Court Reverses $1.54 Billion Verdict Against Marvell

Marvell Technology Group Ltd. convinced a federal appeals court to reverse most of a $1.54 billion damage award to Carnegie Mellon University in a closely watched patent case.

But the U.S. Court of Appeals for the Federal Circuit on Tuesday affirmed that Marvell infringed the two patents at issue in the case, which cover technology related to computer disk drives. The court ruled that Marvell must pay the university at least $278.4 million, and ordered a new trial on issues that could increase that award.

Marvell shares rose initially on the news of the verdict, but were recently trading at $12.28, off 1.6%.

The company, based in Santa Clara, Calif., designs a variety of chips that include components used to control disk drives. Marvell's chips are typically made to order by manufacturing services outside the U.S.

Carnegie Mellon's patents cover methods that help improve accuracy in detecting recorded data when certain types of errors are likely.

Marvell was found guilty of infringing the patents in December 2012 by a federal jury, which set $1.17 billion in damages. A federal judge increased the award to $1.54 billion, reflecting an extension of the period covered by the award and a finding that Marvell willfully infringed the patents.

The verdict became a major cloud hanging over the company, which has been fighting hard to reverse it. It also raised opposition from high-tech companies that include Microsoft Corp., Google Inc., Hewlett-Packard Co., Dell Inc. and Broadcom Corp., which filed court papers attacking the size of the damage award.

A key issue in the case is whether royalty payments ordered by a U.S. court should cover sales of products sold outside the country, as the jury ruled. Marvell and its supporters argued that the royalties should only apply to products sold in the U.S.

The appeals court struck down the finding of willful infringement, while affirming the royalty fee set by the jury of 50 cents for each chip Marvell sold. It agreed with the companies, however, that the royalties should only cover Marvell chips that were imported or sold into the U.S.

Based on the jury's finding of the number of chips imported, the court set the damage award at $278.4 million. But it concluded a new trial was needed to settle the correct sale location of some chips.

K&L Gates, a law firm representing the university, said it is pleased that the court denied "virtually all" of Marvell's defenses and upheld the jury's damages calculation on domestic sales. "We are reviewing the decision carefully to determine the appropriate next steps," the firm said.

Marvell issued a statement that said it was pleased by the court's reduction of the size of the award. "The company is studying the specifics of the opinion carefully to determine its future options," the company said.

Write to Don Clark at [e-mail]

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