Electronic Newsletter of the

Intellectual Property Committee

ABA Section of Antitrust Law

February 1, 2002

We are pleased to bring you a report on Intel Corporation v. VIA Technologies, Inc., 174 F. Supp.2d 1038 (N.D. Cal. 2001), by: Richard S. Taffet and Sophia Fix . Mr. Taffet is a partner in the New York office and Ms. Fix an associate in the San Francisco office of Thelen Reid & Priest LLP.

We started identifying on-going cases that raise the issues associated with duties and obligations of patent owners whose technology is the subject of standardization when we started planning a program for the Spring Meeting on standard setting. Mr. Taffet will be one of the participants in that program, "A Year In the Life of a High Tech Standard Setting Organization." The program will be cosponsored with Corporate Counseling, Sherman Section 1, and Trade Association.

The patent at issue was United States Patent No. 6,006,291, entitled "High-Throughput Interface Between A System Memory Controller and a Peripheral Device" (the "‘291 Patent"). VIA conceded that some of its products practiced the "Fast Write" protocol, and thereby were within the limitations of certain claims of the ‘291 Patent. It argued, however, that it did not infringe because it had agreed to Intel’s industry-wide license in connection with the standardization of a specification that included "Fast Write." Intel argued that "Fast Write" was outside the scope of its industry-wide license because the license only granted rights to protocols "required" to comply with the standard, and "Fast Write" was an optional protocol.

The Court’s holding in favor of VIA resulted solely from its interpretation of Intel’s license agreements under general principles of contract law. It did not, therefore, address the type of issues that have been the subject of recent and significant attention arising in the context of patented technology being used in the development of standards by Standards Development Organizations ("SDOs") and other industry groups. As discussed below, however, the case may still provide some useful insights for participants in SDOs.

In July 1996 Intel released version 1.0 of its Accelerated Graphics Port ("AGP") Specification. The AGP Specification was developed entirely by Intel as an industry standard, without involvement from any SDO or other industry group. The Specification established a new protocol for data transfers between the graphics chip and the chipset included in a computer’s motherboard. AGP was promoted by Intel as an "open specification" and was made available to the industry by a license that could be downloaded from Intel’s web site. VIA signed the AGP 1.0 license agreement in December 1996 and commenced producing chipsets compatible with graphics chips using AGP.

Intel proceeded to develop improvements to the 1.0 Specification, including the "Fast Write" protocol." AGP 1.0 allowed graphic chips to initiate data transfers, while "Fast Write" allowed the chipset itself to instigate high-speed data transfers to the graphics chip. In December 1997, Intel filed a patent application for "Fast Write," and in May 1998 it released the AGP 2.0 Specification that disclosed, among other things, "Fast Write." Upon release of the 2.0 Specification, Intel posted an AGP 2.0 form license agreement. VIA entered the AGP 2.0 license on March 8, 2000.

In July 2000, Intel asserted claims against VIA under four different patents, including the ‘291 Patent.

The issue addressed by the Court on VIA’s motion for summary judgment was whether Intel’s AGP licenses granted VIA the right to practice the "Fast Write" invention.

First, the Court discussed the relevant provisions of the Intel license agreements. As noted by the Court, what was licensed by Intel were "Interface Claims," which were defined to be a patent claim that "must be infringed in order to comply with the AGP Interfaces." In turn, "AGP Interfaces" were defined as "the electrical interfaces and bus control protocols disclosed in, and required by the Accelerated Graphics Port Interface Specification." (Emphasis added.) Finally, the "Accelerated Graphics Port Interface Specification" was defined as "the specifications described in the documents entitled Accelerated Graphics Port Interface Specification, Revisions 1.0 and 2.0 published by Intel."

According to Intel, the licenses granted only a right to the required "baseline" features of the AGP Specifications. Protocols and electrical interfaces not required to perform the baseline functions, including "Fast Write," it argued, were not "required," and were instead "optional," and therefore not licensed. 174 F. Supp.2d at 1048.

VIA, needless to say, offered a contrary interpretation. It argued that "all technology necessary for any specification in the AGP 2.0 Specification regardless of whether it is an optional feature (rather than an essential feature)" was licensed. (Emphasis in original.) Thus, since it was necessary to implement "Fast Write" in the exact way specified in the standard, or the chips would not be compatible with the chips of other manufacturers using the standard, it was "required" and a licensed feature. Id.

The first interpretive step taken by the Court was to ascertain the meaning of the term "Accelerated Graphics Port Interface Specifications." This was significant because the license extended to "the electrical interfaces and bus control protocols disclosed in, and required by" the "Accelerated Graphics Port Interface." Intel’s interpretation, that it simply referred to the generic AGP 1.0 and 2.0 Specifications as a whole, but not to any specific contents within the Specifications, was rejected by the Court as unreasonable. Instead, the Court adopted VIA’s position that the term incorporated the detailed directions of how to implement various features, including "Fast Write." Id. at 1048.

Next, the Court considered whether "Fast Write" was "required" by the Accelerated Graphics Port Interface Specification, even though it was not part of the baseline Specifications. Here, too, VIA’s interpretation, that all features specified in the Specifications, whether optional or not, were "required," was held reasonable. Specifically, the Court relied upon the fact that the AGP 2.0 Specification "makes clear that even ‘optional’ features, such as Fast Write still have a ‘required’ implementation of exceeding exactitude." Intel witnesses agreed that "optional" features had to be implemented as required by the AGP 2.0 Specification. Id. at 1049. Accordingly, the Court concluded, "Fast Write" and the other "optional" features were included in the license since they "must be implemented in the ‘required’ way or not at all." Id.

Intel’s arguments to the contrary were deemed unavailing. For example, the Court rejected Intel’s attempted distinction between "optional" and "required" features, noting that "[t]he license does not explicitly exclude ‘optional’ features. It does not even use the words ‘optional’ or ‘baseline’ at all. On the other hand, the license explicitly extends to interfaces ‘required by’ the specifications. Fast Write . . . is a specification." Id. at 1049. The Court also found the interpretation put forth by Intel to be self-contradictory in that numerous features in the Specifications were labeled "optional" while Intel contended they were licensed. Further, under Intel’s interpretation, the Court observed, graphics chipmakers would not be afforded any license. Finally, the Court rejected Intel’s argument that its interpretation was consistent with the policies underlying the purpose of the license as reflected by industry practice. While plausible, the Court stated, the argument did not make Intel’s interpretation of the actual words used reasonable.

While the foregoing was held by the Court to be dispositive, it stated another independent ground for its decision. Because the license agreements were drafted by Intel, and made available to the industry on a take-it-or-leave-it basis, to the extent any ambiguity existed regarding the meaning of particular words, including "required," applicable law compelled that such ambiguities be resolved against Intel. Id. at 1050. Further, the Court did not find meaningful other models of cross-licensing agreements, or testimony by Intel representatives offering their interpretations of the license terms.

While this case does not address issues arising in the context of an industry standards body pursuant to a patent policy, the Court’s analysis provides some useful insights regarding licenses that may be made available pursuant to such policies. Specifically, just like Intel’s license, such licenses will likely be interpreted under established principles of contract law, and will bind licensors to the terms set forth, irrespective of an SDOs policy. Accordingly, patent owners granting rights to technology that is included in a standard should take care to make sure the terms of their licenses are sufficiently clear so that only those rights intended to be made available are in fact granted. Conversely, licensees, to reduce the risk of expensive and time-consuming infringement litigation, should make sure the grant of rights to them is as clear as possible.

1. The "Fast Write" signal protocol allows communication through chipsets embedded in computer mother boards. As explained by the Court: "[T]he components of a computer system include separate chips mounted on a circuit board known as the motherboard. The system memory, microprocessor, chipset, and various input/output devices, such as modems, are all distinct components. In order to communicate with each other, each component chip must send its signals through the chipset, which acts as a translator between components." 174 F. Supp.2d at 1040.

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AT-IP Report is the electronic Newsletter of the Intellectual Property Committee of the American Bar Association, Section of Antitrust Law. The views expressed in the AT-IP Report are the authors' only and not necessarily those of the ABA, the Section of Antitrust Law or the Intellectual Property Committee. If you wish to comment on the content of this Electronic Newsletter, please write to the ABA, Section of Antitrust Law, Attention: Intellectual Property Committee, 750 North Lake Shore Drive, Chicago, Illinois 60611. Copyright 2002 American Bar Association.