( ESNUG 538 Item 13 ) ------------------------------------------- [10/21/14]
Subject: Mentor Legal warns how SNPS/EVE court decision impacts ZeBu users
> In my view it's good news for EDA users to hear that Aart's "SUE RIVALS"
> strategy has backfired with a jury awarding MENT $36 million in damages
> for SNPS to pay. Hopefully it'll encourage Aart to use attack lawyers less;
> and to focus his $$$ and people back on making better tools instead.
>
> - John Cooley
> DeepChip.com Holliston, MA
> http://www.deepchip.com/items/0538-11.html
From: [ Tom Evans, Mentor Corp Counsel ]
To: [ John Cooley, DeepChip.com ]
Hi, John,
This verdict was very gratifying for us.
It validated the many years of R&D investment Mentor Graphics has made in
emulation technology. The infringed patent, U.S. Patent No. 6,240,376,
broadly covers a variety of techniques for debugging RTL source code using
an emulator.
Not only was our innovation recognized once by the U.S. Patent and Trademark
Office -- its significance was confirmed a 2nd time when the Patent Office
validated the infringed claims of the '376 patent under the new inter partes
review process.
In fact, this patent was one of the first and one of only a few to date to
survive the more demanding requirements of this new review process.
The jury's decision on direct infringement established that Synopsys' ZeBu
emulators misappropriated Mentor's technology and infringed our '376 patent.
Further, their decisions on induced and contributory infringement reflect
their conclusions that Synopsys' customers also are infringing our patent
through the use of the ZeBu emulators.
I would like to note for your DeepChip readers that this $36 million jury
award is compensation only for past infringement.
Mentor intends to ask the Oregon judge for an injunction against any future
sale of ZeBu emulators until the '376 patent expires in July 2018. Such an
injunction would prevent Synopsys from making or selling any ZeBu emulators
in the United States with the infringing technology. An injunction could
further apply to service contracts for previously purchased ZeBu emulators,
preventing Synopsys from providing customers with support and maintenance
for the infringing technology in those emulators.
Also, the jury awarded Mentor a royalty for Synopsys' use of our patented
technology -- so the U.S. District Court judge could require Synopsys to pay
Mentor a running royalty payment for future emulator sales. At present, the
jury determined that a 5% royalty on total Zebu sales was appropriate for
past infringement, but that royalty rate could be increased for future sales.
It might even be increased to as much as 15%, as Synopsys' continued use and
infringement of the '376 patented technology would be deliberate in view of
the jury's verdict.
- Tom Evans
Corporate Counsel
Mentor Graphics Corp. Wilsonville, OR
---- ---- ---- ---- ---- ---- ----
From: [ John Cooley, DeepChip.com ]
To: [ Tom Evans, Mentor Corp Counsel ]
Hi, Tom,
Thanks for this follow-up email. Could you answer a few related questions:
1.) What's this about "induced" and "contributory infringement"?
Also what's this stuff about SNPS EVE Zebu customers infringing
on the '376 patent?
2.) What does this "inter partes" stuff mean? Why should Zebu
customers care about this?
3.) The gross margin on SW is roughly 80%. The gross margin on
HW is roughly 30% to 45%. If the court grants a 15% royalty
on future SNPS EVE Zebu boxes, that remaining 15% to 30% gross
margin might make them unprofitable to sell. Would the court
actually do this?
My readers are HW design and verification engineers, not lawyers. What may
be clear to you as a lawyer may not be clear them. It would help a lot if
you could explain how this case directly impacts them.
- John Cooley
DeepChip.com Holliston, MA
---- ---- ---- ---- ---- ---- ----
From: [ Tom Evans, Mentor Corp Counsel ]
To: [ John Cooley, DeepChip.com ]
Hi, John,
I would be happy to explain more.
1.) One example of contributory infringement is when a manufacturer sells
a product for a customer to use in performing a patented process, and
that product really has no other substantial noninfringing use. In
that case, the manufacturer is contributing to a customer infringing
a patent.
Induced infringement is when someone causes someone else to infringe
a patent.
The common thread to both types of infringement is intent.
To find Synopsys guilty of either type of infringement, the jury had
to conclude that Synopsys knew about Mentor's '376 patent and then it
intentionally led its customers to infringe our '376 patent.
In order to find Synopsys guilty of either contributory infringement
or induced infringement, the jury necessarily had to conclude that
Synopsys customers were infringing our '376 patent by using Synopsys'
Zebu emulators in the way Synopsys intended.
2.) An "inter partes" review is a new trial procedure at the U.S. Patent
and Trademark Office to allow the experts there to reevaluate issued
patents. It was recently introduced by Congress specifically to
give people a quick and effective avenue to invalidate a bad patent
outside of litigation, while still allowing the patent owner the
opportunity to defend the patent. But it has been more effective at
invalidating patents than I think anyone expected.
Recently, a colleague of mine calculated that the Patent Office has
invalidated roughly 92% of all patent claims that have underwent an
"inter partes" review.
That our infringed '376 claims survived this rigorous reexamination
process, and were actually among the very first to do so, I feel is
a testimony to the innovativeness of our patented technology and,
significantly, a statement as to the degree of protection from
infringement '376 deserves.
3.) Lastly, you suggested that gross margins for hardware are roughly
30% to 45%. I can't really speak to that -- my background is in
law, not sales.
The jury concluded that a reasonable royalty for past sales of
infringing Zebu products should be 5%. This was an amount that was
not supposed to reward Mentor Graphics nor punish Synopsys, but
rather to be a fair value for Synopsys' use of Mentor's patented
technology.
Future '376 infringing Zebu sales would be deliberate infringement,
however, in view of the jury's verdict. The court could therefore
increase the royalty rate on Synopsys' future '376 infringing sales
up to as much 15% (that is, triple the reasonable royalty), as
punishment for such deliberate infringement.
Because the increase would be for deliberate infringement after a
jury's verdict, profitability might not be a consideration for the
court in determining the increase.
I hope that this helps address your questions.
- Tom Evans
Corporate Counsel
Mentor Graphics Corp. Wilsonville, OR
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