Brooktree Sues Industry Giant Over Proprietary Chip Design
In what could become the first court test of a 1984 law designed to protect proprietary semiconductor technology, Brooktree Corp., a fast-growing San Diego integrated-circuit manufacturer, has sued industry heavyweight Advanced Micro Devices of Sunnyvale, claiming AMD has infringed on its proprietary chip design.
U.S. District Judge William Enright on Tuesday denied Brooktree’s motion for a temporary restraining order that would have immediately prohibited AMD from selling the chip. Attorney John Land, who represents Brooktree, said Enright cited the “novelty of the case” in declining to issue the order.
“As far as we can tell, this is the first case filed under the Semiconductor Protection Act of 1984, which gives copyright-like protection to the layout or design of integrated circuits,” Land said.
Other disputes have arisen over chip designs since the law was passed, but all have been settled out of court, he said.
Enright, however, did agree to expedite discovery, or evidence taking, and set a Dec. 12 hearing of the San Diego firm’s request for a preliminary restraining order. If granted, the order would prohibit sales of the AMD chip until the court case is settled. Brooktree has asked for at least $1.6 million in damages besides the injunction.
Called Frivolous Ploy
AMD spokesman John Greenagel described the suit as a “frivolous legal ploy aimed at depriving customers of their legal right to choose the superior product,” adding that AMD would “vigorously” defend against the Brooktree suit.
Not surprisingly, Land framed the suit differently, saying the issue is whether “a giant corporation 40 times the size of Brooktree can watch the market, pick a spot that another company has exploited with innovative technology, then clone a chip or at least a portion of a chip, and simply out-muscle them by cutting prices.”
At issue is technology both companies use to produce an integrated circuit that enables workstation computers to convert digital impulses into images on color monitors.
Brooktree calls its chips RAMDACs, an acronym for random access memory digital-to-analog conversion chips. Industry sources estimated the annual market for the chips at $50 million and growing.
The chip, which Brooktree sells to several major workstation computer manufacturers including Sun Microsystems, Silicon Graphics and Digital Equipment Corp., is part of a family of products that has fueled Brooktree’s spectacular growth over the past three years.
From $2 million in sales in 1986, Brooktree booked $13 million in revenue in 1987, and about $39 million for the fiscal year ended Sept. 30. For the fiscal year in progress, Brooktree expects sales to hit about $60 million, spokeswoman Liz Baird said Tuesday. Employees total 275, up from 160 a year ago.
8 Patents Earned
Brooktree President James A. Bixby said the company has received a total of eight patents for inventing a new technology called the “Brooktree matrix” for so-called “mixed-signal” integrated circuits.
The technology combines high-performance digital circuitry with very high-performance analog circuits on a single chip.
The chips, which Brooktree sells as the Bt451 and Bt458, are also described as color “palettes” because they are critical to the ability of monitors on workstation computers to economically and rapidly display a wide range of colors. The innovation also reduces the computers’ need for built-in memory chips by two-thirds.
Filed in U.S. District Court in San Diego Nov. 7, Brooktree’s lawsuit cites its “novel and creative” mask work registrations, a term used for the layout or design of the chip that refers to its photolithographic manufacturing process. Brooktree applied for a patent for the mask work technology.
Major Chunk of Business
“This product is a major part of our business,” Bixby said, declining to specify how much of Brooktree’s 1988 sales the chips represent. “The importance (of the case) goes beyond the single product but extends to (Brooktree’s) family of products.”
AMD, a semiconductor industry mainstay that posted sales of $997.1 million for the fiscal year ended last December, said the color palettes are a relatively small but highly profitable segment of its business. AMD originally conceived of a color palette chip and brought it to market in 1985, Greenagel said.
“Then, as is customary in the industry, Brooktree came up with a better idea and introduced a chip with the advantages of being faster and operating with lower power consumption,” Greenagel said. “So, Brooktree became the new standard for color palettes.
“Then, AMD determined that since this was our original invention we would provide a pin-for-pin compatible AMD device, a chip that could replace the Brooktree part but that utilizes a different internal architecture,” Greenagel said.
“Our product uses considerably less power and is faster (than Brooktree’s chip). The customers have recognized this. Now Brooktree is upset because they have lost . . . to a superior product,” Greenagel said.
Michael Stark, a semiconductor analyst with Robertson, Colman & Stephens investment bankers in San Francisco, disputes AMD’s view, saying Brooktree has “almost invented the digital-to-analog converter market themselves.”
“What AMD is doing is coming in and saying, ‘Brooktree’s done a great job here, we wish we were that smart, so let’s try to copy it,’ ” Stark said. “The sad thing is that AMD is going out in the market and charging lower prices after Brooktree has put in all the research and development and lots of marketing in an effort to educate customers that theirs is the best approach.”
Said AMD’s Greenagel: “We have the greatest respect for intellectual property and are sensitive to people infringing those rights. But we have not infringed on Brooktree’s intellectual property, and we are confident the court will agree.”
