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Nvidia Sued for Patent Infringement

(Image credit: Nvidia)

Subsidiaries of Xperi Corp, a company that licenses intellectual property, have filed suit against Nvidia in the U.S. District Court of Delaware for patent infringement. The case hinges on Nvidia's alleged violation of five of the company's patents for technology used in its gaming and supercomputer GPUs.

During the company's Q1 2019 earnings call, Xperi announced that its subsidiaries Invensas Corporation and Tessera Advanced Technologies had filed the suit:

In addition, today we filed a lawsuit against NVIDIA for patent infringement. We believe that NVIDIA is using our patent semiconductor technology in certain of its CPUs and processors and we have been speaking with NVIDIA for several years about taking a patent license. We ultimately could not reach an agreement and we felt that we needed to take this action to defend our intellectual property rights. We filed the case in Delaware Federal Court asserting 5 patents. -- CEO Jon Kirchner, via Seeking Alpha.

(Image credit: Xperi Q1 Investor Slide Deck)

Xperi and its subsidiaries invent and then license a broad range of technologies, like audio and imaging codecs like DTS:X, IMAX, Virtual:X, and has several large clients, like Sony, LG, Samsung, Tencent, and Alibaba.

But more importantly for this topic, the company also licenses semiconductor packaging and interconnect technology IP. The company claims that Nvidia has violated five of its U.S. Patents (5,666,046; 6,232,231; 6,317,333; 6,849,946; and 7,064,005), all of which pertain to semiconductor designs.

Nvidia doesn't spin its own silicon, it contracts with TSMC to manufacture its chips, but Xperi says the onus falls on Nvidia to answer for the alleged patent infringements because the company is responsible for its own architectural designs.

Given that Xperi has sued and won settlements against both Samsung and Broadcom over three of these same patents, there is little doubt the validity of those patents have passed the stiffest of legal challenges. Both Samsung and Broadcom settled with Xperi for undisclosed sums and entered into multi-year patent licensing agreements.

"Yes, there are five asserted patents, three of which were litigated either with Broadcom and/or Samsung. So, I think it’s IP that we are obviously very comfortable with. We think it’s broadly applicable to their core GPU and processor offerings. And it’s our preference to see a resolution to this, but after working diligently for an extended period of time, we felt it was necessary to take this step to help try to close the gap essentially on our respective views," Kirchner said during the earnings call.

We tracked down the company's filing in the U.S. Delaware Court, but proposed damages and/or royalty demands aren't listed yet. Compared to Nvidia with its ~$102.7 billion market cap, Xperi is a rather small company with a cap of ~$1.2 billion. But given the company's successful defense of several of these patents against industry behemoths Samsung and Broadcom, the validity of the patents will be hard to challenge, meaning the case will likely boil down to if Xperi can prove Nvidia is using the patented IP. Nvidia hasn't released a statement yet, but we've inquired with the company and will update as necessary.