Nvidia Faces Antitrust Lawsuit in Strategic Filing Move by Xockets Inc.

In a notable legal move, Xockets Inc. has filed an antitrust lawsuit against Nvidia Corp., Microsoft Corp., and RPX Corp., seeking to place its case before a highly sought-after judge in the Western District of Texas. According to Bloomberg, the lawsuit was strategically filed to ensure the case would be assigned to Judge Alan Albright, known for his popularity in patent cases and significant rulings in intellectual property disputes.

Filing Strategy Ensures Judge Assignment

Xockets Inc. initially filed a complaint on September 5, 2023, which focused solely on antitrust claims, specifically targeting Nvidia, Microsoft, and RPX. By doing so, Xockets ensured the case was automatically assigned to Judge Albright, as all non-patent suits in the Waco Division of the Western District are sent to him. However, within an hour of the filing, Xockets amended the complaint, adding seven counts of patent infringement and expanding the document from 82 to 203 pages.

Had the patent claims been included in the original filing, the case would have been randomly assigned to one of the district’s 12 judges under current rules aimed at preventing judge shopping. By separating the claims, Xockets was able to secure the judge they wanted. Per Bloomberg, this tactic raised eyebrows among legal experts who have long criticized the practice of forum shopping, especially in patent disputes.

“It just looks like a very clever ploy to maintain jurisdiction in front of Judge Albright,” said Jonathan Stroud, general counsel of Unified Patents and a known critic of judge shopping.

Potential Billions in Damages

Xockets’ lawsuit accuses Nvidia of patent infringement that could amount to billions of dollars in damages. According to Bloomberg, Xockets investor Robert Cote highlighted the scale of the case, noting Nvidia’s explosive growth in market capitalization, from $180 billion to approximately $3 trillion, which Xockets attributes to the use of its patented technology. Nvidia is currently the largest supplier of chips used in AI servers, a market that has seen massive expansion.

Xockets alleges that Nvidia stole “fundamental intellectual property” that transformed it into the leading producer of key components in the AI space. The complaint also claims that Nvidia and Microsoft conspired with RPX to set artificially low prices for the use of Xockets’ patents, creating an antitrust angle in the case.

Related: Nvidia and Microsoft Sued for Allegedly Undercutting AI Technology Patent Prices

Judge Albright’s Role in Patent Litigation

Since his appointment in 2018, Judge Albright has become a key figure in U.S. patent litigation, handling nearly a quarter of all patent suits in 2022. His courtroom has been a magnet for patent owners, which has raised concerns of forum shopping. As Bloomberg notes, this led the Western District of Texas to implement a randomization rule in 2022 to prevent patent plaintiffs from specifically choosing Albright. The rule was updated again as recently as May to further limit judge shopping in patent cases.

Despite this, Xockets’ move to file an antitrust claim first, followed by a rapid amendment to include patent infringement, has enabled the case to bypass randomization. “The antitrust claims are inextricably tied to the patent case,” Stroud told Bloomberg, calling the filing strategy an attempt to forum shop and suggesting it violates the spirit of the randomization order.

Mixed Reactions from Legal Experts

Xockets’ legal strategy has sparked debate in legal circles. Paul Gugliuzza, a Temple University law professor, told Bloomberg that while Xockets’ two-step filing may satisfy the letter of the randomization order, it clearly challenges its intent. Gugliuzza noted that the case was initially filed under an antitrust “nature of suit” code, which does not change even when the complaint is amended to add patent claims. “There are all kinds of examples where parties follow the letter of the law but do so for improper reasons,” Gugliuzza said, adding that this case seems like a prime example.

On the other hand, some lawyers see merit in Xockets’ approach. According to Bloomberg, Dan Ferri, a partner at DiCello Levitt, described the move as “pretty clever” and a potential advantage for Xockets. He pointed out that keeping the case in front of Judge Albright could benefit Xockets, given the judge’s reputation for large patent infringement verdicts.

Nvidia’s Dominance in AI at the Heart of the Case

At the core of Xockets’ lawsuit is the allegation that Nvidia’s rise to dominance in AI chip manufacturing was fueled by its unauthorized use of Xockets’ patented technology. According to the complaint, Nvidia’s position as the leading supplier of chips powering AI servers is largely due to its adoption of Xockets’ innovations.

Source: Bloomberg