ITC issues split decision on Avago patent fight with Mellanox

Avago Technologies (NASDAQ:AVGO) says it has won a significant victory in its ongoing patent fight with Mellanox. Mellanox says it has won a victory over Avago. They’re both right.

The International Trade Commission issued an Initial Determination on Friday, December 13, 2013 on Avago’s complaints that Mellanox and FCI of France have infringed on its U.S. Patent Number 5,596,595 and 6,947,456. On the matter of the first patent, which covers VCSEL technology, the ITC ruled that Mellanox and FCI were in violation of Section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. Section 1337. The Initial Determination upheld the validity of Avago's patents, Avago says, and found that Mellanox and FCI infringe Avago's intellectual property by importing and selling optical communication products with VCSELs based on Avago's IP.

At the same time, the ITC ruled that Mellanox was not in violation of the second patent, which covers VCSEL drivers. “We are pleased with the [administrative law judge’s] ruling, which supports our position that Mellanox and IPtronics do not infringe the key patent at issue in the case,” said Eyal Waldman, president and CEO of Mellanox Technologies, about the ruling on the 456 patent. “Our customers can expect to continue receiving the same quality products that they have relied upon historically from Mellanox.”

But Avago’s success with the first patent infringement claim means the wrangling isn’t over. Avago says it plans to ask the ITC to issue an exclusion order that would prevent Mellanox and FCI from importing products that use technology covered by the VCSEL patent under litigation.

The products in question include active optical cables (AOCs) and optical transceivers. Avago says that the Mellanox AOCs and transceivers under dispute are used in InfiniBand and Ethernet adapters, switches, routers, servers, external storage systems, and supercomputers.

The dispute over these products began when Avago sued IPtronics for patent infringement in June 2010 in the Northern District of California (see “IPtronics, Avago escalate patent war”). The ITC said it would investigate Avago’s complaint in October 2012, and the District Court case for patent damages, trade secret misappropriation, and unfair competition was stayed until the ITC issued its Initial Determination. Mellanox acquired IPtronics in 2013 (see “Mellanox to acquire IPtronics A/S”).

Now that the ITC has made an Initial Determination, Avago says it will pursue the patent infringement, trade secret misappropriation, and unfair competition charges in the District Court.

"Avago is pleased by the ITC's decision and remains committed to protecting and, where necessary, taking action to enforce its valuable patent and intellectual property rights,” said Avago's general counsel, Patricia H. McCall. “Our belief in the strength of our intellectual property in fiber optics is validated by this decision. Avago will be asking the commission to consider the appropriate scope of an exclusion order enjoining Mellanox and FCI from importing the infringing optoelectronic products and systems employing these components into the United States for the term of Avago's VCSEL patent."

Meanwhile, Mellanox has asked the ITC to review the initial finding on the 595 patent. The company asserts the administrative law judge did not follow the law in construing the claims under the patent. The company doesn’t expect a final determination on this issue until mid-April of this year.

Mellanox asserts the proceedings and their eventual resolution will not affect its current or planned product offerings or have a material adverse effect on the company’s business, financial position, results of operations, or cash flow.

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