Orange County Business Journal

Emulex to Pay $58M in Partial Settlement With Broadcom

Chris Casacchia Thursday, July 5, 2012

Costa Mesa-based Emulex Corp. will pay Broadcom Corp. $58 million in release and licensing fees related to a long-running patent dispute regarding fibre channel and Ethernet technology.

The companies announced the partial settlement and license agreement Thursday after the close of trading.

Irvine-based Broadcom will dismiss certain patent infringement claims against Emulex, and will be protected against certain “patent assertions” from the company.

Fibre-channel adapters connect storage equipment to servers and speed up the flow of data.

The resolution cleared up one of three pending patent lawsuits between the companies.

The U.S. District Court for the Central District of California in March granted a permanent injunction against Emulex for infringing on two Broadcom patents involving products from lines of 10 Gigabit Ethernet controllers, chips and switches.

The ruling also required Emulex to pay Broadcom a 9% royalty on products using those patents through June 2013 and prohibited the company from importing, manufacturing, using and selling certain products using these patents in the U.S.

The court ruled in December that Emulex infringed on two Broadcom patents related to lines of 10 Gigabit Ethernet controllers, chips and switches.

Broadcom is the biggest chipmaker based in Orange County, with about $7.4 billion in annual revenue.

Emulex is the sixth-largest computer products maker here, with about $450 million in yearly sales.

Emulex designs and makes networking equipment that connects storage, servers and data centers. For years it has battled Aliso Viejo-based rival QLogic Corp., the market share leader in fibre-channel adapters.

The long-running legal feud began in 2009, when Broadcom charged Emulex with infringing on 10 of its patents for chips related to high-speed networking and data storage technologies.

The original lawsuit was filed in September 2009, a few months after Emulex rebuffed a final $912 million takeover offer from Broadcom.

Industry watchers have closely followed the Broadcom and Emulex litigation, which has caused some customers to delay upgrades through either company pending resolution of the dispute.

The latest ruling provides some additional clarity, though two other patents are still being debated.

Emulex shares were down 1.5% in after hours trading to a market share of $804 million.

Broadcom shares were down about less than 1% in extended trading to a market value of about $18.5 billion.