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Macom Technology Solutions Holdings, Inc. v. Infineon Technologies AG

United States District Court, C.D. California

September 1, 2017

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
v.
INFINEON TECHNOLOGIES AG

          Present: The Honorable CHRISTINA A. SNYDER Judge.

          [REDACTED] CIVIL MINUTES - GENERAL

         Proceedings: (IN CHAMBERS) - [REDACTED] MACOM'S MOTION FOR CIVIL CONTEMPT AND SANCTIONS FOR INFINEON AMERICAS' VIOLATION OF PRELIMINARY INJUNCTION (Filed July 24, 2017, dkt. 341)

         I. INTRODUCTION

         On April 26, 2016, plaintiffs MACOM Technology Solutions Holdings, Inc. (“MACOM”), and Nitronex, LLC filed the instant action against defendants Infineon Technologies AG (“Infineon AG”) and Infineon Technologies Americas Corp. (“Infineon Americas”). Dkt. 1. The gravamen of plaintiffs' complaint is that defendants breached an intellectual property (“IP”) purchase agreement and license agreement entered into in 2010 by Nitronex (the predecessor-in-interest to MACOM) and International Rectifier Corporation (“IR”) (the predecessor-in-interest to Infineon Americas).

         On October 31, 2016, the Court granted plaintiffs' request for a preliminary injunction against Infineon Americas. Dkt. 140. The Court entered the preliminary injunction on December 7, 2016. Dkt. 177. On January 3, 2017, Infineon Americas appealed this Court's order granting plaintiffs' motion for a preliminary injunction to the Federal Circuit Court of Appeals. Dkt. 193. On January 5, 2017, Infineon Americas filed a motion to stay pending appeal or modify a portion of the Court's preliminary injunction. Dkt. 200. On March 6, 2017, the Court denied the stay request but granted Infineon Americas' motion to modify the preliminary injunction. Dkt. 277.

         On March 17, 2017, the Court granted plaintiffs' motion for leave to take expedited discovery concerning potential preliminary injunction violations by Infineon Americas. Dkt. 284. On August 7, 2017, plaintiffs' filed the instant motion for civil contempt and sanctions. Dkt. 363 (“Mot.”). On August 11, 2017, Infineon Americas filed its opposition, dkt. 369 (“Opp'n”), and plaintiffs filed a reply on August 17, 2017, dkt. 376 (“Reply”). With the Court's permission, Infineon Americas filed a surreply on August 21, 2017, dkt. 377, and plaintiffs filed a rebuttal on August 22, 2017, dkt. 379. The Court held a hearing on August 28, 2017. Having carefully considered the parties' arguments, the Court finds and concludes as follows.

         II. BACKGROUND

         The Court and parties are familiar with the facts alleged by plaintiffs and the procedural history of this case. Nonetheless, the Court will summarize plaintiffs' allegations in the operative second amended complaint (“SAC”) and review the preliminary injunction orders before addressing the instant motion.

         A. The Allegations in the SAC

         Nitronex Corporation (the predecessor-in-interest to MACOM) developed a semiconductor (material that conducts electrical current only under certain conditions) using gallium nitride (“GaN”) to form the epitaxial layer of the semiconductor and silicon (“Si”) to form the substrate (or wafer) for the semiconductor (“GaN-on-Si” or “GaN/Si”). Dkt. 170 (“SAC”) ¶¶ 1, 40-41, 52-53. Nitronex used GaN-on-Si semiconductors to develop radio frequency (“RF”) devices for use in mobile communications. Id. ¶¶ 54-59. Nitronex obtained more than 35 U.S. patents based on its work with gallium nitride. Id. ¶ 63.

         In 2010, Nitronex and IR (the predecessor-in-interest to Infineon Americas) entered into an IP purchase agreement and license agreement. Id. ¶ 78; dkt. 170-1 (“IP Purchase Agreement”). The IP Purchase Agreement assigns to IR 54 U.S. and international patents and applications and the right to file related applications and requires Nitronex and IR to work together to enforce the Nitronex Patents.[1] SAC ¶¶ 79-83. The 2010 license agreement provides Nitronex a license to the Nitronex Patents, and a sole right to sublicense them. Id. ¶ 88; dkt. 170-2 (“License Agreement”). The License Agreement permits only Nitronex and IR to practice in certain parts of the “Field of Use” for GaN-on-Si RF devices. SAC ¶ 88; License Agreement. The License Agreement also provides Nitronex with the exclusive right to practice the Nitronex Patents, including as against IR, within Nitronex's “Exclusive Field.” SAC ¶ 89; License Agreement. Nitronex's Exclusive Field includes most RF applications in the Field of Use, except those that operate solely below 100MHz in frequency, including cellular telephone base stations. SAC ¶¶ 89-90; License Agreement. The License Agreement prohibits either party to the agreement from assigning, selling, or otherwise transferring an interest or obligation under the License Agreement without the consent of the other party. Any assignment in violation of that provision is void. License Agreement § 12.12.

         The License Agreement also includes a negative covenant with respect to IR: “IR itself may not directly or indirectly market, sell or service Products in the Exclusive Field and IR may not grant further licenses or sublicenses to any other party under the Licensed Patents to design, develop, make, have made, use, market, sell or service Products in the Field of Use.” License Agreement § 2.1; SAC ¶ 91. The License Agreement does not include a negative covenant in which Nitronex promises to refrain from practicing the Nitronex Patents outside its fields of use. SAC ¶ 92. Nitronex and IR may terminate the License Agreement only for a material breach that is not cured within 30 days of receipt of written notice of such a breach. Id. ¶ 95; License Agreement § 7.1.

         In June 2012, Nitronex was acquired by GaAs Labs, converted into a limited liability company and renamed Nitronex LLC. SAC ¶ 99. On February 13, 2014, MACOM announced the purchase of Nitronex, LLC from GaAs Labs and Nitronex LLC became a wholly-owned subsidiary of MACOM. Id. ¶ 101. MACOM had been selling gallium nitride-on-silicon carbide (“GaN-on-SiC”) products since 2011, before its acquisition of Nitronex. Id. ¶ 126. On January 13, 2015, Infineon AG acquired IR. Id. ¶ 109. IR changed its name to Infineon Technologies Americas Corp. Id. ¶ 17. Infineon Americas is a wholly owned subsidiary of Infineon AG. Id.

         Plaintiffs allege that after Infineon AG acquired IR, Infineon AG attempted to disrupt or renegotiate the Nitronex-IR agreements. Id. ¶ 113. During telephone calls between the parties, plaintiffs allege that Infineon representatives stated that Infineon believed MACOM was infringing on unidentified Nitronex Patents by selling GaN-onSiC devices. Id. ¶ 124. In a February 2, 2016 letter to MACOM, Infineon complained of MACOM's GaN-on-SiC sales and asserted that such sales were a material breach of the License Agreement that would allow Infineon to terminate that agreement. Id. ¶ 143. In a letter dated March 22, 2016, Infineon purportedly terminated the License Agreement. Id. ¶ 147. Soon thereafter, plaintiffs initiated this action. Plaintiffs allege that Infineon's purported termination was without cause, done in bad faith, and pretextual. Id. ¶ 148. Plaintiffs further allege that Infineon has been promoting and/or marketing GaN-on-Si RF products for use in cellular base station applications-activities that are within MACOM's Exclusive Field-in violation of the License Agreement. Id. ¶ 163-64.

         B. The ...


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