## Facts

- Texas Instruments Incorporated (TI) and Hyundai Electronics Industries Co., Ltd. (Hyundai) were sophisticated semiconductor competitors with large patent portfolios.
- The parties executed a worldwide portfolio cross-license to avoid repeated, patent-by-patent licensing as products and patents changed over time.
- The agreement used a lump-sum, sales-cap structure: Hyundai paid for a defined volume of worldwide semiconductor sales, and the license automatically terminated when Hyundai’s total sales reached a specified cap.
- TI asserted Hyundai exceeded the cap, the license terminated, and Hyundai’s continued sales constituted unlicensed infringement; Hyundai disputed how sales were counted toward the cap.
- A jury found Hyundai willfully infringed and awarded TI more than $25 million in damages.
- The court then held a bench trial on Hyundai’s remaining equitable defense that the sales-cap clause constituted patent misuse via unlawful tying.

## Issues

1. Whether a portfolio cross-license that measures consideration by a worldwide sales cap constitutes patent misuse as an unlawful tying arrangement.
2. Whether, under 35 U.S.C. § 271(d), Hyundai was required to prove TI’s market power and anticompetitive effect to establish misuse based on alleged tying.

## Decision

- The court rejected Hyundai’s patent misuse defense and held TI’s patents remained enforceable.
- The court found the sales-cap provision did not tie two separate products; it functioned as a pricing mechanism for a single portfolio license transaction.
- The court held Hyundai failed to show TI had market power or that the provision caused anticompetitive effects as required for tying-based misuse under § 271(d).
- The court treated the provision as an arm’s-length negotiated compromise between sophisticated parties, not coercion.
- The court declined equitable relief in light of Hyundai’s attempt to avoid the consequences of the bargain it helped draft after its sales growth triggered termination.

## Legal Principles

- Patent misuse based on tying requires proof of two distinct products and a condition linking access to one to acceptance of the other.
- A portfolio license term that measures royalty or consideration by reference to total sales can be a legitimate pricing device rather than an unlawful tie.
- Under 35 U.S.C. § 271(d), tying theories of misuse are not per se; the accused infringer must show the patentee’s market power and resulting anticompetitive effect.
- Equitable misuse relief may be denied where the accused infringer seeks to escape negotiated contractual consequences rather than remedy anticompetitive exploitation of patent rights.

## Conclusion

The court held that the sales-cap portfolio cross-license was a lawful method of pricing and risk allocation, not patent misuse, because it did not tie separate products and Hyundai failed to prove market power or competitive harm; TI’s infringement judgment remained enforceable.


Tex. Instruments Inc. v. Hyundai Elecs. Indus. Co., 49 F. Supp. 2d 893 (E.D. Tex. 1999)