Tuesday, April 20, 2021

Waco jury in VLSI v. Intel starts deliberation: Intel vehemently denies infringement and attacks $3 billion damages claim

In my previous post on the VLSI v. Intel patent trial in the Western District of Texas, I asked the question of whether the jury will be persuaded that, should it find an infringement, Intel would have paid a $3 billion royalty on two patents that are part of a portfolio that was at some point valued at $7 million. The answer is just a question of days, if not hours: counsel for both parties--Irell & Manella's Morgan Chu and WilmerHale's Bill Lee--just delivered closing argument.

A week ago, Intel's opening argument emphasized the semiconductor company's independent research and development. VLSI's lawyer told the jury that this is irrelevant under patent law: you can infringe whether or not you know the patent. Mr. Chu called this argument "a red herring" and "a signpost in the desert"--but the strict-liability nature of patent law is separate from whether jurors will feel that Intel has committed a wrongdoing it needs to be penalized for, or whether there is, at best, an accidential infringement at issue.

The "signpost in the desert" was not only the "post" metaphor: Mr. Lee compared VLSI's efforts to allege an infringement despite a patent having been narrowed on reexamination as "moving the fencepost" in order to develop an infringement theory regardless.

Most of the argument was very technical, and counsel for both parties tried to put testimony, particularly expert testimony, into a particular context. For example, a point that Mr. Lee made and which might resonate with the jury was that VLSI got an Intel witness to confirm that a page from a document was consistent with one of VSLI's arguments, but the headline of the document showed that it was just some general technical description and not specific to the accused products. What I consider even more likely to bear weight with jurors is an Intel position on claim construction: Mr. Lee said that this morning he "walked from [his] hotel to the court": "'from' means 'from', 'to' means 'to'." Those kinds of non-infringement arguments appeal to common sense. By comparison, VLSI's lawyer's explanations of the meaning of "when" were much more technical--that was necessary in the context, but it just wasn't as easy to understand as Intel's interpretation of "from" and "to." VLSI's explanation of "determinism" was funny: if you boil an egg for 10 minutes, then you always know what the result is going to be like.

Yet another point that jurors can easily understand was that the companies who previously owned these patents had lots of lawyers, lots of licensing executives, and lots of engineers, but didn't decide to sue Intel.

Throughout the trial, from opening to closing, Mr. Chu sounded like someone who was really tired of hearing Intel's non-infringement and damages-related arguments. Mr. Lee's role was that of a voice of reason. What he said and the way he said it described this case as one in which a company that had just been created to acquire those patents and sue Intel was looking for a payout orders of magnitude greater than the purchasing price of the patents.

Intel's lawyer may also have managed to persuade jurors that Intel's licensing expert, who worked on microprocessor patent licensing for decades while at IBM, had a stronger background than VSLI's royalties expert.

Mr. Lee pointed to testimony according to which Intel would have generated the relevant sales anyway, with or without the alleged patent infringement.

Interestingly, VSLI's lawyer changed his tone a bit during the initial part of his rebuttal today. Mr. Chu sounded concerned that some of Intel's defensive arguments could really get traction. He started his rebuttal saying that Intel made it sound like VSLI accused Intel's witnesses of being liars ("liar is a schoolyard term"), but tried to put this into perspective. As he went on, he sought to show his frustration (over Intel's arguments allegedly not making sense) to the jury.

Mr. Chu criticized Intel's invalidity contentions by saying Intel came with one prior art reference, then added another, and yet another. As a patent litigation watcher I've seen countless attacks on the validity of a patent that argue a patent is invalid ofter a single reference, but if one disagreed, the combination of two--or maybe also three or more--references would do the job. There are also many cases in which defendants will start with a combination of two or three references. This is case-specific. I don't disagree with Mr. Chu that a combination of seven references is a lot, but there's no formal legal limit on the number of elements of a prior art combination. Mr. Chu also stressed that those prior art combinations involve patents from major corporations, and argues this weighs against obviousness.

Juries rarely invalidate patents, even though most patents aren't valid as granted. In this jury trial, the emphasis was also clearly more on (non-)infringement and on the hypothetical damages.

In his closing argument, Mr. Chu reminded jurors of NXP receiving a share of what VLSI may be awarded. That is a double-edged sword: on the one hand, it addresses Intel's "VSLI doesn't invent or make products" argument, but it may also reduce the witness of any testimony from NXP, and jurors may indeed ask themselves why NXP didn't bring an action against Intel itself while it owned those patents.

Toward the end, Mr. Chu did his best to deliver a passionate, patriotic argument about the United States having been the leaders in technology for more than 200 years "in every facet of life." And he thanked the jury for paying attention to both sides: "You've been fabulous." That was an emotional closing, but the question for the jury to decide is not who was most grateful for their attention. Now the jury will have to weigh what it heard, after getting a late lunch, and it will have to take into consideration that VLSI bears the burden of proof on infringement. I think Intel may avoid an infringement finding, but even if it happened, I can't imagine it would be another billion-dollar amount. The history of those patents, their age, their prior owners, their past valuation--that's a combination of arguments, any single one of which has the potential dissuade a jury from rendering a ginormous damages verdict.

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