Texas Instruments v. Hyundai Electronics Industries

49 F. Supp. 2d 893 (1999)

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Texas Instruments v. Hyundai Electronics Industries

United States District Court for the Eastern District of Texas
49 F. Supp. 2d 893 (1999)

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Facts

Texas Instruments (TI) (plaintiff) had over 3,000 semiconductor patents and filed several hundred patent applications each year. Hyundai Electronics Industries (Hyundai) (defendant) had over 1,200 semiconductor patents and filed additional applications each year. Both companies also had thousands of patents around the world. Given their voluminous portfolios of patents, both TI and Hyundai had multiple patents maturing and expiring each day. This made entering into license agreements relating to single patents very difficult, requiring a party that wanted to sell its product into a new country to check whether its sales would infringe any of the other party’s patents and to repeat that process constantly as patents matured and expired. As a result, TI and Hyundai began negotiating a portfolio cross-license agreement, in which they licensed a portfolio, or block, of patents to each other to avoid patent-by-patent licensing. TI and Hyundai negotiated the terms of the portfolio but disagreed on royalties. TI wanted a running royalty structure, in which Hyundai would pay a certain percentage of its sales to TI. Hyundai preferred a fixed royalty, paying TI a one-time, lump sum fee. The parties ultimately agreed to a royalty sales-cap provision by which Hyundai would pay TI a set fee for a certain volume of license rights based on Hyundai’s worldwide sales of semiconductor products, after which the agreement would terminate. TI ultimately sued Hyundai for patent infringement. A jury found in TI’s favor, after which the trial judge tried Hyundai’s remaining defense of per se patent misuse, which stemmed from Hyundai’s claim that TI had engaged in an illegal tying arrangement. Hyundai argued that the sales-cap provision the parties had negotiated, which covered worldwide sales of all of Hyundai’s semiconductor products, impermissibly tied semiconductor products Hyundai sold that incorporated TI’s patents and Hyundai’s products that did not.

Rule of Law

Issue

Holding and Reasoning (Heartfield, J.)

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