Key Takeaways:
A startup funded by the cofounder of Yahoo and the CTO of Intel is suing Nvidia and Microsoft for allegedly infringing on its patent for a key innovation in AI chips and being part of a buying cartel that reportedly sought to fix lower prices for the technology artificially.
In a new lawsuit, Texas-based Xockets says Nvidia has infringed on its patented data processing unit (DPU) technology, which helps make cloud infrastructure more efficient by accelerating data-intensive workloads.
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Xockets says the chip giant inherited the infringement through its 2020 acquisition of Mellanox. It claims Mellanox initially infringed on its patent after Xockets publicly demonstrated its DPU tech at a conference in 2015.
Xockets alleges that three of Nvidia’s DPUs — BlueField, ConnectX, and NVLink Switch — are based on Xockets’ patented technology.
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The startup also accuses Microsoft of infringing on its patents, alleging that as an Nvidia customer, Microsoft has “privileged access to NVIDIA’s infringing GPU-enabled server computer systems and components for AI.”
Xockets says it’s made Nvidia aware of the alleged infringement — it alleges the startup’s founder and board member Parin Dalal raised the issue to Nvidia’s DPU business VP in February 2022.
Xockets accuses Nvidia of pursuing a strategy of “efficient infringement,” which boils down to infringing now and letting lawyers figure out the rest later.
Leave Nvidia alone it’s making me money, go after other companies please lol.
— Adam (@AdamBoo1996) September 5, 2024
Xockets is also accusing Nvidia of monopolizing the market for GPU servers for AI and participating with Microsoft in a buying cartel through an organization called RPX, a company Xockets says was “formed at the request of Big Tech companies to enable and create buyers’ cartels for intellectual property.”
Xockets alleges that RPX enabled members like Nvidia and Microsoft to jointly boycott innovations like Xockets’ in order to drive prices lower than if each company had negotiated on its own.
In addition to seeking damages for the alleged infringement, Xockets aims to block the sale of Nvidia’s new Blackwell GPU-enabled AI computer systems, set to ship this fall and prevent Microsoft from using these systems in their generative AI platforms.
Xockets argues that Nvidia and Microsoft are abusing their market dominance and engaging in predatory practices that are devaluing smaller innovators’ intellectual property. The startup claims to represent a broader fight against Big Tech’s tactics to undermine innovation and competition.
Oh is that the proper legal defense for violation of U.S. law, “but I was making money?”
OK nvm— David Dayen (@ddayen) September 5, 2024
Robert Cote, an IP lawyer and Xockets investor emphasized that the company has “more than enough wherewithal to take on Goliath.”
Cote further framed the lawsuit as part of a broader battle between inventors and Big Tech companies, asserting that it is an opportunity to challenge the power dynamics favoring large corporations over smaller innovators.
Xockets’ efforts to negotiate in good faith with Nvidia and Microsoft were allegedly met with resistance, pushing the startup to take legal action.
Also, putting all your bets on national champions is generally not a very good idea. It’s why the UK and France lost out in the computer race
— Max Jerneck (@MaxJerneck) September 5, 2024
Xockets is also seeking injunctive relief to halt the activities of the alleged buyers’ cartel and prevent further use of its patented DPU technology without proper licensing.
The company states that it has been prepared for this legal battle for some time and is determined to see its intellectual property rights enforced.
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Xockets’ claims have drawn attention from regulatory authorities, with ongoing investigations into Nvidia and Microsoft by the U.S. Department of Justice, the Federal Trade Commission, and the European Union.
Both Nvidia and Microsoft, through their coordination with RPX, are accused of conspiring to monopolize the market for AI server technology and suppressing innovation.
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The tech giants have declined to comment on the lawsuit, and Google, where Parin Dalal is currently employed, has also stated that it has no official involvement in the litigation.
The outcome of this lawsuit could have major implications for the tech industry, particularly concerning how intellectual property rights and antitrust laws are interpreted and enforced in the rapidly evolving field of AI technology.
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