VLSI LLC v. Intel Corporation – Day 1

The long saga that is VLSI v. Intel (which we have covered extensively hereherehere, and here) finally began its conclusion. Two titans of patent litigation—Bill Lee of WilmerHale and Morgan Chu of Irell & Manella—face off in the most popular patent venue in the country, where billions of dollars are at stake. For those interested in patent litigation, it doesn’t get any better. 

The day began with jury selection, which was conducted by Magistrate Judge Jeffrey C. Manske (Judge Albright plans to use Judge Manske to pick the jury in most of his cases). Voir dire was relatively uneventful, with two jurors dismissed for cause. For VLSI, Morgan Chu of Irell & Manella LLP conducted the Plaintiff’s side, and Jim Wren of Baylor Law School conducted voir dire for Intel. At the conclusion of voir dire, a jury of four men and three women were selected. 

Before opening statements, Judge Albright gave his standard pre-trial instructions to the jury, which consisted of a lengthy explanation of various terms of art used in patent litigation, as well as the standard Fifth Circuit pattern jury instructions. 

VLSI’s Opening Statement

Morgan Chu began VLSI’s opening by immediately referring to the U.S Constitution Article I, Section 8, regarding which Mr. Chu remarked, “One of the first acts of Congress was to establish the patent system.” To me, VLSI apparently intended to highlight how important patent rights are, in a district believed to hold strong beliefs about individual property rights. 

Mr. Chu introduced the two asserted patents as the “stars” or  “heroes” of the story (something Intel later attacked repeatedly). Mr. Chu then went on to explain how the patents worked and what the inventions sought to accomplish—namely, an increase in microprocessor speed and reduced power consumption. 

I thought the most interesting part of VLSI’s opening was its attempt to sidestep the elephant in the room—the fact it is a non-practicing entity. Enter NXP. 

Mr. Chu pointed to the gallery and asked Mr. Jim Spehar, a Vice President of Research and Development for NXP, to stand up. NXP originally acquired the asserted patents from its predecessor, Freescale. NXP, Mr. Chu explained, is a company that heavily invests in R&D and prides itself in innovation. Well, here is the problem—innovation is expensive. How does NXP attempt to solve this problem? Mr. Chu explained that NXP partnered with VLSI, who attempts to license patents developed by NXP, and in turn, uses money derived from licensing to reinvest in innovation at NXP. 

Specifically, Mr. Chu pointed to a slide entitled “VLSI Enables Cycle of Innovation.” Mr. Chu broke down this “cycle” in four, easy to understand steps. First, NXP “invents” (in response to which Intel later pointed out—repeatedly—that NXP itself didn’t actually invent the asserted patents). Second, NXP’s patents are granted by the PTO. Third, VLSI—working with NXP—licenses the patents or sues to enforce NXP’s rights. Finally, NXP invests the licensing income in more R&D—which tied into Mr. Chu’s theme that America is the innovation capital of the world. Pretty clever, right?

Another interesting thing about VLSI’s opening—VLSI did not present a damages number. VLSI only mentioned that Intel has sold a “billion” infringing products. However, it did not mention an actual number. VLSI repeatedly emphasized the concept of a reasonable royalty rate, but again, no mention of an actual number. 

Overall, Mr. Chu emphasized more general principles (i.e., the idea of patent rights, how important innovation is, why patents are important, etc.). He did get into specifics concerning the patents—but at a higher level than Intel. He spent a significant amount of time on NXP and its history as well. 

Intel’s Opening Statement

Intel’s opening statement was delivered by William “Bill” Lee of WilmerHale. Mr. Lee began his opening by thanking the jury for their service and introducing his trial team—emphasizing lawyers who were from Texas. Both sides made several attempts to relate with the Texas jury. 

Mr. Lee used a common theme for defendants: what is the other side of the story? Well, he told it, and hit these same facts repeatedly: no one has ever used the accused patents, no money was ever invested in the accused patents, and VLSI doesn’t make any products. 

After giving some background on how Intel was formed and some detail on Intel’s products, Mr. Lee went on the attack. First, he hit VLSI: VLSI doesn’t make any products, conduct any research, and it doesn’t invest in any products—unlike Intel. Second, he made clear that NXP is NOT a party to this case, and even NXP didn’t invest money in the two patents at issue. Finally, he attacked Mr. Chu’s “star and hero” analogy with a simple question: if these two patents were really “stars,” why didn’t NXP—a claimed innovator—not invest any money into products that could have potentially produced revenue for NXP? It seemed like an effective rebuttal from where I was sitting. 

Mr. Lee also emphasized the numerous witnesses planned to testify in the case and gave a brief overview of each witness’s expected testimony. Mr. Lee covered both patents, and explained in detail why each patent did not infringe. He further explained why the ’759 patent was also invalid. 

Finally, Mr. Lee concluded by addressing the issue of damages. He opined that VLSI’s damage model was a “made for litigation model,” while Intel’s model was based on real world numbers (aka what each company paid for the patents). Specifically, he asked the jury to compare what VLSI paid for the patents and with what VLSI was asking for—and then ask themselves “is this ‘reasonable’.” Only time will tell!

The First Witness

After opening statements, VLSI called the NXP representative, Mr. James Spehar to the stand. Mark Mann of Mann Tindel Thomson firm took the lead. He asked several questions concerning NXP’s history, what products they made, and briefly explained what a “license” is and how it could potentially help NXP. 

I think the point of this witness was to try to put some distance between the NPE designation VLSI wants to avoid being associated with and attempt to show VLSI was a partner helping NXP license its patents. Mr. Mann referred to the slide (shown in opening) “VLSI Enables Cycle of Innovation.” He had the witness explain that NXP doesn’t look for companies who might be infringing its patents, so they “partnered” with VLSI to protect patents owned by NXP. Thus, any money received from VLSI’s licensing actions would be put back into the “cycle of innovation.”

From my interpretation, VLSI attempted to show that NXP and VLSI “partnered” with each other so each company could do what it did best—NXP could focus on innovation, and VLSI could focus on licensing. 

The Cross

Well, Intel’s plan was to shoot this nice, helping-hand theory down. Hard. Cross examination of Mr. Spehar was conducted by Joe Mueller of WilmerHale, who took an energetic and more aggressive tone than any of the lawyers so far in the trial. 

Right out of the gate, Mr. Mueller asked the witness if he had ever met the CEO of VLSI before the day of trial. The witness responded no; trial was the first time he met VLSI’s CEO. So, then, how could you be a “partner” with someone you never met before today, asked Intel’s counsel.

Mr. Mueller continued on to show that Mr. Spehar didn’t know the asserted patents existed until the lawsuit was filed and NXP didn’t invest any money in the asserted patents. But the biggest attack was on the “VLSI Enables Cycle of Innovation” slide used during opening. 

First, Mr. Mueller pointed out that NXP itself didn’t invent the two asserted patents—it acquired them from its predecessor. Second, he pointed out that these patents were not granted by the PTO to either VLSI or NXP. Third, VLSI has not licensed anything at this point. Finally, VLSI has not given NXP “a penny” from any licensing activity. Thus, Intel’s counsel attempted to show the cycle of innovation slide was unsupported . 

It will be interesting to see how VLSI’s theory and association with NXP holds throughout the remainder of the trial. 

Day one concluded around 6:00 pm. We will be back at it tomorrow with more content!