Appeal Won’t Revive Big Memory Chip Verdict

SAN JOSE, Calif. (CN) - A judge who found errors in a $124 million jury award over a new computer memory chip made the right call, a California appeals court ruled.

Grail Semiconductor sued Mitsubishi Electric & Electronics USA in 2007, claiming that the tech giant used the startup's design for a less-volatile computer memory chip after a series of meetings between the two companies.

Although Grail's suit originally alleged misappropriation of trade secrets, unfair competition and breach of contract, the case was pared down to a single contract action by 2009. A jury awarded Grail nearly $124 million - the lowest of three figures posited by the startup's expert - in 2012.

Mitsubishi moved for judgment notwithstanding the verdict, objecting to both the jury finding of liability and the amount of the award, and also demanded a new trial. The Santa Clara County Superior Court denied much of Mitsubishi's request but did find the $124 million award excessive.

Both companies appealed the ruling, which also found that Grail had failed to show irreparable harm that money could not compensate and denied to issue an injunction over the memory chip.

A three-judge panel with the Sixth Appellate District found no problem with the lower court's decisions Tuesday.

"It is beyond question here that Grail established every element of breach of contract, including resulting harm," Judge Franklin Elia wrote for the panel. "The court did not find insufficient proof of the existence of damages; it ruled only that the amount of those damages was calculated incorrectly and therefore warranted a new trial using the correct measure of value."

The appellate panel also found no violation of the hearsay rule in the admission into evidence of website documents about Mitsubishi subsidiary Renesas, which advertised a memory chip with Grail's design.

"In this case the jury heard abundant evidence, independent of the exhibits, that Renesas' MONOS chip used an inductor," Elia wrote. "In addition, the challenged exhibits pertained exclusively to the MONOS chip, while expert analysis of the SuperSRAM technology also suggested use of Grail's confidential information. After admitting the exhibits the court allowed contrary defense evidence indicating that the word 'inductor' in the exhibits was a mistranslation from the Japanese word for 'dielectric.' The jury thus heard both sides of the issue, received documents purporting to be the same but in different languages, and reached a conclusion favorable to Grail. Having examined the asserted error in light of the entire record, we cannot find prejudice from the admission of the challenged documents. Consequently, the trial court did not err in declining to grant a new trial on liability."

Meanwhile, the now-insolvent Grail failed to show that it needed a permanent sales ban on Mitsubishi's memory chip - prescribed by the parties' 2001 nondisclosure agreement -to stop future harm, the court found.

"Grail did not demonstrate that Mitsubishi was continuing to disclose information in violation of the agreement; its focus was on Renesas' use of the technology for Renesas products," Elia wrote. "That conduct was itself the subject of a separate patent infringement action pending in federal court.

"On this ground alone we must uphold the trial court's order," he continued. "That the parties' contract allowed for injunctive relief is not controlling; an injunction is an equitable remedy, which may be denied notwithstanding the parties' contractual stipulation if the remedy at law is adequate. As the facts in this record do not compel a conclusion as a matter of law that damages will be an inadequate remedy for Mitsubishi's breach of the agreement, we cannot find an abuse of discretion in declining to order injunctive relief."

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