September 24, 2020

Marvell beats back derivative suit over patent rout


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Marvell-Technology-Group-Article-201501261908By Marisa Kendall, From The Recorder
SAN FRANCISCO — Marvell Technology Group’s ties to Bermuda may spare the Silicon Valley company a costly courtroom battle.
U.S. District Judge Lucy Koh ruled Monday that shareholder derivative claims against Marvell’s top officers and directors “must fail” because the company is incorporated under Bermuda law, which has stricter standing requirements. Koh, of the Northern District of California, also dismissed a direct shareholder claim against Marvell executives for breach of fiduciary duties, ruling there is no proof shareholders had or would sustain damages.
She granted plaintiffs leave to amend both sets of claims.
Marvell, a semiconductor company based in Santa Clara, was hit with several securities suits last year after suffering a $1.5 billion patent infringement judgment in 2012. A Pennsylvania jury found Marvell willfully infringed two Carnegie Mellon University patents for hard-drive technology. Plaintiffs lawyers argued the hefty judgment is likely to hurt the company and its shareholders. The lawyers claim Marvell’s directors and executives allowed the patent infringement and failed to disclose the misconduct to shareholders.
But Bermuda law generally prevents shareholders from bringing derivative suits, and mandates the company itself, not the shareholders, is the proper plaintiff. The English common law, which originates from an 1843 court case, provides a derivative suit only holds water if a majority of the company’s shareholders are on board.
Plaintiffs lawyers had asked to stay the litigation in order to call a meeting and seek authorization from the shareholders, but Koh denied the request.
The team, led by La Jolla attorney Francis Bottini Jr. conceded their derivative claims fell flat under Bermuda law and argued California law should apply instead.
Marvell is represented by Quinn Emanuel Urquhart & Sullivan partner Harry Olivar Jr. in Los Angeles.
Koh also shot down plaintiffs’ sole non-derivative claim, ruling the lawyers failed to prove shareholders would be injured as a result of the patent judgment.
“Plaintiffs allege only that the ongoing [Carnegie Mellon] litigation ‘could have a material adverse effect on [Marvell’s] business, financial condition, results of operation and cash flows,'” Koh wrote. “Since that filing, however, Marvell has continued to pay dividends to shareholders.”
IMAGE: Marvell Technology Group
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