UPDATE 2-Marvell patent verdict grows to $1.54 billion

Tue Apr 1, 2014 11:15am EDT

* Judge awards Carnegie Mellon "enhanced" damages

* Award less than university sought; Marvell shares rise (Adds details from decision, comments from analysts and Carnegie Mellon law firm, updated share price)

By Jonathan Stempel

April 1 (Reuters) - A federal judge ordered Marvell Technology Group Ltd to pay nearly $1.54 billion to Carnegie Mellon University for selling billions of semiconductors that infringed the school's two hard disk drive patents.

While the award is 31 percent more than the $1.17 billion previously awarded by a jury, it was less than half the maximum $3.75 billion that Carnegie Mellon sought, and eased concern that the payout might be higher. Marvell still plans to appeal.

Shares of Marvell were up 3.4 percent at $16.29 in morning Nasdaq trading after peaking at $16.65.

In her decision late Monday, U.S. District Judge Nora Barry Fischer in Pittsburgh, where Carnegie Mellon is based, said the school deserved "enhanced damages" because it showed that Marvell and its Marvell Semiconductor unit deliberately copied its patents through "known willful infringement."

Carnegie Mellon said at least nine Marvell circuit devices had incorporated patents issued in 2001 and 2002 over how accurately hard drive circuits read data from high-speed magnetic disks.

The payout is equal to 1.23 times the sum of the original $1.17 billion jury verdict from December 2012, plus $79.6 million for alleged infringements that the jury did not consider because it had lacked recent financial information at the time.

"This award is sufficient to penalize Marvell for its egregious behavior and to deter future infringement activities," the judge wrote in a 72-page decision.

Fischer rejected Carnegie Mellon's request for an "unprecedented financial penalty" to triple damages to $3.75 billion, roughly twice Marvell's liquid assets, saying this would "severely prejudice" Marvell's business. She also denied the school's request to stop further sales of the chips.

OVERHANG REMOVED

MKM Partners analyst Ian Ing, who rates Marvell "buy," wrote that the decision removed a "major overhang" on the stock.

Several analysts expect the award to be lowered, especially if the 50-cent-per-chip royalty rate that Fischer used is cut.

"Fears were the damages would be even higher," wrote Brean Capital analyst Mike Burton, who also rates Marvell a "buy." He said Marvell might on appeal reduce the damages award by 80 percent, "if the case even stands to begin with."

K&L Gates, a law firm representing Carnegie Mellon, said in a statement that it was pleased that Fischer "addressed both Marvell's continuing and willful infringement." It said it looked forward to the appeals court "vindicating Carnegie Mellon University's intellectual property rights just as Judge Fischer did."

Patent infringement lawsuits have gained greater prominence in recent years as more companies try to protect inventions they create or acquire amid rapid innovation.

Apple Inc and Samsung Electronics Co have battled for nearly three years over smartphone technology, while the U.S. Supreme Court is hearing six patent cases, an unusually large number, in its current term.

Marvell said it intended to argue before the U.S. Federal Circuit Court of Appeals in Washington that the Carnegie Mellon patents are invalid, that there was no infringement, and that Fischer erred in calculating the royalty rate and applying it to chips made and sold abroad.

The company has said a single, $250,000 royalty payment should have sufficed.

Marvell is based in Hamilton, Bermuda, and Marvell Semiconductor is based in Santa Clara, California.

The initial $1.17 billion award was the third-largest in U.S. patent litigation since 1995, PricewaterhouseCoopers said in a June 2013 study.

The case is Carnegie Mellon University v. Marvell Technology Group Ltd et al, U.S. District Court, Western District of Pennsylvania, No. 09-00290. (Reporting by Jonathan Stempel in New York; Additional reporting by Nate Raymond in New York and Rachel Chitra in Bangalore; Editing by Gopakumar Warrier, Nick Zieminski and Lisa Von Ahn)