Twenty-six semiconductor companies, including Intel, a division of Advanced Micro Devices, VLSI, and Texas Instruments have been named as defendants in a controversial patent infringement lawsuit that, in different forms and actions, has generated close to $500 million for its plaintiff.
The suit, which was filed July 31, is one of the several hundred lodged against major industrial defendants such as Ford, Motorola, Mitsubishi, and Apple Computer over the past 20 years. The exact patents in question in this case have served as the basis of at least eight other legal claims.
The lawsuits have all been brought by inventor Jerome Lemelson, who, depending on one's point of view, was either an inspired technological visionary or someone who discovered a way to turn the nuances of the patent procedure into a lucrative cottage industry.
"Jerome Lemelson has filed over 500 patents. He was the third most prolific inventor in the history of the U.S. patent office," said Gerald Hosier, the attorney for the Lemelson Medical, Education, & Research Foundation Limited Partnership. Even though he died last October, more than 70 Lemelson patents remain pending. The foundation contributes money to, among other institutions, the Massachusetts Institute of Technology, he said.
The Lemelson actions are pejoratively known in the defense community as "submarine patents" because the defendants do not know the patents exist until well after an alleged violation. The current suit against chipmakers, for instance, claims that 1956-circa patents cover procedures involved in the semiconductor masking process. Jack Kilby developed the first integrated circuit in 1958.
Manufacturers dispute the legitimacy of the patents but often find it easier to settle to avoid expensive litigation, defense attorneys said. "Most are settled for nuisance value," one said.
"Most people would not regard these patents as contributing to the advancement of industry," said Cheryl Johnson, a patent attorney at Graham & James. "The nuisance value is what underlies most of his lawsuit."
Nuisance or not, the Lemelson settlements add up. The actions can settle for a few hundred thousand dollars or "single-digit millions," another source added.
Lemelson is believed to have begun his inventing career in the 1950s. Working independently, he filed patents that were said to eventually apply to Velcro darts, medical equipment, VCRs, cassette tape decks, fax machines, Hot Wheels tracks, semiconductor manufacturing equipment, industrial robotics, and wiper blades, to name only a few.
The suits rarely go to trial, sources say, but they can be lengthy. Ford spent years defending a suit over the same patents at issue in the case against the semiconductor makers, as well as thousands of hours defending a suit before settling last year.
Hosier charges that much of the expense comes as a result of defense tactics but confirms that these cases can go on for some time. Ford defended a suit for six years before settling, he said, after 150 to 250 depositions were taken in actions involving auto defendants. Mattel, the toy manufacturer, won a case on appeal but lost a judgment in trial court against it for $80 million, Hosier added.
While semiconductor companies are disputing the legitimacy of the suit, history says that a six- to seven-figure nuisance payoff per defendant could be the likely outcome.
The patents underlying the current suit relate to the automated manufacturing process. According to Hosier, Lemelson filed a complex patent in the mid-1950s that defined a method for capturing real-world images and turning them into digital information that could manipulated or used by assembly equipment.
However, because of government procedure, the actual patents from the 1950s filing started to come out only in 1963 and continue to surface even today, Hosier claimed. The most recent patent came out in 1995. So far, Lemelson or his foundation have received 465 patent claims from an original group of 18.
All of the patents relate back to the original filing date, so anyone who has come up with a similar invention in the intervening years may owe licensing fees, Hosier said.
"It is a no-fault tort," he added. "If the inventor is first, he has the exclusive patent."
Detractors, however, say the inventor's real gifts were in deft navigation of the legal system. Lemelson's original patent applications are said to be broad and vague, which drew out the approval process. Supplemental applications were then filed on top of the original actions. Under patent procedure, the supplements were given the benefit of the earlier filing date.
This allowed Lemelson to claim rights to procedures and innovations that appeared after the original filing but before the patent in question. One case picked out at random by one defense attorney could be traced through 13 different patent applications. Hosier denies any intent on Lemelson to draw out the application process.
In August 1994, Hosier estimated the corpus of the patent portfolio was worth $500 million. An attorney that has defended a number of Lemelson suits said that confidentiality agreements prevent defendants from discussing settlement amounts but added that no one disputes the $500 million figure.
The Lemelson foundation gives some of its money to charitable causes, but it is not a charitable foundation per se. The "foundation" is actually a Nevada limited partnership. Hosier, who works on a reported 37 percent contingency fee, flies around the country in a private jet, more than one attorney pointed out.
Interestingly, Intel was sued recently for patent infringement by a group called TechSearch. The suit hinges on a patent TechSearch bought from a company struggling with bankruptcy. TechSearch's lawyer is a former partner of Hosier.
Although the semiconductor patent suit has been filed, a number of defendants have not been served with the case. Hosier, however, reported that he has had discussions with some of the defendants.
Chip companies contacted so far say the suit simply does not apply to their work. "We don't believe our processes infringe upon the patents," Intel spokesman Chuck Mulloy said. "We intend to vigorously defend it." (Intel is an investor in CNET: The Computer Network.)