Broadcom Defensive Patent Play Goes Offensive
By ANDREW SIMONS
A February buy of patents by Irvine-based Broadcom Corp. has provided ammunition in the Irvine chipmaker’s legal tussle with rival Agere Systems Inc.
Broadcom is suing Allentown, Pa.-based Agere for allegedly violating patents that Broadcom bought from Austin, Texas-based Cirrus Logic Inc.
The patents cover how data are stored and accessed on magnetic and optical drives.
The suit, originally filed in February, was moved from federal court in Wisconsin to Agere’s home state of Pennsylvania last month.
“Broadcom has sued Agere for infringement of five patents relating to hard disk drive technology,” said Bill Blanning, a Broadcom spokesman. “We have a portfolio of over 30 patents relating specifically to this technology.”
The lawsuit marks a shift in Broadcom’s legal strategy.
In the past year, a more conciliatory Broadcom has settled a series of legal disputes, including big fights with Intel Corp. and Microtune Inc. of Plano, Texas.
In those cases, rivals holding patents sued Broadcom for alleged infringement. Broadcom countersued with its own infringement charges.
Meanwhile, Broadcom has been building up its own patent portfolio with the Cirrus Logic deal and others in the past year.
Chief Executive Alan E. “Lanny” Ross has sought to buy companies and patents as a defense strategy against rivals looking to take Broadcom to court.
In the Agere case, Broadcom appears to be using its patents offensively.
“Broadcom will aggressively protect its intellectual property and will pursue strategies that most effectively accomplish that goal,” Blanning said. “While litigation is not the preferred approach, we will sue to protect our IP if necessary.”
The suit follows litigation Broadcom filed against Agere last year over patents related to high-speed communications and wireless patents.
Agere countersued in that case, saying Broadcom infringed on six patents relating to wireless technology and circuit designs. That case is set for trial in November in federal court in Pennsylvania.
Agere didn’t return calls seeking comment.
Philadelphia-based Lavin Coleman O’Neill Ricci Finarelli & Gray is representing Broadcom in the Agere suits.
Both companies make communications chips and count yearly sales in the $1.7 billion range. Agere arguably is Broadcom’s closest competitor by size.
Both companies make broad lines of chips for wireless phones, networking gear and other products.
The lawsuits could indicate that Broadcom’s willingness to settle litigation has its limits.
Broadcom faces at least one other lawsuit. In April, Lonestar Inventions LP filed a complaint against the company, saying it infringed on a single patent relating to circuit technology.
Under former chief executive and cofounder Henry Nicholas, Broadcom sought to fight lawsuits in the same die-hard way he battled to land the company’s chips in cable TV set-top boxes, networking gear and other devices.
When Ross took over after Nicholas stepped down in early 2003, he sought to settle litigation so Broadcom could focus on restructuring and making chips.
Money spent on litigation “could have been spent on R & D;,” Ross said last year.
Chips used in the storing of data are of interest to Broadcom after a series of acquisitions. In the past year, it bought two storage-related companies,Santa Clara’s Gadzoox Networks Inc. and Nashua, N.H.-based RAIDCore Inc.,and the Cirrus Logic patents.
Analysts said they aren’t too worried about the Agere litigation distracting Broadcom.
“It is of concern, but not that large of a concern,” said Albert Lin, an analyst with the San Francisco office of Greenwich, Conn.-based American Technology Research Inc., which advises institutional investors. “The history of this space has been marred with many lawsuits with all these companies. Usually, they come to some sort of settlement. There’s never been a case where a company has some sort of patent portfolio where they exercise it to where a judge absolutely stops another company from doing business.”
David Wu, an analyst with Wedbush Morgan Securities Inc. in Los Angeles, was more cynical.
“That’s what lawyers do,” he said. “It’s what keeps the unemployment rate among lawyers low. It’s America, you’re allowed to sue anybody.”
MAKING NICE – Lawsuits settled by Broadcom Corp. in the past year:
June: patent, antitrust litigation with Microtune, signed cross-licensing pact
December: patent suit brought by PCTel over soft modems, signed cross-licensing pact
August: long-running patent lawsuits with Intel, paid $60 million, struck cross-licensing pact
July 2003: patent suit over networking chips with National Semiconductor, signed cross-licensing pact
