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R2 Semiconductor Outlines Next Steps Following Chip IP Victory Over Intel in Germany
[February 12, 2024]

R2 Semiconductor Outlines Next Steps Following Chip IP Victory Over Intel in Germany

R2 Semiconductor last week scored an important intellectual property victory when the Düsseldorf Regional Court ruled that Intel Corp. (Nasdaq: INTC) infringed on R2's European patent for integrated voltage regulation technology. In doing so, the court also issued an injunction prohibiting Intel in Germany from selling, importing or making chips with the infringing technology, which is especially prominent in Intel's server business. The injunction also applies to Intel customers Dell, HP and HPE, since they use Intel's infringing technology.

Today, R2 addressed the next steps and key questions following Intel's loss in the highly respected German court.

Five Questions Following German Court Decision Against Intel

Q: What happens next in this dispute?

A: In Germany, R2 is fully prepared to enforce the injunction granted by the court against Intel, Dell, HP and HPE to protect our valuable intellectual property, including posting the required bonds. It seems that Intel has appealed, but in Germany, courts do not typically stay the injunction during such appeals - which means the injunction would remain in place through 2025, at a minimum. Additionally, Intel is pursuing a validity challenge to the patent in the German Patent Court, which will be finalized later this year. But, as Intel recognizes in its most recent 10-K, that Court has already given its preliminary opinion that the R2 patent is valid.

In addition to the pending litigation on the same patent in the UK (in which an injunction is also sought), R2 is also considering whether additional enforcement steps may be required elsewhere; after all, R2's patent is a European patent, and therefore protects its rights Europe-wide. And, the patent involved is a different one than the one Intel challenged in the U.S. several years ago, so the prior litigation history really has nothing to dowith Intel's current predicament.

Q: Can't Intel just remove the technology from its chips?

A: Very unlikely. The infringing technology is integral to the processor chip and removing it would likely require redesigning the whole chip. That process typically takes years, and costs billions of dollars. Plus, the alternate technologies available to Intel are inferior, and lead effectively to increased power consumption by the chip, lower and/or volatile performance, and lower mean time to failure. Each of those is very bad, especially for computer servers.

Q: Is this a big deal for Intel?

A: The infringing technology is mainly used in servers - a huge business for Intel. In 2022, for example, Intel earned global revenues of $63.6 billion. Of that number about $31 billion is attributable to servers. If the company can't make, sell or import chips for that business in Germany and other parts of Europe - and HP, HPE and Dell can't use them -- it's a big deal. Plus,

Intel last spring announced plans to invest more than 30 billion euros to build a chip manufacturing site in the German city of Magdeburg. The injunction may very well affect that investment.

Q: Isn't the injunction only limited to a few products?

A: Intel seems to be saying that the injunction is limited to the four chip families the German court discussed in its opinion. That is not so; in fact, the German court prohibited Intel (and Dell, HP and HPE) from infringing the patent, by any means - the injunction is not just for the four families, it covers any chips that infringe in the same way. So, any Intel chip that has similar integrated voltage regulating technology will be subject to the injunction. Intel revises chips each year and introduces a new generation annually, but each chip is largely a derivative of the previous generation with incremental changes.

Intel (and Dell, HP and HPE) must provide R2 with a list of all such processors in the coming weeks, so we will be able to more precisely identify the many chip families impacted. So, newer chips like those in its 13th and 14th generation (e.g., Raptor Lake) may very well be within the scope of the injunction.

Q: Is R2 is a "patent troll," a "shell company," or a serial litigant?

A: No. A patent troll is an entity that obtains patents for the purpose of suing or licensing, and never practices its own technology. In contrast, R2 is a well-established, 15-year-old, California-based tech firm that invented the integrated voltage regulation technology. Even today, it continues to develop the technology, and works with some of the leading tech companies in the world in the process. Its business model is like that of other public companies, such as ARM, which licenses designs just like R2.

Intel is intimately familiar with R2's chip IP development business -in fact, the companies were in the final stages of an investment by Intel into R2 in 2015 when Intel unilaterally terminated the process, and Intel (and its downstream customers, HPE and Dell) are the only entities R2 has ever accused of violating its patents. Years before that, in 2011, Intel actually filed a patent application for the same invention R2 patented in 2009. Intel later pulled the patent application during the U.S. litigation.

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