Startup accuses Nvidia and Microsoft of patent infringement and cartel formation

A startup funded by Yahoo’s co-founder and Intel’s CTO is suing Nvidia and Microsoft for allegedly infringing the company’s patent on a key innovation in AI chips and for participating in a purchasing cartel that allegedly tried to artificially lower the price of the technology.

In a new lawsuit, Texas-based Xockets claims that Nvidia infringed on its patented data processing unit (DPU) technology, which helps boost cloud infrastructure performance by accelerating data-intensive workloads. Xockets claims that the chip giant inherited the infringement through its 2020 acquisition of Mellanox. It claims that Mellanox initially infringed on its patent after Xockets publicly demonstrated its DPU technology at a 2015 conference.

Xockets claims that three of Nvidia’s DPUs—BlueField, ConnectX, and NVLink Switch—are based on Xockets’ patented technology. The startup also accuses Microsoft of infringing its patents, claiming that as an Nvidia customer, Microsoft has “privileged access to patent-infringing NVIDIA GPU-enabled server computing systems and AI components.”

Xockets claims to have informed Nvidia of the alleged infringement — it claims that the startup’s founder and board member, Parin Dalal, raised the issue with Nvidia’s vice president of DPU business in February 2022. Xockets accuses Nvidia of pursuing an “effective infringement” strategy, which essentially amounts to infringing now and letting lawyers figure out the rest later.

Xockets also accuses Nvidia of monopolizing the market for AI GPU servers and participating in a purchasing cartel with Microsoft through an organization called RPX, a company that Xockets claims was “formed at the request of large tech companies to enable and create purchasing cartels for intellectual property.” Xockets claims that RPX has allowed members like Nvidia and Microsoft to jointly boycott innovations like Xockets’ in order to lower prices than if each company had negotiated alone. Through the alleged cartel, Xockets claims, Microsoft and Nvidia are able to “monopolise GPU-enabled generative AI by controlling the hardware and platforms necessary to access this capability.”

Xockets is seeking damages for alleged infringement and an order from the court that the companies cease violating patents and antitrust laws. Although the company faces two of the largest companies in the country, said Xockets investor and board member Robert Cote, an intellectual property attorney Edge that Xockets has “more than enough resources to take on Goliath.”

Dalal is currently an employee at Google, where he is a principal engineer for machine learning and AI, although Google does not appear to have an official role in the dispute. Cote said he could not comment on the Google case. Nvidia and Google declined to comment. Microsoft and RPX did not immediately respond.