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Marvell to Seek to Void $1.17 Billion Patent Verdict

By Todd Shields and Jordan Robertson
December 27, 2012 4:13 PM EST 8 Comments
Marvell Technology Group Ltd.'s shares have dropped 13 percent in the past two days to their lowest level since March 2009, after a federal jury in Pittsburgh yesterday hit the maker of chips for computers and mobile phones with the fourth-largest U.S. patent verdict ever
Photographer: David Paul Morris/Bloomberg
Marvell Technology Group Ltd.'s shares have dropped 13 percent in the past two days to their lowest level since March 2009, after a federal jury in Pittsburgh yesterday hit the maker of chips for computers and mobile phones with the fourth-largest U.S. patent verdict ever

Marvell Technology Group Ltd. (MRVL) said it will seek to overturn a $1.17 billion jury verdict, one of the biggest awards on record, for infringing integrated-circuit patents held by Carnegie Mellon University.

The shares have dropped 13 percent in the past two days to their lowest level since March 2009, after a federal jury in Pittsburgh yesterday hit the maker of chips for computers and mobile phones with the fourth-largest U.S. patent verdict ever, according to data compiled by Bloomberg. All three verdicts bigger than the one against Marvell were reversed on appeal.

Marvell doesn’t use the technology at issue and “there are strong grounds for appeal,” Marvell, based in Hamilton, Bermuda, said in a statement released today. The size of the verdict also puts it at risk of being reduced, said Brian Love, assistant professor at Santa Clara University’s law school.

“The jury in this case awarded CMU every dollar it requested, which is a rare feat,” Love wrote in an e-mail. “By receiving precisely what it requested -- an amount calculated by a hired-gun expert and likely based on questionable assumptions -- CMU’s award may be in greater jeopardy than usual.”

Marvell will file post-trial motions to overturn the verdict, and if necessary, appeal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., the company said.

Marvell fell 3.5 percent to close at $7.14 today in New York.

Damages Award

The jury found Marvell’s infringement willful, providing a basis for U.S. District Judge Nora Barry Fischer to increase the award by as much as three times, according to a statement by K&L Gates LLP, the law firm representing the university. Tripling the award would make it the largest ever in a patent case.

Universities have stepped up patent applications and litigation in recent years as budget troubles have forced them to find new sources of revenue, said Love. The verdict may also tempt other schools to claim awards for patents developed on campuses, according to Mark Lemley, a professor at Stanford Law School and director of the Stanford Program in Law, Science and Technology.

Carnegie Mellon’s victory will probably have more institutions “seeing stars in their eyes,” Lemley said.

Marvell investors are concerned about the potential for triple damages, Kevin Stadtler, president of Stadtler Capital Management, which holds a short position on Marvell and stands to benefit if the stock drops, said in an e-mail. The penalties may force Marvell to raise capital by issuing shares, said Stadtler, whose company is based in Fort Worth, Texas.

Disk Technology

Marvell said in today’s statement that it hasn’t recorded any liability on its financial statements for the lawsuit.

“In assessing the impact of this jury verdict on its financial statements, Marvell will review the verdict, evaluate the post-trial motions, and evaluate the likelihood of a successful appeal,” the company said.

Marvell had revenue of $2.95 billion for the year ended Jan. 31.

Carnegie Mellon sued over use of the two patents, issued in 2001 and 2002, that cover ways to detect data stored on a computer’s hard-disk drive by filtering out noise or unwanted electrical signals. The school in a March 6 complaint said at least nine types of Marvell’s circuits use its inventions.

“We are gratified by the jury’s unanimous verdict,” Ken Walters, a spokesman for the school in Pittsburgh, said in an e- mailed statement. “This case deals with fundamental technology for increasing the accuracy with which hard-disk drive circuits read data from high-speed magnetic disks.”

The case is Carnegie Mellon University v. Marvell Technology Group Ltd., 09cv290, U.S. District Court for the Western District of Pennsylvania (Pittsburgh).

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Jordan Robertson in San Francisco at jrobertson40@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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