Intel Deals Blow to Fortress in $3 Billion Patent Clash

• Intel Corp. (INTC) won a Texas jury verdict confirming that Fortress Investment Group controls VLSI Technology LLC, potentially nullifying over $3 billion in patent-infringement verdicts against Intel.
• The jury’s finding supports Intel’s claim that its 2012 licensing agreement with Finjan Inc., also controlled by Fortress, covers VLSI’s patents, which could lead to the dismissal of a $949 million verdict from November 2022 and a prior $2.2 billion verdict.
• The trial highlighted Fortress’ influence through governance documents and board memberships, despite VLSI’s argument that investors, owning over 90% of VLSI and 99% of Finjan, hold ultimate control.

Intel Corp. (INTC) has secured a significant legal victory in its ongoing patent dispute with VLSI Technology LLC, as a Texas jury determined that VLSI is controlled by Fortress Investment Group, potentially allowing Intel to challenge over $3 billion in patent-infringement verdicts. The jury’s finding, delivered in the US District Court for the Western District of Texas after a three-day trial, supports Intel’s argument that its 2012 licensing agreement with Finjan Inc., also deemed controlled by Fortress, covers VLSI’s patents due to their affiliation under the asset-management firm. This ruling strengthens Intel’s position to seek dismissal of a November 2022 verdict awarding VLSI $949 million and could pave the way for overturning another $2.2 billion verdict from a prior trial, according to a Bloomberg Law report.

The dispute between Intel and VLSI has unfolded across multiple legal venues, including federal district courts, appeals courts, and an administrative tribunal, highlighting the complexity of patent litigation in the semiconductor industry. The recent trial focused on Fortress’ control over VLSI and Finjan, with Intel presenting evidence from governance documents, Securities and Exchange Commission filings, and Fortress’ website to demonstrate the asset manager’s influence. Intel’s counsel, Joe Mueller of Wilmer Cutler Pickering Hale and Dorr LLP, emphasized that many leaders at Fortress and VLSI are attorneys well-versed in the implications of such governance structures. The jury learned that two of VLSI’s three board members and the majority of Finjan’s board are Fortress employees, reinforcing Intel’s claim of control.

VLSI, represented by Morgan Chu of Irell & Manella LLP, countered that investors, not Fortress, hold the reins, owning over 90% of VLSI and 99% of Finjan. According to the report, Chu urged jurors to “follow the money,” arguing that these investors, not the asset manager, dictate the entities’ actions. Despite these arguments, the jury sided with Intel, a decision that could reshape the financial stakes in this high-profile case. The US Court of Appeals for the Federal Circuit had previously supported Intel’s right to present its patent-license defense, prompting Judge Alan Albright to hold this trial while barring mention of the $949 million verdict to avoid prejudicing the jury.

This outcome reflects broader trends in the semiconductor industry, where patent disputes often involve complex licensing agreements and corporate affiliations. Intel, a leading chipmaker, has faced increasing legal scrutiny over its intellectual property, with competitors and patent-holding entities leveraging litigation to secure substantial payouts. The Fortress-VLSI case underscores the growing role of investment firms in patent monetization, where entities acquire patents to assert them against major technology companies.

Intel’s success in this case reinforces its position in defending its intellectual property while highlighting ongoing challenges within the industry. As investment firms continue to shape the landscape of patent litigation, technology giants must navigate an increasingly complex legal environment to safeguard innovation and competitiveness.

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