Intel files a federal patent infringement suit against Broadcom, charging the communications chip company is building its business on Intel's know-how.
"The violations of Intel's technology rights described below appear to be part of a carefully crafted plan to build Broadcom's business using Intel's technology," Intel said in its suit, filed in U.S. District Court in Delaware.
Broadcom shares opened at $250.38 today and climbed as high as $257. But as investors received word of the suit, which was reported first by CNET News.com, the shares began to slide. In late trading, the shares dipped to as low as $232.75 before closing at $238.44.
In the suit, Intel alleges Broadcom has violated five Intel patents, one relating to networking, one to chip packaging and three to video compression. Intel is seeking an injunction preventing further infringement, plus unspecified damages and court costs.
Broadcom spokesman Bill Blanning said Intel made no efforts to resolve these issues before filing suit.
"This is the first we've heard of this complaint," Blanning said, adding that the company has yet to review Intel's suit.
"That said, we are confident in the soundness of our business practices and will vigorously defend (ourselves) against this complaint," he said
Intel was an early investor in Broadcom, but relations between the two companies have grown increasingly contentious. The companies now compete in a number of emerging communications markets, such as high-speed networking.
In March, Intel went to Santa Clara County Superior Court seeking an injunction to prevent Broadcom from inducing former Intel employees to divulge trade secrets. On March 10, the court issued a preliminary injunction preventing Broadcom from "disclosing, using or acquiring" Intel trade secrets, Intel said in today's filing.
Intel also has a patent claim against Altima Communications, which Broadcom is acquiring. That action, first filed in December, relates to patents held by Level One Communications, the company Intel acquired last year in a $2.2 billion deal.
Intel spokesman Chuck Mulloy said litigitation is a last resort for his company, but "Broadcom has demonstrated it has little respect for Intel's intellectual property."
"We have an obligation to our shareholders to protect the investment represented by our intellectual property," Mulloy said.
But Merrill Lynch analyst Joe Osha said Intel has shown plenty of willingness to go to court in the past, noting the enormous energy Intel spent trying to thwart Taiwan's Via Technologies, which was aiming to offer its own companion chipsets to Intel's microprocessors.
"They would have been better off finding a way to work with them," Osha said.
Osha said Intel has had limited success with its own efforts in the communications chip market.
"They've decided to sue the most successful company (in the market) instead," Osha said.