal errors by the district court that require this Court’s reversal:

To begin with, the CMU patents should have been found invalid as anticipated by the prior art. The two claims that went to trial both disclose precisely the same elements as the Worstell patent.

The district court likewise erred in denying JMOL of noninfringement. Because CMU did not assert infringement under the doctrine of equivalents, every element of the asserted claims must read exactly onto an accused device. But they do not. Marvell’s NLD chips use a pre-filter circuit, outside the Viterbi “trellis,” to determine a single signal sample. CMU’s claims, by contrast, require a branch-metric function to be performed on a plurality of signal samples, inside the trellis. Likewise, Marvell’s MNP chips use a conventional Viterbi detector and a post-processor where the output of the Viterbi is compared to two alternative sequences to correct errors. By contrast, according to the inventor, CMU’s invention addresses media noise “in a trellis and NOT in post-processor.” Finally, CMU’s claims are directed to the use of detectors, and Marvell’s simulations are not detectors.

Even if the judgment of liability could stand, the jury’s damages award of $1.17 billion cannot. The court improperly admitted expert testimony conjuring a hypothetical-license royalty of $.50 per chip on worldwide sales despite uncontroverted evidence that the only licenses CMU had ever granted were modest flat fees. Nor was there any legal basis for the award of some $900 million based on Marvell’s sale of foreign chips—chips that were manufactured, sold, and used abroad, without ever entering the United States. This extraterritorial application of U.S. patent law, if affirmed, would lead global companies to locate their research, development, and customer-relations activities outside the United States, harming not only U.S. companies and workers, but also the U.S. universities with whom they partner.

In any event, the $.50-per-chip rate is unsupported by any evidence that any similar patents command such a figure in the real world, and cannot be sustained by (i) an “excess profits” theory that uses Marvell’s business-wide profit goal as its benchmark or an (ii) “operating profit premium” theory that rests on a tiny amount of unrepresentative sample chips, both conjured for this litigation by CMU’s damages expert.

The award of $287 million in enhanced damages for willfulness should also be vacated, for Marvell had objectively reasonable invalidity and non-infringement defenses.

And once the district court found that CMU had “inexcusably” and “unreasonably” delayed for [nearly] six years before bringing suit, to Marvell’s prejudice, it should have excluded $620 million in pre-suit damages as barred by laches.”

The Professor Brief emphasized:

“The practical effect of [CMU’s] damages theory is to confer a worldwide patent right, contrary both to established precedent and sound innovation policy.”

“Virtually all technology companies designing a new product produce a small number of prototypes, demonstrate those prototypes to potential customers, and tweak their designs based on customer feedback—often over the course of months or years in a lengthy iterative process indistinguishable from Marvell’s so-called ‘sales cycle.’”

“[A]ny technology company worth its salt does precisely what Marvell did in this case. Technology companies, across all industries, routinely work, first, internally and, later, with potential customers to test and tailor product prototypes.”

“A holding from this Court that such conduct is sufficient to draw worldwide sales into the ambit of U.S. patent litigation will effectively render the extraterritoriality rule a dead letter.”

The list of signatories includes:

  • Professor Jeremy Bock
  • Professor Michael A. Carrier
  • Professor Bernard Chao
  • Professor Jorge L. Contreras
  • Professor Robert A. Heverly
  • Professor Timothy R. Holbrook
  • Professor Amy L. Landers
  • Professor Mark A. Lemley
  • Professor Yvette Joy Liebesman
  • Professor Brian J. Love
  • Professor Tyler T. Ochoa
  • Professor Pamela Samuelson
  • Professor Christopher B. Seaman
  • Professor Lea Shaver
  • Professor Toshiko Takenaka

The Tech Company Brief stated that:

“Amici, and technology companies generally, were shocked to learn that a U.S. court would impose massive patent damage award based on sales of products that never touched U.S. soil and thus could not have infringed any U.S. patent.”

“The alleged domestic use in this case involved research, development, and internal testing and evaluation of engineering samples. According to the district court, this precursor activity was a but-for cause of all of Marvell’s worldwide sales, entitling Carnegie Mellon to a share of all of Marvell’s global revenue for the chips at issue—to the tune of over $1.5 billion. That result was astounding and explains amici’s participation here because amici currently research, design, test, and develop many of their products in this country. To amici’s knowledge, no U.S. court has previously awarded U.S. patent damages based on the value of products made, distributed, and used abroad. Amici, and technology companies generally, were shocked to learn that a U.S. court would impose massive patent damage award based on sales of products that never touched U.S. soil and thus could not have infringed any U.S. patent.”

“In an era when good jobs are scarce and this country’s economic health depends in large measure on technology companies, courts should be wary of expanding the scope of patent damages in a way that encourages innovative companies to move their operations abroad. U.S. patent infringement will still be adequately deterred if U.S. patent damage awards remain limited to products made, used, sold, or imported in this country.”

“As a matter of both law and sound policy, the damage award cannot stand.”

The list of signatories includes:

  • Broadcom Corporation
  • Aruba Networks, Inc.
  • Dell Inc.
  • Google Inc.
  • Hewlett-Packard Company
  • Limelight Networks, Inc.
  • Microsoft Corporation
  • SAS Institute Inc.
  • Xilinx, Inc.
Patent Office

Are the CMU patent claims subject to any patent office proceedings?

Both of the two asserted patent claims are subject to ex-parte reexamination at the U.S. Patent and Trademark Office ("USPTO"). Earlier this year, the USPTO in instituting the reexaminations (control numbers 90/013,124 and 90/013,125) found that substantial new questions of patentability exist as to the asserted claims. The reexamination proceeding materials are publicly available at the USPTO Public Pair website. The website indicates that CMU did not file any patent owner statement in response to the institution of the reexaminations. The USPTO has initially rejected as invalid both of the asserted claims (Claim 4 of U.S. Patent No. 6,201,839 and Claim 2 of U.S. Patent No. 6,438,180) in non-final office actions.

Additional information regarding district court proceedings in the CMU litigation is accessible here.

Forward-Looking Statements

These FAQs contain forward-looking statements that involve risks and uncertainties, including statements regarding the complex nature of the patents at issue in the CMU litigation; Marvell’s non-infringement position; Marvell’s own patents; the CMU patents at issue as to invalidity and infringement; reasonableness of the assessed damages; findings of the CMU damages expert; CMU’s failure to meet the burden concerning the willfulness analysis and the jury’s finding Marvell willfully infringed; statements about the nature and grounds for an appeal by Marvell; and statements about post-trial actions including motions and appeals processes. The forward-looking statements contained herein are subject to risks and uncertainties, which may cause the actual outcomes or results to vary from those indicated by the forward-looking statements. These risks and uncertainties include any adverse outcomes of any motions or appeals against Marvell that might result in enforcement of the existing judgment unchanged, any disruption to Marvell's ability to continue its normal business operations and other risks and uncertainties, including those more fully described from time to time in Marvell’s filings with the SEC. Facts and circumstances referenced and asserted by Marvell are subject to change and Marvell undertakes no obligation to revise or update any of this information in respect of future events.