Intel Steps Up Legal Battle With Broadcom
Giant computer chip maker Intel Corp. filed a sweeping federal lawsuit Wednesday against rival Broadcom Corp. charging that “nearly every aspect” of the Irvine firm’s business violates Intel patents.
Intel alleges in the suit, filed in Delaware, that Broadcom has constructed a “carefully crafted plan” to build its business using Intel technology.
Broadcom is “confident in the soundness of our business practices” and will defend against the accusations “vigorously,” said Broadcom spokesman Bill Blanning. Broadcom executives had not reviewed the complaint on Wednesday, he said.
Broadcom shares slid late in the day on news of the suit, and closed down $13.50 at $238.44 a share in Nasdaq trading. Intel eased 56 cents to $73.50 a share on Nasdaq.
The lawsuit is the latest and broadest legal challenge that the Santa Clara, Calif.-based company, the world’s largest maker of microprocessors, has leveled against a company it helped to build. Intel was an early investor in what has become the industry’s fastest-growing communications chip maker.
In March, Intel sued Broadcom in Santa Clara County Superior Court on allegations that Broadcom had stolen trade secrets by hiring away three former Intel employees and attempting to hire a fourth.
A judge ruled that the three employees could remain with Broadcom, but blocked the fourth from joining the firm. The judge also appointed an independent monitor to ensure that Broadcom does not misappropriate Intel’s trade secrets while the case is pending.
Wednesday’s suit in federal court takes a big step further. It accuses Broadcom of stealing Intel’s intellectual property by violating one patent on hardware used for high-speed digital subscriber line--or DSL--modems, another patent on the process for packaging silicon chips, and three software patents on technology for transmitting video over the Internet.
“Broadcom has demonstrated that it has very little respect for Intel’s property rights,” said Intel spokesman Chuck Mulloy. “We felt we had little choice but to move forward to protect patent rights.”
The suit seeks unspecified damages and an order halting Broadcom from selling the alleged infringing products in the future.
The lawsuit surprised Broadcom.
Intel “made no effort to alert us to this action or to seek to resolve any of the issues with us,” Blanning said.
The two companies still cooperate with each other in some areas. In home networking, for instance, Broadcom sells chips to Intel. But they became fierce competitors as Intel expanded into the semiconductors market for wired communications gear over the last few years.
Last year, Broadcom racked up more than $300 million in revenue from communications chips. Intel generated about $700 million in the same market, said Joe Byrne, an industry analyst for Dataquest.
A key force in Intel’s communications-chip strategy was its March 1999 acquisition of Level One Communications Inc., a Broadcom rival, for $2.2 billion. Level One is Broadcom’s primary competitor for chips that go into networking equipment.
Broadcom and Intel “ended up on the warpath when Intel decided it wanted to get into communications,” said market analyst Alex Gauna of Banc of America Securities.
Gauna said Intel came “late to the game,” and he characterized the company’s litigious posture toward Broadcom as “a desperate act of a company drowning in the communications sea.”
Intel’s spate of communications acquisitions, including Level One, “have been a well-understood failure to date,” he said.
While the companies battle for market share, the state case inches toward trial in Santa Clara. In his ruling over the employees, Superior Court Judge William F. Martin had harsh words for Broadcom’s chief executive, Henry T. Nicholas III, calling his attitude toward Intel’s trade secrets “extremely cavalier” and his testimony “unpersuasive and not credible.”
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Broadcom’s Sales Surge Irvine-based chip maker Broadcom has been one of the fastest-growing tech companies of the last few years, as annual sales rose more than 20-fold between 1996 and 1999.
Annual sales, in millions Source: Bloomberg News
