Small Electronics Company Zaps Motorola

Power Integrations wins $32.3 million award in patent case

By John Manser, Delaware Law Weekly, October 26, 1999

Cellular phone giant Motorola Inc. was hit with a $32.3 million jury award, one of the largest ever given in U.S. District court in Wilmington, for infringing on a patent for microchips used in recharging cell phones and laptop computers.

Power Integrations Inc., a California company employing about 200, sued the Schaumburg, Ill.-based Motorola in August 1998. PI complained that Motorola, which lists 133,000 employees, used its patented technology for the manufacture of computer chips that supply reduced voltage to battery chargers.

A jury of eight women and one man deliberated for seven hours before reporting at 1 a.m. on Oct. 16 that Motorola was liable for patent infringement. Because the jury found the infringement willful, PI counsel William Marsden said the company would ask federal Judge Joseph J. Farnan Jr. to triple the award to $96.9 million.

"There has been only one case that I am aware of that brought in a higher award," Marsden said, referring to last year's Allied Signal litigation that resulted in a $39 million verdict. "No other verdicts have been close to it."

Motorola's attorneys are expected to ask Farnan to reverse the jury verdict, a routine motion in such cases. A Motorola spokesman said the company would consider all avenues of appeal.

Marsden, a well-known Wilmington patent attorney, at first represented PI as a partner with Potter Anderson & Corroon, then switched to Fish & Richardson, PI's out-of-state counsel, during the litigation. Marsden now heads up Fish & Richardson's new Wilmington office.

PI was started in 1988 to design and market high-voltage integrated circuits for use mainly in alternating-current to direct-current power converters.

"Virtually every electronic device that plugs into a wall socket requires a power supply to convert high voltage alternating current into a low voltage direct current," said PI President Howard Earhart in court papers. Portable products such as cell phones and laptop computers require such power supplies to recharge their batteries.

PI distinguished itself by designing high-voltage power conversion integrated circuits under the TopSwitch brand that reduced the size and number of components and improved the converters' efficiency.

Earhart said in court papers that Motorola's Energy Systems Group, Apple Computer, Compaq, IBM, Nokia, Samsung and others benefited from PI's patented technology.

Since 1994, PI has sold about 175 million TopSwitch integrated circuits with total sales of about $159 million.

In early 1998, PI became aware that Motorola was selling a new line of power chips that the company advertised as a "direct replacement" for TopSwitch, Earhart said in court documents. PI, however, hadn't authorized Motorola's manufacture of the product and claimed the chips infringed on PI patents.

At least one company which normally bought PI products said it would buy Motorola's chip unless PI lowered prices. When PI refused to drop its price, the company took its business to Motorola, Earhart said in court papers.

PI argued to the jury that Motorola induced and contributed to infringement of its patent by distributing marketing material that told purchasers how to use Motorola's power conversion chip.

The jury found on all five claims under one PI patent that Motorola had induced infringement by its customers under the doctrine of equivalents; the jury also found that Motorola had contributed to infringement by its customers under the doctrine of equivalents for the same five patent claims.

The jury, however, found Motorola not liable for infringement of another PI patent. And PI was found not to have violated several Motorola patents, as the large electronics company had claimed.

"This is a significant victory for Power Integrations," Marsden said. "The verdict reinforces the value of Power Integrations' intellectual property." In fact, PI shares hit a new 52-week high of 85 on Oct. 18 after the company announced the jury's verdict. The company opened yesterday at 84.625.

Joining Marsden in representing PI were Frank Scherkenbach, Howard Pollack and Katherine Kelly Lutton of Fish & Richardson's Silicon Valley office, and Twin Cities associate Stephen Schaefer.

Motorola counsel included William J. Wade of Wilmington's Richards Layton & Finger.

The case is Power Integrations Inc. v. Motorola Inc., CA 98-490.

From Law News,, 99/10/26