SAN MATEO, Calif. The U.S. Patent and Trademark Office has issued a ruling favoring Lexra Inc. in its dispute with MIPS Technologies Inc. that could open the door for other MIPS licensees to question their royalty obligations to the company.
The decision found that a component of MIPS' patents is invalid because it was predated by an earlier patent issued to IBM Corp. The ruling not only leaves Lexra in the clear but also threatens to undermine MIPS' intellectual-property business.
MIPS said it will appeal the decision. Jim Kurkowski, director of intellectual property for MIPS (Mountain View, Calif.), said that he expects the patent's validity to be affirmed. MIPS can initially appeal this decision within the Patent and Trademark Office (PTO), and if those decisions go against the company, the company will have the right to appeal to the Federal District Court. "This is just the first step in a long process," he said. "It is still so earl y in the process that it will have no impact on us. To presume at this point that the patent is unenforceable would be extremely premature."
But Bob Yoches, a lawyer for Lexra, said, "We think these claims were one of the jewels in [MIPS'] crown [of intellectual property].
"If this holds up," he said, "and MIPS loses [the right to enforce] these claims, they won't be able to stop anybody from implementing these instructions [without paying any type of licensing fees]."
Charlie Cheng, president and chief executive of San Jose-based Lexra, predicted that MIPS licensees may question whether they need to continue paying for the intellectual property used in MIPS-based designs if the fundamental patents are not valid. "If you are an intellectual-property company, your entire franchise is built upon a foundation of strong patents," he said. "I think there will be a ripple effect through the entire MIPS world."
But others noted that MIPS' business is based on more than patented technology, and that customers might be willing to pay for the company's value-added products and services.
The PTO found that six claims within a MIPS patent that focused on loading and storing unaligned data were predated by an earlier patent issued to IBM Corp. in 1975. Of 14 claims in that patent, known as the 976 patent, Lexra had originally disputed just four. The PTO went beyond that request to invalidate not only those four claims but two others.
Nonetheless, industry observers point out that a patent predated by prior art is fundamentally flawed and that basing an entire business model on bad patents is a poor strategy. "MIPS has played a really risky game here, and they risk losing their whole business model if they can't enforce their patents," said Linley Gwennap, principal analyst at Silicon Valley technology research firm The Linley Group (Mountain View, Calif.).
Bernard Peuto, president of the research firm Concord Consulting (Portola Valley, Calif.), agreed that the MIPS bu siness would be threatened if this patent is invalidated. "If these patents disappear, then their licensing position will be weakened," he said. "Their licensees would be able to ask for a discount."
Still, Peuto noted, MIPS delivers more than just patented technology. It also offers a service that many find valuable: the designs for an actual product, a processor core. "You have to look at the service that is delivered, and if people value that service, then they are probably going to be willing to pay money for it," he said.
That is exactly the case with MIPS licensee NeoMagic Corp. (Santa Clara, Calif.). "MIPS is in the business of delivering a valuable product, and we licensed its technology because it is delivering something of value to us," said Mark Singer, vice president of corporate marketing for the company. Whether the MIPS core was based on a MIPS patent or on an older IBM patent was not relevant, he said, because what NeoMagic needed was a functioning microprocessor core.
"We aren't going to put a patent in our chip. We need a CPU, and we can't get that from the patent office or from IBM," he said. "MIPS delivered a core," and NeoMagic is willing to pay for it.