Intel, VLSI Agree to End $4.1 Billion Delaware Chip Patent Case

Intel Corp. and VLSI Technology LLC took action to end a $4.1 billion legal battle in Delaware over five VLSI-owned microchip patents on Tuesday.

VLSI agreed to dismiss its patent claims in the case, and Intel agreed to drop its counterclaims, with neither paying the other, the parties said in a joint filing with the US District Court for the District of Delaware.

The stipulation also said VLSI had agreed to a covenant not to sue Intel or its suppliers or customers over the five patents at issue.

The case began in June 2018. VLSI, which was formed by investment management firm Fortress Investment Group LLC, sued Intel for infringement of US Patent Nos. 6,212,633; 7,246,027; 7,247,552; 7,523,331; and 8,081,026—chip-related patents previously acquired from a Dutch-owned semiconductor company.

VLSI has also sued Intel over other microchip patents in cases in California, Texas, and China. Two Texas juries awarded VLSI over $3 billion collectively.

But the Delaware action raised the stakes considerably: VLSI sought damages of as much as $4.12 billion.

Intel, in a short statement on the case’s resolution emailed to Bloomberg Law, highlighted the fact that it “paid nothing to VLSI,” while VLSI agreed to the covenant barring future legal action.

VLSI didn’t immediately respond to a request for comment sent to its legal team.

The filing comes as VLSI has drawn fire for allegedly failing to comply with a judge’s new order bolstering disclosure requirements on third-party litigation funding.

Judge Colm F. Connolly, who has been presiding over the VLSI-Intel case, issued a standing order in April 2022 that required parties with certain corporate structures, including LLCs, to disclose “the name of every owner, member and partner of the party, proceeding up the chain of ownership until the name of every individual and corporation with a direct or indirect interest in the party has been named.”

Though VLSI filed additional disclosures, including a declaration from its CEO, Intel and Connolly said the company was not in compliance with the order.

Connolly asked the parties in October to brief the court on whether he should dismiss the suit “because of VLSI’s failure to provide the information required” under the order—and on whether the judge’s order itself was valid.

VLSI stated that dismissal would be improper and argued Connolly’s order was invalid because corporate disclosure requirements are governed by the Federal Rules of Procedure. District court judges, VLSI argued, are not authorized to require more through a standing order, as opposed to an order through a more rigorously vetted local rule.

Intel argued that the order was valid as the federal rules set “a floor, not a ceiling” with regard to the disclosure requirements. Its briefing also hammered VLSI for purposely obscuring its investors, which Intel alleged was is a strategy to insulate Fortress and the investment firm’s various funds from potential future litigation.

More briefing was to be due in mid January, but that is likely to be canceled with both parties seeking dismissal.

As part of their stipulation, VLSI and Intel agreed that, “unless otherwise further ordered by the Court, neither party shall file additional briefing in this Action, including the supplemental briefing with respect to the Court’s April 2022 Standing Order and related matters.

Intel is represented by Morris, Nichols, Arsht & Tunnell LLP; McCollom D’Emilio Smith Uebler LLC; Turner Boyd LLP; and Wilmer Cutler Pickering Hale and Dorr LLP.

Irell & Manella LLP and Farnan LLP represent VLSI.

The case is VLSI Technology LLC v. Intel Corp., D. Del., 1:18-cv-966, 12/27/22.