Patent infringement fine

Intel shares fell 2.6 per cent on Tuesday as the largest chipmaker was accused by a court of infringing two patents owned by VLSI Tech and is now ordered to pay $2.18bn. Intel said it would appeal.

Intel (INTC) shares, up 29% in the last quarter, fell 2.6% on Tuesday after a federal court in Texas ordered the company to pay $2.18 billion for patent infringement related to the chipmaker.

According to the court order, Intel infringed two patents owned by VLSI Technology. These patents include technologies that increase the power and speed of processors, a key competitive issue.

According to the prosecutor, "Intel has sold nearly a billion processors that infringe these two patents".

Intel denies infringing either patent and says one of them was invalid and the technologies were carried out by Intel engineers.

The company said it "categorically disagrees with the court's verdict" and intends to appeal. If Intel loses the appeal, the $2.18 billion fine would be one of the biggest for the company and the industry average.

Intel is in a difficult position because of its manufacturing process problems and high competition, but the company ended fiscal 2020 with a large profit, increased dividends and free cash flow of $21.1 billion. This means that if the $2.18 billion fine is imposed, it would not have much impact on the company's overall performance.