As of 2024, Nvidia stands at the center of the artificial intelligence (AI) chip industry. Nvidia is one of the world’s most valuable publicly traded businesses with its most recent quarterly revenue reaching $30 billion. It is known to be one of the “Magnificent Seven” tech stocks (along with firms like Amazon, Apple, and Meta). Nvidia has grown enormously over the last few years and essentially dominates the AI graphical processing units (AI-GPU) market. Nvidia’s GPUs are well-known for efficiently managing complex calculations in AI computations.
It seems as if no one can block its way. But is Nvidia really “invincible” after all?
Despite its formidable growth, Nvidia may face some troublesome legal consequences due to a recent patent lawsuit filed by a tech startup, Xockets Inc.. Xockets Inc., a small Texas-based company founded in 2012, sued Nvidia and Microsoft for stealing its data processor technology—specifically, its New Cloud Processor and New Cloud Fabric technology that Xockets sought to license. In the complaint, Xockets alleged that its Data Processing Unit (DPU) technology was the key element in Nvidia’s explosive success in recent years.
The plaintiff accused Nvidia of predatory infringement that “NVIDIA was falsely proclaiming itself as the pioneer of accelerated computing and AI with its DPUs.” Xockets is currently seeking damages as well as an injunction preventing the sale of products using “patent-infringing technology”.
As a side note, this case was intentionally filed in the Western District of Texas to be heard under Judge Alan Albright, who has ruled in many famous patent cases. On September 5th, Xockets filed its initial complaint with only antitrust claims so that the case could be automatically assigned to Judge Albright; and, a few hours later, Xockets filed an amended complaint with claims of patent infringement. Judge Albright’s patent caseloads have been reduced to limit forum shopping, but he remains one of the most “coveted” judges when it comes to patent suits. Strategically, this amended complaint filing was indeed a clever litigation strategy by Xockets’s lawyers.
Nvidia has not yet responded to the complaint. The parties may settle before the case goes through a full trial but, at the same time, Nvidia may face significant financial loss. Big tech companies have constantly faced patent lawsuits and sometimes paid millions or even billions of monetary damages or settlements. For example, Google recently faced $1.67 billion in damages in a patent infringement lawsuit; the parties eventually settled, but Google suffered some financial loss and a scratch in its reputation.
This Xockets lawsuit may affect Nvidia’s long-term outlook and its patent management standard. Given the novelty of the subject matter, there is ambiguity as to how much protection AI-related innovation receives under the current patent law regime; some say “increased patent litigation might be the way to develop the law in this area.” Despite the costliness of patent litigations, perhaps this is a realistic way to create standards in patent law dealing with AI-related innovations. Amongst this uncertainty, the Xocket-Nvidia lawsuit will certainly bring some interesting topics for debate.