Licensing by Acquisition: The High-Stakes Dispute Over Whether Intel is Licensed to VLSI’s Patents

The Federal Circuit has issued an interesting nonprecedential order in In re VLSI Technology LLC, denying VLSI’s petition for a writ of mandamus that sought to reverse a district court order allowing Intel to amend its answer to assert a declaratory judgment counterclaim regarding a patent license defense.

The Federal Circuit’s brief order sheds some light on the standards for amending pleadings late in litigation and the propriety of declaratory judgment counterclaims in patent cases even where the underlying infringement claims have been extinguished.

Background: A separate VLSI v. Intel case was before the Federal Circuit in December 2023.  In that case, the court overturned VLSI’s $2 billion patent infringement verdict – and remanded for a new trial on damages.  VLSI Tech. LLC v. Intel Corp., 87 F.4th 1332 (Fed. Cir. 2023).  This appeal involves a separate set of infringement claims based upon a separate family of patents also owned by VLSI (and originating from NXP Semiconductor).

Fortress Investment Group (“Fortress”) created VLSI back in 2016 and subsequently and acquired a number of patents from the Dutch-based NXP Semiconductors. In 2017 VLSI Technology LLC sued Intel Corporation for patent infringement in the Northern District of California, asserting four patents: U.S. Patent Nos. 8,566,836; 8,004,922; 7,675,806; and 8,268,672. Although VLSI’s patent case has vanished, Intel is seeking a declaratory judgment ruling that it has a broad license to all VLSI patents.

License by Acquisition: In 2020, Fortress also acquired control of Finjan Holdings — and Intel has argued that purchase instantly created license rights over the asserted NPX patents.  The basic setup is that Intel licensed Finjan’s past and future back in 2012 — and the agreement broadly included a license to patents held by Finjan “affiliates.”  Since VLSI and Finjan are now under common control, Intel argues that VLSI’s patents are also licensed.

Once the purchase occurred, Intel amended its answer to raise an affirmative defense that it was licensed to practice the patents under a prior agreement with a third party.  However, that defense disappeared as VLSI withdrew its patent case. In particular, in this action the district court granted summary judgment of noninfringement to Intel on two patents (the ‘836 and ‘922 patents) and VLSI dropped its allegations and granted Intel a covenant not to sue on the other two asserted patents (the ‘806 and ‘672 patents). Concluding this deprived it of jurisdiction over the license defense, the court denied Intel’s request to proceed to trial on that issue.

At that point, however, Intel proposed an amended answer to include a declaratory judgment counterclaim that it is licensed to VLSI’s entire patent portfolio. The district court granted Intel’s motion to amend. VLSI then petitioned the Federal Circuit for a writ of mandamus to reverse that order.

The Federal Circuit’s Mandamus Analysis: The Federal Circuit began by noting the exceptional nature of mandamus relief, which requires a petitioner to show:

  1. A clear and indisputable right to relief;
  2. No other adequate method of obtaining relief; and
  3. The writ is appropriate under the circumstances.

See Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367 (2004).

Applying these standards, the court found VLSI failed to make the required showing – particularly the requirement for immediate relief.  In particular the court noted that VLSI’s argument about a lack of jurisdiction can be challenged before the District Court as well as in an appeal after final judgment.

That motion to dismiss for lack of jurisdiction over the DJ counterclaim is now pending before N.D. Cal Judge Freeman. In its motion, VLSI argues that the court lacks subject matter jurisdiction over Intel’s counterclaim because the underlying infringement claims have already been resolved, rendering the license claim moot. VLSI contends that simply restyling the mooted defense as a declaratory judgment counterclaim cannot create jurisdiction where none exists for a defense. The motion also asserts that Intel is barred from bringing its counterclaim in N.D. Cal. by a forum selection clause in the relevant license agreement that requires disputes to be litigated in Delaware. Finally, VLSI argues that even if jurisdiction exists, the court should decline to exercise it under the Declaratory Judgment Act because the license issue should be decided alongside the live patent infringement claims pending between the parties in the Western District of Texas.  In terms of judge shopping, it seems that the patentee would much rather have the license case decided by Judge Albright (who already once sided in its favor) as opposed to Judge Freeman.

This same issue involving the license defense is part of the parallel case that is back before a Judge Albright in the Western District of Texas. 21-cv-00057-ADA.

In the Texas case, the district court had denied Intel’s motion to add its license defense. On appeal, the Federal Circuit found the district court abused its discretion in denying the motion to amend. VLSI Tech. LLC v. Intel Corp., 87 F.4th 1332 (Fed. Cir. 2023).  The appellate panel rejected the district court’s conclusions that Intel unduly delayed in bringing the motion, that VLSI would be unduly prejudiced, and that the amendment would be futile. On futility, the Federal Circuit held the district court erred in finding the license defense clearly meritless under Delaware law as applied to VLSI, a non-party to the Intel-Finjan agreement. The court explained Delaware law allows contracts to bind affiliates in some contexts, so additional litigation was needed to resolve the defense.  In its decision though the Federal Circuit emphasized its holding was narrow – it was not deciding the ultimate merits of the license defense, only that the district court erred in finding it so clearly futile as to deny the amendment. Further proceedings are ongoing in that case on remand as they are in other parallel cases, including those in China.

The Federal Circuit’s mandate in the Texas case issued on March 14, and so the court is only now getting restarted.



16 thoughts on “Licensing by Acquisition: The High-Stakes Dispute Over Whether Intel is Licensed to VLSI’s Patents

  1. 4

    Yes, “a license back to the seller is kinda universal” in selling patents to a PAE. But that alone does not protect their customers from being sued on customer products other than the products sold to the customers by the patent seller. In fact, the kind of patents companies are likely to sell to PAEs are often patents that were NOT covering and protecting their own sold products.

  2. 3

    How did VLSI sue Intel for infringement of the same patents in two different districts?

    1. 3.1

      Don’t think they did? The WD Texas case involved different patents.

      Having said that, I have seen cases where a Plaintiff sued a Defendant in two different jurisdictions on the same patent. Takes a somewhat unusual set of facts, but it does happen.

  3. 2

    Time to define “affiliate?”

    1. 2.1

      Sunlight is never a bad idea.

  4. 1

    The plaintiff “VLSI Technology LLC” in this major patent litigation should not be confused with large scale semiconductor manufacturers or the like companies with VLSI in their title. It is a PAE of licensing personnel. See its website.

    1. 1.1

      The plaintiff “VLSI Technology LLC” in this major patent litigation should not be confused with large scale semiconductor manufacturers or the like companies with VLSI in their title. It is a PAE of licensing personnel. See its website.
      And your point is?

      VLSI refers to a type of technology — not a manufacturer. And the article already inferred that VLSI is a PAE when Dennis wrote “Fortress Investment Group (‘Fortress’) created VLSI back in 2016 and subsequently and acquired a number of patents from the Dutch-based NXP Semiconductors.”

      1. 1.1.1

        VLSI Technology, Inc. designed and manufactured custom and semi-custom integrated circuits. This major company was based in Silicon Valley. VLSI was acquired in June 1999, for about $1 billion, by Philips Electronics and is today a part of the Philips spin-off NXP Semiconductors.

    2. 1.2

      Hang on, you be sayin that they trollin in vlsi now?

      1. 1.2.1

        Not of interest to those regularly denying, even to Congress, that they even exist, much less comprising a large percentage of patent plaintiffs, but at least most of them do not use confusingly nearly identical names of major companies.


          Nice strawman.

          “Denying” is not accurate.

    3. 1.3

      The two are closely related. VLSI is a former chip manufacturer, purchased by Philips in 1999 and spun-off as NXP. The VLSI patents here come from VLSI the company – but were sold in order to be asserted. I don’t know whether these are fully clean sales or if NXP receives some $$$ based upon success.

      1. 1.3.1

        Yes, PAE suits in general may have percentage of litigation recovery interests, as well as funding, by unnamed foreign sources, or even possible foreign ownership and funding control over the litigation, but freedom from direct discovery or counter-claims, by suing via an intervening -“sale” U.S. “shell” entity. But the latter is not usually named for their purchased U.S. patents source company – most patent sellers would not want that. It might help someone trying to pierce that corporate veil.


          Another thing companies selling or trading patents to PAEs need to think about is making sure that none of their own present or former customers get sued on any of their patents that they provided to the PAE. [Which has happened, absent contractual provisions to prevent that.]



            …um, why?


            I guess, but a license back to the seller is kinda universal in such deals (absent malpractice??)

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