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Broadcom has agreed to renew its patent licensing agreement with MIPS Technologies for a $26.5 million cash payment, according to an SEC filing made by MIPS at the end of last month. MIPS develops fundamental microprocessor architecture technology which it licenses to a number of leading companies in the semiconductor space, including Broadcom.
According to a client note from Gary Mobley, an analyst at The Benchmark Company who focuses on public companies in the semiconductor industry, Broadcom has historically been the largest contributor of royalty payments to MIPS. He also says that this “unprecedented” licence agreement is “an indication to us that Broadcom is being pre-emptive and trying to avoid future patent litigation should MIPS be sold in its entirety or should MIPS’ patents be sold to a patent troll”.
MIPS has experienced mixed fortunes over the past few years, leading to mounting speculation that it would put itself up for sale and that its patents – rated to have significant potential for returns by Ocean Tomo – might fall into the hands of an NPE or an operating company that would use them offensively. However, the agreement with Broadcom stipulates that it will have a licence to MIPS’ patents until they expire.
Furthermore, Mobley thinks that other semiconductor companies which license architecture technology from ARM Holdings – MIPS’ major competitor – may be tempted into obtaining a similar licence to the MIPS portfolio in order to negate the possibility of being sued for infringement at some point in the future:
It is possible other ARM licensees may see what Broadcom saw. That is, other ARM Holdings licensees, worried about MIPS patents getting into the hands of an aggressive patent troll, may decide to negotiate a patent license agreement with MIPS to avoid future litigation. Broadcom is not even close to being ARM’s biggest royalty contributor, and therefore, it is reasonable to think other SoC chip companies such as Qualcomm, ST-Micro, Mstar, etc. may consider signing a patent license agreement with MIPS to avoid future litigation. In our opinion, Broadcom’s assessment of potential litigation liability relating to MIPS patent is a testament to the value of the MIPS patents.
The guarantee of a shield against litigation should MIPS’ patents be used offensively in the future may seem to be too much of a good opportunity to pass up. MIPS could find itself with a lot more cash should Mobley’s suggested scenario play out and prospective licensees come flocking. That would be a very welcome development for the struggling company. Could that potential outcome just be an unintended consequence of the Broadcom deal? Or would it be the desired consequence of some clever strategic thinking at the company?
IP management, Licensing, IP litigation, Patents, IP business