SAN FRANCISCO (CN) - A federal judge refused to dismiss claims that a technology company used the court system to railroad a competitor and drive it out of the industry.
Plaintiff Sidense Corp. and defendant Kilopass Technologies both make computer memory devices, specifically: "standard complimentary metal-oxide-semiconductor logic (CMOS) embeddable antifuse one-time programmable (OTP) nonvolatile memory (NVM) technology."
In simpler terms, they design and manufacture memory devices that retain information when power is removed.
They are direct competitors and license their technology to customers, "who use the designs to build CMOS integrated circuits with embedded 'antifuse' NVM arrays that include rows and columns of memory cells," Sidense said in its Aug. 24 lawsuit.
"Antifuse programming involves a permanent structural change made by subjecting an individual memory cell to programming voltage, which melts and then re-crystallizes to form a conductive channel. Once programmed, an antifuse memory cell cannot be un-programmed."
The companies have a history of litigation.
Sidense filed an antitrust lawsuit in May 2014, claiming that Santa Clara-based Kilopass "scheme(d) to destroy and eliminate Sidense" as a competitor and monopolize the market by filing baseless patent lawsuits.
"Not only did Kilopass' baseless patent litigation scare customers away from doing business with Sidense, Kilopass' onslaught forced Sidense to divert millions of dollars away from its marketplace and technological competition with Kilopass to ward off the litigation and the marketplace consequences of that litigation," according to new, Aug. 24 complaint.
"Kilopass' blatant anticompetitive conduct also caused Sidense to lack capital funding and financial strength to qualify for certain prospective lucrative licensing opportunities."
Sidense says it filed a previous lawsuit against Kilopass in August 2011, in response to a "baseless" Kilopass patent lawsuit. Sidense sought damages for defamation, unfair competition, trademark violations, and interference with contract.
Kilopass was granted partial summary judgment in that lawsuit on Aug. 16, 2012. On the same day, the court issued a noninfringement order in Kilopass' underlying patent case, finding that Sidense did not infringe Kilopass' patents, according to U.S. District Judge Susan Illston's order last week, denying Kilopass summary judgment.
"Shortly thereafter, Sidense stipulated to voluntarily dismiss its remaining claims in the business torts case with prejudice," Illston wrote. "In its stipulation, Sidense noted that the court had adjudicated the underlying patent infringement claim and granted Kilopass' motion for summary judgment on many of Sidense' alleged business torts, thus substantially reducing Sidense's potential damages recovery compared to the cost of continued litigation."
Sidense's May 2014 antitrust lawsuit claimed that Kilopass "weaponized the litigation process" to corner the market on the specialized memory technology.
Kilopass filed a motion to dismiss Oct. 2 this year, claiming Sidense's claims are barred by res judicata, "because they repeat claims that arise from the same common nucleus of facts as the business torts case that Sidense filed and then dismissed with prejudice," and that Sidense has not pleaded sufficient facts establishing a legally cognizable market.
But Illston found that the claims are different and that any overlap is superficial and intended to provide context.
"While the resulting harm might be similar if all of the allegations were true - a loss of business to Sidense - the claims do not arise from the same nucleus of facts," Illston wrote.
She also rejected Kilopass' argument against Sidense's ability to identify a "cognizable market."
"The court finds that Sidense has sufficiently pled the relevant market for its antitrust claims," the judge said. "Sidense alleges that the relevant market is 'for CMOS embeddable antifuse OTP intellectual property.' Sidense describes the technologies that embeddable NVM products are based on. It then explains how different technologies are chosen, and the factors affecting the market. Simply put, Sidense has plausibly alleged a technology market in which Kilopass and Sidense compete. Taken as true, Sidense has sufficiently pled a relevant market."
Sidense attorney Roger Cook, with Kilpatrick Townsend & Stockton, said discovery for the trial would start immediately.
"The discovery process starts right away," he told Courthouse News. "We've got a case management conference in January. Once we finish up with discovery, then we go to trial. I believe the trial date is November 2016."
He said this is not the first time companies have used the court system to deter competitors.
"The legal name for this is sham litigation," he said.