STC.UNM v. Intel Corporation

Filing 77

REPLY to Response to Motion re 54 MOTION to Compel filed by STC. UNM. (Pedersen, Steven)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW MEXICO
STC.UNM,
Plaintiff,
v.
INTEL CORPORATION,

Civil No. 10-CV-01077-RB-WDS

Defendant.

REPLY IN SUPPORT OF STC’S MOTION TO COMPEL
Intel does not dispute that research and development activities are properly
discoverable for an infringement determination by the jury. Nor does Intel dispute
that the public literature attached to STC’s motion (Exhs. C-E) shows that Intel is
developing double patterning techniques (the subject of the ‘998 patent) for use in
its future 14 and 10nm technology nodes. Nor does Intel any longer dispute that its
research and development activities for its still non-commercial 22nm process
technology should be part of this case.
As explained herein, Intel’s opposition obfuscates the scope of the sought-after
discovery, misstates the law regarding the relevancy of the discovery vis a vie STC’s
damages case, and overstates any burden to Intel.

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There is No Risk of “Grave Harm”
Intel’s first argument, and supposedly its most important, is that discovery
related to the development of its 14 and 10nm technology processes would cause it
“grave harm.” This is nonsense for a number of reasons.
First, this presupposes that the double patterning process associated with those
products is somehow a secret. However, the fact that Intel is using double
patterning in the development of its 14 and 10 nm is not secret. Indeed, as set forth
in the exhibits to the instant motion Intel has already publically declared in its
presentations that “pitch division [double patterning] is the only option available in
2009 and 2010 . . . to support patterning for 15nm logic.” See Exh. D, at p 9. Thus,
the entire pretense for Intel's opposition, that the subject information is a highlyguarded secret, is simply untrue.
However, assuming the subject information is truly secret, Intel's argument
necessarily presupposes that STC’s lawyers and its expert, who has previously
consulted for Intel and makes a living by consulting throughout the semiconductor
industry, would disclose the information received in the discovery process to third
parties. This is the remotest of possibilities as any such disclosure would essentially
end that person’s career.1 Moreover, this is an argument that any litigant could
make in an effort to avoid producing relevant, yet confidential, information. It is

As specified in STC’s opposition to Intel’s motion to amend the protective order,
STC’s expert, Dr. Mack, procured a safe in conjunction with his expert witness role
in a prior litigation involving this patent to keep process flows and other highly
technical documents secure and safe in his office.
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also precisely the concern that any protective order, such as the one negotiated by
the parties and entered by the Court in this case, is designed to address.
Intel argues that the Court’s protective order is not “good enough” for its 14 and
10nm technology nodes. This argument is discredited by the simple fact that Intel is
comfortable with producing documentation for its newest 22nm product technology
under the protective order. Opposition, at 4. Moreover, STC has agreed to print and
take from Intel’s counsel’s office only a reasonable amount of the technical
documents that are relevant to STC's infringement charge. See Protective Order
[Doc. 63], at ¶9(a). The same safeguards would apply to discovery related to the 14
and 10 nm products, and, presumably, should be equally agreeable to Intel.
Lastly, and perhaps most important for purposes of this reply brief, Intel grossly
mischaracterizes the scope of the sought-after discovery. Intel’s opposition suggests
that it will have to turn over all of its trade secrets concerning its research and
development. This is not true. STC is only requesting discovery into one discrete
area of the manufacturing process, i.e., the use of double patterning.
By no means is STC seeking access to all of Intel’s trade secret information for
its 14 and 10nm technologies. This is evidenced by the fact that the parties have
already agreed to certain safeguards and limitations concerning Intel’s production
for its 45, 32 and 22nm technologies. For example, Intel has stated it will only
produce relevant portions of its process flow documents to show where it utilizes
double patterning. Exh. H, at 4-5 (Responses to RFPs 1 and 2); Protective Order

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[Doc. 63], at ¶9(a). Further, STC has agreed to only print and take from Intel’s
counel’s office a reasonable amount of the technical documents that are necessary to
its case. See Protective Order [Doc. 63], at ¶9(a). The limited amount of information
that STC will access through discovery could not be used by a competitor to build
semiconductors from the ground up, and is likely not all that more expansive than
what Intel engineers are already disclosing to the public through their own
presentations.
Thus, in the extremely unlikely event that STC should somehow lose control the
information, Intel would not experience the “grave harm” that it describes.2

The Discovery is Relevant and Needed Now
Intel does not argue its R&D activities are immune from discovery; it argues
that STC does not need such discovery “at this point.” While STC is not sure what
“at this point” means, STC submits that piecemeal discovery is not an efficient
method to ready any case for trial.

Among the various arguments that Intel asserts in support of its opposition is that
its products are subject to export controls. Opposition, at 3 fn 1. STC does not
dispute this fact. But, it is worthwhile to point out to the Court that 15 CFR §§
730.1-774.1 are not regulations from the Federal Government directed specifically
to Intel. That portion of the CFR contains general directives concerning the export
of, inter alia, software and computers that affect all U.S. citizens and corporations.
In any event, STC is trying this case in the state of New Mexico, and has no
intention of exporting any Intel documents to Burma, Cuba, Iran, Libya, North
Korea, Sudan or Syria. This is just one example of Intel’s obfuscation of the realties
before the Court.
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Intel further argues that STC is limited to de minimis reasonable royalty
damages for Intel’s R&D activities because STC does not, itself, manufacture
products. And, as such, Intel should not have to produce discovery on its 14 and
10nm R&D. Intel misstates the law. Contrary to Intel’s assertion, STC is not
seeking a reasonable royalty tied to Intel’s current limited manufacture of prototype
products. Instead, and as set forth in its initial brief, STC is entitled to damages for
Intel’s accelerated market entry into the 14 and 10nm marketplace that is resultant
from its current infringement.
35 U.S.C. § 284 supplies the authority for an award of damages to a plaintiff
which succeeds in proving infringement:
Upon finding for the claimant, the court shall award the claimant
damages adequate to compensate for the infringement, but in no event
less than a reasonable royalty for the use made of the invention by the
infringer . . .
Further, the Federal Circuit has held that ‘[t]he methodology of assessing and
computing damages under 35 U.S.C. § 284 is within the sound discretion of the
district court.” TWM Mfg. Co., Inc. v. Dura Corp., 789 F.2d 895, 898 (Fed. Cir.), cert.

denied, 479 U.S. 852 (1986). As explained in the cases cited in STC’s motion,
damages that are available to a patentee for an infringer’s accelerated market entry
are tied to the infringer’s post-expiration sales.
Accelerated reentry damages of the type approved in BIC Leisure are
not the equivalent of a royalty which extends beyond the expiration of
the patent. . . . What BIC Leisure allows are damages based only upon
those post-expiration sales which the defendant would not have made
but for its wrongful conduct before the patent expired.

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Amsted Indus. Inc. v. Nat'l Castings, Inc., 1990 U.S. Dist. LEXIS 8553, at *56-68
(N.D. Ill. 1990). Thus, STC is entitled to damages under the patent statute, and
those damages are not limited to lost profits, or royalties tied to Intel’s so called de

minimis R&D activities, but are instead related to the value of Intel’s accelerated
entry into the 14 and 10nm markets.
Accordingly, should STC ultimately prevail on the issue of infringement, it will
be entitled to damages for Intel’s sale of 14 and 10nm devices made after the
expiration of the patent that Intel could not have been made but for its infringing
R&D activities that allowed for Intel’s accelerated entry into those markets. As
Intel argues (Opposition at 1-2) these processes are 18 months ahead of its
competitors, and worth "literally billions of dollars." Thus, denial of this important
discovery would not prevent STC from de minimis damages; it would deny STC the
opportunity to prove up damages for billions of dollars of product sales. Accordingly,
the sought-after discovery is highly relevant to infringement and damages.
Finally, this discovery is also relevant to the issues of the value of the patented
technology and willful infringement, e.g., a determination that Intel has continued
to infringe in its research and development activities, even after it has been sued for
infringement, is strong evidence of the paramount value that it has placed on the
technology and that it has willfully infringed the patent.

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The Discrete Discovery is Not Unduly Burdensome
Intel argues that producing the discovery would be unduly burdensome because
its processes are not finalized, and would distract its engineers. STC has already
identified two Intel engineers that have given public presentations on the use of the
subject technology in R&D. Presumably, there are documents underlying those
presentations that can be produced. It is also likely that those individuals have
direct knowledge of Intel’s current use of the technology in its research and
development activities, and can provide documents and deposition testimony on the
same. When the discrete scope of STC’s inquiry is properly framed, the discovery
obligation is not unduly burdensome to Intel.

Modifying the Protective Order Is Not Necessary
Intel suggests that an amendment to the protective order would be required if
the Court grants the instant motion. Opposition, at 12. STC disagrees and
addresses this issue in its opposition to Intel’s motion (Doc. No. 67) on the same.

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Conclusion
STC’s motion should be granted, and Intel should be compelled to produce
discovery on its 14 and 10nm processes.

Dated: April 18, 2011

Respectfully submitted,
/s/ Steven R. Pedersen
Rolf O. Stadheim
Joseph A. Grear
George C. Summerfield
Keith A. Vogt
Steven R. Pedersen
STADHEIM & GREAR, LTD.
400 N. Michigan Avenue, Suite 2200
Chicago, Illinois 60611
[phone]

Deron B. Knoner
KELEHER & MCLEOD, P.A
201 Third Street NW, 12th Floor
PO Box AA
Albuquerque, New Mexico 87103
[phone]

Attorneys for Plaintiff STC.UNM

Certificate of Service: I hereby certify that on April 18, 2011, I caused the foregoing
to be electronically filed with the Clerk of the Court using the CM/ECF system
which will send notification of such filing via electronic mail to all counsel of record.
/s/ Steven R. Pedersen

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