Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Samsung faces tough legal battle against Netlist
Samsung Electronics' chip production facility in Hwaseong, Gyeonggi Province / Courtesy of Samsung Electronics
By Baek Byung-yeul
By Baek Byung-yeul
Samsung Electronics is facing a tough legal battle in the United States as it has been ordered by a jury to pay over $303 million to U.S. memory module company Netlist for infringing five patents.
Given the Korean tech giant's first-quarter earnings were hit by a downturn in the global chip industry, the patent dispute compounds problems for the company, according to industry officials, Monday.
On Friday, a jury in Texas deemed that Samsung must pay over $303 million to Netlist for the patent infringement. After a six-day trial, the jury reached the verdict that Samsung willfully infringed Netlist's patents.
An official in the local chip industry said on condition of anonymity, “Samsung could end up having to pay a large amount in damage compensation or settlement to Netlist in the event of an unfavorable verdict.”
“The lawsuit between Samsung and Netlist is not finalized and the end result remains to be seen. But, the amount of damage compensation that the jury ordered Samsung to pay to Netlist is considerably larger than the amount that would normally be awarded in such a case,” the official added.
“It's hard to say who's right at the moment, because there are so many strategic aspects to a legal dispute involving patents. In the semiconductor industry, companies register their own patents, but there are many overlapping patents, so it is difficult to distinguish the truth from lies by making claims like, 'I'm right and you're wrong.' Therefore, it is common for companies to sign a cross license agreement with each other and adjust the overlapping patents without further dispute,” the official said.
For Samsung, which generates over 300 trillion won ($224.5 billion) a year in sales, the 400 billion won in compensation is not a major blow to its operations. However, if the compensation is booked as a provision, it could have a modest impact on earnings given its preliminary operating profit in the first quarter of 2023 plunged 95.75 percent from the same period in 2022 to 600 billion won.
California-based Netlist sued Samsung in 2021, claiming the Korean company committed patent infringement in producing memory chips for data center servers. The patents in question are said to describe technologies that make memory modules more efficient, allowing them to extract information from large amounts of data in a short amount of time. Netlist asked the jury for $404 million in damage compensation.
The U.S. judicial system is based on jury verdicts and the case is expected to take five to six months to be finalized.
On the other hand, Samsung argued that Netlist's patents are invalid and that its technology works in a different way than that of the U.S. company.
A Samsung spokesman said, “As the case is still in litigation, we will review it closely and put up a vigorous defense.”
It remains to be seen whether Samsung and Netlist will reach an agreement over the patent infringements, as is often the case in traditional litigation between chip companies.
Netlist has a history of aggressively defending its intellectual property rights by suing semiconductor companies for infringements of its patents.
In 2016 and 2017, Netlist filed lawsuits with the U.S. International Trade Commission (ITC) alleging that SK hynix infringed its semiconductor technology patents.
The ITC found no infringement, but Netlist refiled the case in the U.S. District Court for the Western District of Texas, which was settled in 2021 when SK agreed to pay $40 million in royalties.