When NVIDIA Corporation (NASDAQ:NVDA) filed its first-ever patent-infringement lawsuit last September against none other than Samsung (OTC:SSNLF) and Qualcomm (NASDAQ:QCOM), it knew all too well there would be bumps along the way. By the end of 2014, Samsung had already filed two separate countersuits -- one in Virginia, which NVIDIA noted has a faster time to trial than most other U.S. jurisdictions, and one with the International Trade Commission.
It was hard to blame Samsung for taking action considering the stakes: NVIDIA had also asked the International Trade Commission to block U.S. shipments of many flagship Samsung devices that infringe on seven of its patents. As it stands -- and keeping in mind newer infringing models could be added along the way -- that list includes Samsung's Galaxy S5, Galaxy Note 4, Galaxy Note Edge, Galaxy Note 3, Galaxy S4, Galaxy Tab S, Galaxy Note Pro, and Galaxy Tab 2.
Nonetheless, NVIDIA executive VP David Shannon insisted Samsung's actions were "predictable," and nothing more than "typical legal ping pong," as the two companies prepped their cases. More importantly, Shannon has repeatedly stated they do nothing to change the validity of NVIDIA's original lawsuit.
A crucial first step for NVIDIA
On Monday, Shannon provided an encouraging update for NVIDIA shareholders on the company's case. In a pretrial decision from the ITC known as a "Markman ruling," Shannon says, "Administrative Law Judge Thomas Pender has determined what the claim language will mean for the hearing and his ultimate decision on the merits of the case."
"We're very pleased with the outcome of the ruling," Shannon elaborated, "in which claim constructions favorable to NVIDIA will be applied to six out of seven disputed claims when the judge considers the question of Samsung's and Qualcomm's infringement. This further strengthens the patents we have asserted, and we look forward to a full hearing in late June."
A settlement on the way?
First, keep in mind that patents are meant to define the boundaries of any given invention, and should be written in such a way that people of ordinary skill in the industry can understand it. But that also means the verbiage in any given patent can potentially be interpreted in more than one way. In a Markman hearing, the goal is to settle such disagreements on claim interpretation before the actual infringement issues are considered.
According to the U.S. Federal Judicial Center, "This approach emphasizes the central role of claim construction and focuses the judge's time and effort on this activity. It recognizes that many cases may be resolved through settlement or summary judgment once the claims are construed."
Translation? Now that the judge has sided with NVIDIA's interpretation on six of the seven claims in question, don't be surprised if Samsung and Qualcomm find a way to settle this before it ever reaches the courts. Otherwise, the two tech behemoths will likely have their hands full trying to disprove both NVIDIA's version of what its patents mean, and how they've been infringed.
Not that this should come as a surprise; NVIDIA singled out "just" seven of its 7,000 issued and pending patents for this particular case, which came after years of trying to come to terms with Samsung to no avail. And considering the gravity and deep pockets of both Samsung and Qualcomm, you can bet NVIDIA wouldn't take its battle to court without having its ducks in a row.
But that's not to say NVIDIA has a perfect record so far. Shannon also noted a "small development" in Samsung's Virginia countersuit, where the judge denied NVIDIA's request to move the case to California. Even so, unlike the overwhelmingly positive ruling in NVIDIA's favor above, the court's venue should have little affect on the merits (or lack thereof, as NVIDIA says) of Samsung's case.
For now, given the positive potential of NVIDIA's lawsuit, it's no surprise NVIDIA stock jumped nearly 3% in late-trading Monday, then continued to climb in after-hours trading.