Tessera Technologies Inc. (TSRA), the technology licensing company run by CEO Tom Lacey, said it launched a multi-jurisdiction patent enforcement campaign against Broadcom Ltd. and eight of its distributors related to eight patents related to semiconductor circuitry and packaging.
San Jose, California-based Tessera said the proceedings are in the United States International Trade Commission, the U.S. District Court in Wilmington, Delaware, and courts in Germany and the Netherlands, alleging infringement of a total of eight patents.
The ITC complaint involves three patents and seeks an exclusionary order. The complaint was field against Broadcom Ltd. Singapore, Broadcom Corp., Avago Technologies Ltd. Singapore, Avago Technologies U.S. Inc., Arista Networks Inc.; ARRIS International plc, ARRIS Group, ARRIS Technology, ARRIS Enterprises LLC, ARRIS Solutions, Pace Ltd. (formerly Pace plc), Pace Americas LLC, Pace USA LLC, ASUSTeK Computer Inc., ASUS Computer International, Comcast Cable Communications LLC, Comcast Cable Communications Management LLC, Comcast Business Communications LLC, HTC Corp., HTC America Inc.; NETGEAR Inc., Technicolor S.A., Technicolor USA Inc. and Technicolor Connected Home USA LLC.
Tessera filed an enforcement action in U.S. District Court in Wilmington, Delaware, against Broadcom and the others involving the same three patents in the ITC complaint. In addition, Tessera filed a second enforcement in the federal court in Wilmington, Delaware, against Broadcom and the others involving four other patents.
Tessera also filed enforcement actions involving a European patent in courts in Germany and the Netherlands.
Lacey said on a conference call with analysts and investors that the actions were filed as a last resort after years of trying to negotiate a business settlement.
Tessera said the increase in its litigation expenses in the second half of 2015 and first quarter of 2016 were linked to these actions. The company said it still expects to keep its litigation expenses in the range of 4% to 10% of revenue it previously forecast. That means Tessera could spend up to about $26 million this year on the litigation. The company spent some $6.5 million on litigation in the first quarter.
Lacey said the actions were not taken lightly and are made only after years of effort to reach a fair and equitable resolution without litigation.
The company said it believes Broadcom is infringing many of its patents and has refused to negotiate a settlement so that it can continue to do so.
Lacey declined to say how much in damages Tessera will be seeking, though he indicated it was “significant and material to Tessera.”
“We remain willing to negotiate a resolution that fairly compensates Tessera and its shareholders for our valuable intellectual property,” he said. “However, we are also fully prepared to proceed through the entirety of the legal process, and we remain very confident in our ability to achieve a positive outcome."
Broadcom is not an existing Tessera customer, and as such the proceedings announced today do not impact Tessera's second quarter revenue or earnings per share guidance or 2016 full-year revenue guidance. The Company expects 2016 litigation expense will remain within its current target operating model based on anticipated case activity for the remainder of the year.
Broadcom is one of two potential licensing customers Tessera has previously disclosed to analysts and investors. Asked whether and how the enforcement action against Broadcom might affect discussions with the other potential licensee, Lacey said it wouldn’t because the two situations were very different and unique.
Tessera said the ITC complaint and German action would likely be resolved some time in the first half of 2017, while the Netherlands action would take until the second half of 2017. The two actions filed in federal court in Wilmington, Delaware are likely to take until 2018 or later.
“They’re emphasizing ‘injunction jurisdictions’ where they have the best chance of being able to block Broadcom’s products,” said Mark Gober, a senior director at 3LP Advisors in Silicon Valley. “And they have the funds to pursue these cases if Broadcom won’t settle. This tactic certainly applies pressure on Broadcom to take a license, but the timing of settlement will come down to price.”
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