Netlist Inc. accuses South Korean company's products of patent infringement, seeks to stop products from entering US

By Allen Jones | Sep 9, 2016

LOS ANGELES – Netlist Inc., a California-based manufacturer of memory subsystems used in global data centers and other high-performance communications systems, is accusing a South Korean company of patent infringement.

SK hynix Inc., the world’s second-largest memory chipmaker, is accused of importing to the United Sates products based on six inventions patented by Netlist. The company’s patent infringement accusations are outlined in a complaint recently filed with the U.S. International Trade Commission. In the complaint, Netlist requests the commission to direct the U.S. Customs and Border Protection agency to stop SK hynix products – specifically its SK Hynix RDIMM and LRDIMM memory modules – from entering the U.S.

Netlist also filed legal proceedings with the U.S. District Court for the Central District of California, which the company could appeal to if the trade commission fails to find valid infringement. In a news release, the company’s CEO Chun Hong said Netlist attempted “to reach a fair and equitable resolution” with SK Hynix that would have avoided any litigation.

“As we now face the prospects of the infringement continuing indefinitely, we believe that litigation is necessary to defend our intellectual property rights,” Hong said. “While we remain willing to negotiate a resolution which fairly compensates Netlist and its shareholders for our valuable intellectual property, we remain confident in the strength of our case and are fully prepared to proceed through the complete legal process to achieve a successful outcome.”

Netlist has asserted six patents in its trade commission and district court filings. The U.S. Patent Nos. are 8,756,364; 8,516,185; 8,001,434; 8,359,501; 8,689,064 and 8,489,837.

The International Trade Commission arbitrates complaints brought to it under section 337 of the Tariff Act of 1930. As an independent, quasi-judicial U.S. agency, the commission investigates intellectual property infringement grievances. If a violation is determined, it may issue orders to exclude products from entering into the U.S.

During the commission investigation, Netlist and SK hynix attorneys will conduct discovery, present evidence and make legal arguments before an administrative law judge that will consider the evidentiary record and the arguments of the parties and make an initial determination. The commission, however, will make the final decision in the investigation and may review and uphold, reverse, modify or set aside the administrative law judge’s initial determination or ask for additional proceedings.

The commission has a statutory deadline of a year and a half to reach a decision in the case. During this time, Netlist’s district court filing is stayed pending the outcome of the commission's pronouncement.

“The outcome there is not binding on the district court,” law professor Paul Janicke told the Northern California Record.

Janicke, who teaches in the Intellectual Property and Information Law Program at the University of Houston Law Center in Texas, said there is no real reason to file complaints with both the trade commission and district courts. If the patentee’s claim is validated by the trade commission on any one of its six patents, an exclusion order preventing that product from coming into the country will last the life of the validated patent. The patent attorneys, however, could have gotten the same thing from a district judge, Janicke said.

“I think they go the ITC route because it is faster,” he said. “In a district court, especially in Los Angeles, who knows how long it would take. And after a trial, there is a long period, frequently, of post-trial motions so it could go two-and-a-half to three years, easily.”

Janicke estimates 48 percent of patent infringement cases heard in district courts result in a win for patent owners and said the percentage is likely to be about the same in trade commission patent investigations. However, the odds could be in Netlist’s favor, he said, due to the number of patents the company is claiming SK hynix infringed upon.

“If you go in with six patents, you've enhanced your odds inherently,” Janicke said. “That is going to be a tough case for the defense to fight off because it might be able to invalidate two of the patents or maybe show noninfringement of another one. But six, that is pretty tough.”

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