Intel this week filed an lawsuit against Fortress Investment Group, a patent assertion entity controlled by SoftBank. Responding to a series of patent infringement lawsuits that Fortress has brought against Intel in recent years, Intel's latest lawsuit accuses Fortress of engaging in anticompetitive behavior, alleging that Fortress stockpiled technology patents in order to patent troll Intel. As a result, Intel is asking the courts to declare Fortress’s patent aggregation business practice as unlawful, and essentially unwind Fortress's operations.

In the recent years IP aggregation with an aim to enforce patents and receive royalties has developed into a business in and of itself. This has lead to the rise of firms known as patent assertion entities (PAEs) — or commonly called patent trolls — who acquire a large number of patents from various companies and then license them (often in package deals) to high-tech companies who are developing actual products.

Through a network of PAEs that Fortress controls, it owns more than a 1,000 U.S. technology patents. Among these are patents originally granted to NXP Semiconductor, giving Fortress a fairly deep collection of chip design patents to enforce. As a result, Fortress (and other PAEs it controls) have previously filed lawsuits against Intel claiming that virtually all CPUs from the company produced since 2011 illegally use the NXP IP.

While Intel is not contesting the validity of the patents themselves, the company is contesting the legality of Fortress's actions with those patents. In its suit, Intel claims that Fortress's patent aggregation business violates Sections 1 and 2 of the Sherman Antitrust Act, as well as Sections 4 and 7 of the Clayton Act (an antitrust law covering unethical business practices), with Intel asking the U.S. District Court for the Northern District of California to act and remedy the situation. Overall, Intel is asking the court to declare Fortress’s patent aggregation business practice as unlawful, declare all patents obtained in violation of the laws as unenforceable, declare all patent contracts and agreements entered into violation of laws as illegal, and transfer all of the claimed patents back to the transferors.

Ultimately, Intel's case rests on the idea that patent enforcement actions by PAEs do not necessarily help to drive innovation by inventors, but rather they hurt manufacturers. As such, what's being called into question is how those patents are being used and enforced, rather than their technical validity. Especially, as Intel insinuates, that Fortress's entire business model is based around the idea of parlaying patents – specifically looking to profit from the spread between what Fortress pays for the patent and what they think they can get companies to settle for out of court (rather than spending even more money defending them in court).

Intel for its part is hardly new at fighting against patent trolls. However, the major complication in this case is that Fortress is a SoftBank business – having been acquired for $3.3 billion back in 2017 – meaning it has the backing of the Japanese conglomerate. So Fortress is far more well heeled than the typical PAE, and SoftBank itself is already a natural competitor to Intel, as it also owns Arm.

Here is what Intel said in its antitrust suit titled ‘Intel Corporation v. Fortress Investment Group LLC et al’ (5:2019cv06856):

Intel brings this complaint to end a campaign of anticompetitive patent aggregation by Fortress and a web of PAEs that Fortress owns or controls. […]

Through its anticompetitive aggregation scheme, Fortress has engaged in anticompetitive conduct in creating a portfolio of patents that purportedly read on electronic devices and components or software therein and processes used to manufacture them that allows it to charge far more than the value of the inventive contributions (if any) of the patents and of competitive prices for licenses. Fortress and its PAEs seek to use that ill-gotten power to extract and extort exorbitant revenues unfairly and anticompetitively from Intel, and other suppliers of electronic devices or components or software for such devices and ultimately from consumers of those products. Fortress’s aggregation is thus intended for an anticompetitive purpose — to invest in patents at costs lower than the holdup value of the patents to ensnare as many potential licensees as possible and to allow it and its PAEs to assert as many possible claims of infringement to tax the commercial use of existing technology at rates beyond the actual value (if any) of the aggregated patents. […]

Intel brings this action to remedy the harms that it has already suffered from Defendants’ violations of federal antitrust and state unfair competition laws and to prevent further harm to itself, the broader electronics industry, and U.S. consumers.

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Source: Reuters, USCourts.Gov

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  • name99 - Thursday, October 24, 2019 - link

    Well Intel are under a whole lot of non-technical investigations/lawsuits -- for favoring Indians over Koreans, for treating old people badly, for not handling retirement funds properly, blah blah.
    Make of those what you will

    On the tech side they settled with WARF regarding load-store aliasing prediction (unlike Apple who took it all the way to the Supreme Court, and won [in the sense that Apple won on Appeal, and the SC saw no reason to take the case on behalf of WARF]); and they're facing a whole lot of Meltdown legal messiness.

    But recent (say past 8 yrs or so) lawsuits *initiated* by Intel, I can't think of any.
    In 2010 they were scolded by the Justice Dept, followed by a suit in 2013, for engaging in non-compete collusions with other tech companies, which is kinda sorta adjacent to the issue here.
  • CityBlue - Thursday, October 24, 2019 - link

    @Drumsticks you do know that contra-funding/contra-revenue discounts, that illegal practice for which Intel were fined €1Bn in 2014 (a piddling amount in comparison to the benefit they gained, and the harm they caused the market/less-well heeled competitors), is sadly alive and well again at Intel in 2019 (and has been for years)? Some companies never learn... or believe they're above the law.
  • Drumsticks - Friday, October 25, 2019 - link

    Is there any (even rumored) proof of that? It would be news to me. The 2014 fine was for conduct done in the mid 2000s, not for conduct in the mid 2010s, as best I know. I'm not excusing their previous conduct, but it'd be news to me if they're up to the same against Zen.
  • CityBlue - Friday, October 25, 2019 - link

    Try this:

    Article from 2018: "Guess what is making a comeback at Intel, yup, contra-revenue funding. SemiAccurate has learned that it never really went away, just changed targets, and the numbers appear to be pretty huge."

    Or Google "intel contra-revenue" for various articles on the subject, all covering activities after the period covered by the fine.
  • shabby - Thursday, October 24, 2019 - link

    "Fortress and its PAEs seek to use that ill-gotten power to extract and extort exorbitant revenues unfairly and anticompetitively from Intel"

    Lol this looks mighty familiar huh, didn't intel have this ill-gotten power over amd before?
  • unrulycow - Thursday, October 24, 2019 - link

    Ignoring the irony of this suit being brought by Intel, they are correct that patent trolls are inherently anti-competitive. They are essentially challenging the entire patent system however and are unlikely to win, even if the country would be better off if they did.
  • rrinker - Thursday, October 24, 2019 - link

    Perhaps if some of the other big name victims of patent trolling would join in, the morons in Washington just MIGHT get the hint that the system as it operates today is almost completely useless and in serious need of revamping.
    And once they fix the patent system, they can get to work on the copyright system.

    And pigs might just fly some day.
  • drexnx - Thursday, October 24, 2019 - link

    so they're not at all arguing about the infringement?
  • RBFL - Thursday, October 24, 2019 - link

    Getting into the whole does X infringe is incredibly complicated. Realistically most complex designs of pretty much anything in most industries probably infringe (unknowingly) on a competitor's IP.

    Clearing designs when there are 1,000s of patents out there, many badly written with woolly claims and often covering prior art, is almost impossible. Most real companies, i.e. Intel, cross license with other companies and compete at the product and not feature level.

    IP trolls make nothing and therefore have no need to and in this case seem to be trying to extract unreasonable licensing fees.

    Patents, although currently a horrible system with a great need to update, should not be used as a means of rent seeking by people who generally have no engineers but a lot of lawyers. Typically they will shake down smaller firms that are not very Patent savvy, as taking a case to court can easily lead to spending 7 figures and destroying the company. Using patents in this manner is equivalent to blackmail.
  • willis936 - Thursday, October 24, 2019 - link

    “ In the recent years IP aggregation with an aim to enforce patents and receive royalties has developed into a business in and of itself.”

    Is 50 years ago considered “recent”?

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