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Intel’s $2 Billion Patent Loss Tests Waco Trial Jury Assumptions

March 4, 2021, 7:00 AM

A $2 billion patent verdict against Intel Corp. challenges the conventional thinking about juries in Waco, Texas, and will be discouraging to companies facing new lawsuits, attorneys say.

Jurors in Waco said Intel owes VLSI Technology LLC $2.18 billion for infringing two patents that relate to power savings and performance improvements in microprocessors. It is the among the largest patent verdicts in U.S. history.

While the number of patent cases in Waco has exploded, one of the major unknowns has been how jurors will respond. Ryan Malphurs, managing partner of the trial consulting firm Delphi Litigation Strategies in Texas, said the conventional wisdom is Waco isn’t a place for large damages cases.

The Waco division of the U.S. District Court for the Western District of Texas draws juries from a large area of the state. Attorneys say that Waco jurors tend to be politically and socioeconomically conservative, and have not often issued large damages awards in other types of cases.

It’s unclear whether the verdict will survive an Intel appeal. Still, it throws into question some of the assumptions about Waco juries and illustrates that significant damages awards are available in the right case, attorneys said.

“This is going to convince some people that the conventional wisdom, that it’s not an area that will give big verdicts, is not always true,” Derek Gilliland, an attorney at Sorey Gilliland & Hull LLP in Texas, said.

The size of the award could lead plaintiffs in other cases to shift their strategies, such as by making larger settlement demands.

Kathi Vidal, managing partner of Winston & Strawn LLP’s Silicon Valley office, said if the Intel verdict stands it will embolden plaintiffs. It dispels the notion that a patent owner might get a winning verdict in Waco “but the money may not follow,” she said.

Docket Explosion

Only a handful of patent cases were filed in Waco before Judge Alan Albright, a former patent litigator, took the bench in 2018. Attorneys were mostly left to speculate about how juries there would handle such cases.

They got a taste in October, in a case between MV3 Partners LLC and Roku Inc. The trial ended with Roku’s streaming media players and smart TVs being cleared of infringing MV3’s patented mobile streaming technology.

“Anyone who has been previously perhaps overgeneralizing based on the MV3/Roku verdict now has some additional information that they would seriously need to consider,” Joseph Abraham, an attorney at the Law Office of Joseph M. Abraham PLLC in Austin, said of Tuesday’s verdict.

Malphurs said the trial format in Waco, like certain courts in East Texas, may be inherently more favorable to plaintiffs because of the speed at which the trials move. Intel and VLSI’s trial spanned six days, a relatively condensed time for a case involving complicated technology.

“That may be the result of more large verdicts, rather than simply the demographics and socioeconomics of the populace,” Malphurs said.

‘Many Attacks on Appeal’

No patent verdict over $1 billion has survived through appeal. Intel, which is set to return to West Texas for a second trial against VLSI next month, has pledged to challenge it.

One point of attack is expected to be the damages theory given by VLSI’s economic expert, Ryan Sullivan. During trial, Intel said his model was made for litigation and wasn’t used in real world negotiations.

Sullivan’s written report is sealed, but his model was described at trial as involving calculations performed by another VLSI expert, along with a layer of regression analysis, attorneys said. Intel tried to exclude Sullivan’s testimony before trial, but was denied by the judge.

“This is a complete adoption of Dr. Sullivan’s damages model by the jury,” Michael Tomasulo, an attorney at Winston & Strawn in Los Angeles, said. “And it’s certainly going to be the subject of many attacks on appeal.”

Sullivan, the president of the San Diego-based firm Intensity LLC, has worked with VLSI’s attorneys at Irell & Manella LLP before. He was part of a patent case Juno Therapeutics Inc. brought against Kite Pharma Inc. over a cancer treatment in the U.S. District Court for the Central District of California.

Following a December 2019 trial, jurors awarded Juno $752 million. Kite has appealed the verdict and criticized what it called “gymnastics” in the damages calculation. Kite argues the end result bears “no resemblance to any license in evidence.”

“The district court was required to act as a gatekeeper precisely because a jury can be easily misled by an expert attesting to a damages methodology unmoored from reality or economic theory,” Kite wrote in an appellate filing.

Challenge Rule

Intel’s loss has also brightened the spotlight on a rule that has made it harder to challenge patents at the Patent Trial and Appeal Board.

The PTAB in May 2020 denied challenges Intel filed against both of VLSI’s patents, citing the upcoming trial in West Texas. The board’s NHK-Fintiv rule authorizes PTAB judges to deny review based on the late stage of a parallel infringement case.

Intel, along with companies like Apple Inc. and Google LLC, have filed a lawsuit in California federal court trying to invalidate the rule. The rule has had an outsized impact on cases with litigation in Waco, where Albright has a fast timeline to trial and is reluctant to pause lawsuits for PTAB review.

Last year, tech-friendly groups like the Computer & Communications Industry Association, which counts Intel among its members, urged Congress to investigate the PTAB’s use of discretion in denying patent reviews.

“Increasing discretionary denials at the PTAB have led to a resurgence in forum shopping and gamesmanship in patent assertion,” the letter said.

The case is VLSI Technology LLC v. Intel Corp., W.D. Tex., No. 21-00057.

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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