Freescale Semiconductor Inc. takes on 17 alleged patent infringers

When Freescale Semiconductor Inc. bought a California company in 2008, it apparently bought some patents worth protecting.

The U.S. International Trade Commission is investigating a complaint by Freescale alleging patent infringement by 17 companies. The patents all relate to televisions, media players and cameras — products containing semiconductors and chip sets that Freescale didn’t develop until it bought California-based SigmaTel Inc. for $110 million.

Freescale spokesman Rob Hatley declined to comment on whether the patents were acquired in the SigmaTel deal. But Will Strauss, an analyst for Arizona-based Forward Concepts, said the products listed in the complaint were SigmaTel’s target customers and not Freescale’s.

“It sounds to me like they’re realizing the worth of that [SigmaTel] acquisition,” Strauss said.

The companies targeted in the March 1 complaint include major retailers and industry giants such as Panasonic Corp. (NYSE: PC), JVC Americas Corp., Wal-Mart Stores Inc. (NYSE: WMT) and Best Buy Co. Inc. (NYSE: BBY). The resulting Section 337 investigation is scheduled to last 16 months, according to the International Trade Commission.

Austin-based Freescale, which manufactures semiconductor chips, employs about 19,500 workers nationally, with 5,000 in Austin. The company was founded in 2004 as a spinoff from Motorola Inc. (NYSE: MOT).

Regarding the patent infringement complaint, no action will be taken until an investigation is completed. The case will be assigned to an administrative law judge who will conduct a hearing, Trade Commission spokeswoman Peg O’Laughlin said.

The judge’s finding will then be reviewed by the Trade Commission’s six commissioners, who will be charged with issuing any orders, such as cease and desist, to the accused companies, she said.

The hearing is scheduled for January 2011.

The vast majority of the complaints investigated by the Trade Commission are based on patent infringements. The commission completed 31 Section 337 investigations during 2009 and 41 in 2008.

“We have a very heavy caseload in this area,” O’Laughlin said.

Hatley said Freescale had little choice but to go to court over the matter.

“This is a legitimate action defending our patent portfolio,” he said.

But the complaint appears to have antagonized at least one of those accused by Freescale. Earlier this month, Panasonic Corp. filed a patent infringement complaint with the Trade Commission against Freescale. Panasonic also named in the complaint Mouser Electronics Inc. and Motorola.

In January, Freescale reported a $1.2 billion loss on $3.5 billion in revenue during fiscal 2009, versus a $7.7 billion loss on $5.2 billion in revenue during 2008. The company reported losing $114 million on $951 million in revenue during the fourth quarter 2009, compared with a $4 billion loss on $940 million in revenue during the same three-month period the previous year.

The semiconductor industry fell to an all-time low during the first quarter 2009 as electronics manufacturers quickly responded to the global economic recession. The recession, which began to take hold in late 2008, prompted consumers to cut back on buying the electronic devices that require semiconductors.

In early 2009, Freescale cut about 700 local jobs as part of companywide reduction of 2,400 positions. But this year, the economic slump appears to easing, according to recent data from the Semiconductor Industry Association, a U.S.-based trade organization.

The increase reflected an improving business environment that is being seen across a range of demand drivers for semiconductors, including personal computers, cell phones, automobiles and industrial applications, association President George Scalise said.

Strauss said the semiconductor industry won’t return to its 2007 level of activity until 2013. And when it does, he expects companies such as Freescale to remain lean by continuing their cost-cutting practices adopted during the recession.