Intel, Dell and HP face lawsuit in France as fight with Third Point continues

By Louis Goss

A chip company backed by a leading hedge fund has filed a lawsuit in France against Intel Corp and two of its customers, Dell and Hewlett-Packard, in a case that could see the tech giants blocked from importing certain microchips to the country.

The lawsuit filed in Paris could see R2 Semiconductor enforce a patent granted to it by Europe's centralized patent office in 2020, that could see Intel blocked from selling vast swathes of products in France that contain what R2 says is patented voltage regulation technology.

The patent infringement lawsuit, that was filed on Monday, could also see Intel's (INTC) customers Dell (DELL) and HP (HPE) blocked from using chips that contain the technology that R2 - a portfolio company of Daniel Loeb's hedge fund Third Point - says was invented by its founder and CEO.

The French filing sits in the context of a long running legal battle between Intel and R2 that first started in 2017, when the small California company tried to sue Intel for patent infringement in the U.S. in a case that was eventually ruled in Intel's favor.

In March, Daniel Loeb's hedge fund Third Point, which owns an approximately 75% stake in R2, confirmed it has been funding its portfolio company's legal fight, having first invested in the company in 2008.

R2 Semiconductor's other top shareholders include venture capital firms Sequoia Capital, Morgenthaler Management Corp and Sigma Partners, according to FactSet shows.

R2 has already filed lawsuits in both Germany and the U.K. which could see Intel blocked from selling microchips in both countries. R2 was awarded an injunction by a court in Dusseldorf in February and is set to start a trial in the U.K.'s High Court on April 16.

"R2's integrated voltage regulation technology is critical to Intel's products in the PC, laptop, and server markets, yet R2 receives no recognition or compensation for our innovation, which was the result of years of work and effort," R2 CEO David Fisher said.

Intel has previously called R2 a "patent troll" and claimed the company is seeking to pressure it into handing over a major payout to settle the case out-of-court. In March, Intel filed a lawsuit in Milan seeking to overturn R2's European patent.

"We are looking into the filing in France. R2, a company that does not make or sell any products, is asserting the European version of a patent that was already invalidated in the U.S. - we expect that on appeal in Germany it will also be found either invalid, not infringed, or both," an Intel spokesperson told MarketWatch.

In its 2023 annual report published in March, Intel disputed the validity of R2's patent while stating that due to uncertainty around the scope of any injunctions, it is "unable to make a reasonable estimate of the potential loss or range of losses, if any, that might arise."

Under German law, Intel could also recover any losses it suffers due to R2's patent being enforced, if its European patent is later overturned or deemed invalid.

Third Point has previously said it believes a settlement from Intel could end up being "material" to its own net asset value. The New York hedge fund indicated that Intel could suffer billions worth of losses from its legal fight with R2.

Dell and HP were approached by MarketWatch for comment.

-Louis Goss

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04-08-24 1219ET

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