Docket Update: Billions Worth of Consumer Devices Threatened as Semiconductor Foundry Dispute Comes to the ITC

On August 26, the ITC received two new Section 337 complaints from GlobalFoundries, both broadly captioned Semiconductor Devices, Products Containing the Same, and Components Thereof, asserting seven patents related to circuit design and production methods. These ITC complaints are part of a larger legal dispute between two of the world's largest semiconductor fabrication companies.

Although based in the United States, complainant GlobalFoundries is owned by the government of Abu Dhabi in the United Arab Emirates. It makes chips in Europe, in Asia, and at three factories in upstate New York and Vermont. The bulk of its U.S. operations and intellectual property were acquired from AMD and IBM. Indeed, three of the seven patents asserted at the ITC were purchased by GlobalFoundries from IBM in 2015.

The primary target of GlobalFoundries' patent dispute is Taiwan Semiconductor Manufacturing Company (TSMC), which is far and away the world's leading provider of semiconductor manufacturing services. Many well-known chipmakers outsource their manufacturing to a "foundry"—a company that operates semiconductor fabrication plants and manufactures chips on behalf of others. About half of all outsourced chip manufacturing worldwide is done by TSMC.

The complaint also names some of TSMC's chipmaker customers—including Qualcomm, Broadcom, Mediatek, and Nvidia—along with numerous device makers who incorporate those companies' chips in their consumer products—notably Apple, Asus, Cisco, Lenovo, TCL, Hisense, Google, Motorola, and OnePlus.

It's worth noting that while the patented technology in this case involves microchips, the accused imports facing potential exclusion from the U.S. market are electronic devices like laptops, tablets, televisions, set-top boxes, smartphones, smart watches, and even Apple AirPods. As a result, the remedy requested by the patent owner in this case would—as in many other Section 337 patent cases—impose a serious burden on the consuming public and downstream businesses that grossly outweighs the value of the asserted patents.

This kind of far-reaching injunction is not at all necessary to ensure the enforcement of GlobalFoundries' patent rights and would never be granted in district court, where a federal judge would be perfectly capable of adjudicating this dispute.

Despite the obvious disproportionality of banning so many consumer products, GlobalFoundries claims in its public interest statement to the ITC that "the requested remedial measures will have no discernable impact on consumers in the U.S." To support that contention, they point to the existence of "non-accused replacement products."

But the best case that GlobalFoundries can make is that "the requested remedial measures would affect no greater than 21 % of the U.S. television market" and that "non-accused smartphones [made by Samsung and LG] accounted for a substantial share (39%) of the U.S. market."

That U.S. smartphone market had a customs value of $55.7 billion in 2017. It's hard to see how blocking 61% of that ($34 billion) could have "no discernable impact."

Image Credit: Juliao Matos