The eight-employee semiconductor designer files lawsuits against five Japanese computer makers, saying they infringed on its patents by selling Pentium-based PCs.
The struggling San Diego-based company, which reported revenue of $52,000 and a net loss of $873,000 in the quarter that ended Nov. 30, has filed lawsuits against Japanese PC manufacturers Sony, Matsushita, Fujitsu, Toshiba and NEC, alleging they infringed Patriot's patents by selling computers containing Pentium chips that run at 120MHz or higher.
Chips running at this speed have been around since late 1995 and are in the bulk of desktop, notebooks and servers operating today. More suits against other PC makers may follow, Patriot has indicated.
Theoretically, the lawsuits could lead to millions of dollars in damages. Patriot has said that its intellectual property has been incorporated into $150 billion worth of semiconductors. It is difficult to evaluate the validity of Patriot's claims, said Richard Belgard, a patent consultant, but if the company can show validity, it should be fairly straightforward to establish whether infringement occurred.
Intel is fighting Patriot's claims. Last week, the chipmaking giant filed an action for declaratory relief in the U.S. District Court for the Northern District of California. Its suit seeks a ruling that Intel's intellectual property does not infringe Patriot's patents.
"After reviewing the suits against our customers, it became clear to us that Patriot was really claiming our microprocessors infringed," said Chuck Mulloy, an Intel spokesman.
Patriot, which has not sued Intel, has said it will vigorously defend itself in the declaratory relief action and file a counterclaim.
Patriot has not identified other potential defendants but has said that several electronics manufacturers are benefiting from its technology. The selection of Japanese defendants for the first round of suits may have been deliberate, noted one source, because Japanese companies have historically shown a tendency to settle early. Patriot has not commented on this matter.
In microprocessors, time is kept by a vibrating crystal. In the early days of the business, processors operated at the same pace of the vibrating crystal. Microprocessors, however, started to move much faster than the crystal, requiring an internal mechanism to keep the two synchronized, said Jim Turley, an independent chip analyst and a member of Patriot's scientific advisory board.
Around six months ago, Patriot's executives determined that they had a claim against PC makers using Pentium chips, Turley said. He did not comment on the merits of the suit but said "it looks like (the original inventors) were onto something clever."
The patent application was filed in June 1995, and itself grew out of a patent application from August 1989. The U.S. patent office granted the patent in September 1998.
Patriot has seen better days. Founded in 1987, the company specialized in embedded processors for communications and medical equipment. At its peak, the company had 32 employees, said CEO Jeff Walin, who joined the company in 2002.
"The company is being funded on a dead equity basis," said Walin, explaining that Patriot is surviving by selling debentures.
The publicity surrounding the suit has caused Patriot's stock to rise from 7 cents to 12 cents.
Intel paid Intergraph hundreds of millions to settle two lawsuits that alleged Intel's Itanium and Pentium chips violated Intergraph's patents. The Intergraph settlements, however, ended after lengthy court proceedings and discovery.