A massive patent dispute has erupted in Texas, with startup Xockets, funded by Yahoo co-founder and Intel CTO, suing Nvidia and Microsoft. Xockets accuses the tech giant of violating its patents on a key AI chip innovation and engaging in cartel conspiracy. The startup is seeking damages and an injunction against further violation of patent and antitrust laws.
Xockets’ Data Processing Unit (DPU) technology is designed to significantly improve the efficiency of cloud infrastructure by accelerating data-intensive tasks. Xockets claims that Nvidia also inherited patent infringement when it acquired Mellanox for $7 billion in 2020. According to the plaintiff, Mellanox began using the patented Xockets technology after its public demonstration at a conference in 2015.
Image Source: Xockets
Xockets makes serious allegations against Nvidia, claiming that three of the company’s key networking products – BlueField, ConnectX and NVLink Switch – are based on Xockets’ patented technology. Microsoft has also become embroiled in the conflict, with Xockets alleging that the corporation, as an Nvidia customer, received privileged access to patent-infringing server systems and AI components based on Nvidia GPUs, thereby indirectly participating in patent infringement.
The startup has repeatedly tried to resolve the issue with Nvidia. In particular, Xockets founder and board member Parin Dalal personally discussed the problem with the vice president of Nvidia’s DPU division in February 2022. However, according to Xockets, Nvidia is pursuing a strategy of “efficient disruption” – a tactic in which the company deliberately uses someone else’s technology, calculating that the potential legal costs will be lower than the benefits of using the innovation.
In addition to patent infringement, Xockets makes an even more serious allegation against Nvidia, which allegedly seeks to monopolize the market for GPU servers for AI. Moreover, the startup claims that Nvidia and Microsoft are colluding through the RPX organization. According to the lawsuit, RPX was created at the request of large technology companies to secure and create intellectual property cartels, a powerful tool for manipulating the market for innovation.
The crux of the charge is that RPX allows its members, such as Nvidia and Microsoft, to coordinate efforts to boycott innovations like Xockets’s, with the goal of artificially lowering the price of technology compared to a situation where each company would be forced to negotiate on its own.
Despite the fact that Xockets is up against two tech giants with a combined market capitalization exceeding $1 trillion, the startup intends to defend its rights. Robert Cote, an investor and board member of Xockets and an experienced intellectual property lawyer, said in an interview that they have more than enough money to take on Goliath.
What makes this case intriguing is the fact that Dalal, one of the key initiators of the lawsuit, currently serves as the chief engineer of machine learning and AI at Google, a company that is a direct competitor to both Nvidia and Microsoft in the field of AI technologies. However, Google does not appear to have an official role in this litigation. Cote declined to comment on the situation with Google, and Google itself, like Nvidia, refrained from making any comments.