Startup accuses Nvidia and Microsoft of infringing on patents and forming a cartel

A startup funded by the cofounder of Yahoo and CTO of Intel is suing Nvidia and Microsoft for allegedly infringing on its patent for a key innovation in AI chips and being part of a buying cartel that allegedly sought to artificially fix lower prices for the technology.

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

Xockets alleges that three of Nvidia's DPUs - BlueField, ConnectX, and NVLink Switch - are based on Xockets' patented technology. The startup also accuses Microsoft of infringing on its patents, alleging that as an Nvidia customer, Microsoft has "privileged access to NVIDIA's infringing GPU-enabled server computer systems and components for AI."

Xockets says it's made Nvidia aware of the alleged infringement - it alleges the startup's founder and board member Parin Dalal raised the issue to Nvidia's DPU business VP in February 2022. Xockets accuses Nvidia of pursuing a strategy of "efficient infringement," which basically boils down to infringe now, let lawyers figure out the rest later.

Xockets is also accusing Nvidia of monopolizing the market for GPU servers for AI and participating with Microsoft in a buying cartel through an organization called RPX, a company Xockets says was "formed at the request of Big Tech companies to enable and create buyers' cartels for intellectual property." Xockets alleges that RPX enabled members like Nvidia and Microsoft to jointly boycott innovations like Xockets' in order to drive prices lower than if each company had negotiated on its own. Through the alleged cartel, Xockets claims, Microsoft and Nvidia are able to "monopolize GPU-enabled generative artificial intelligence by controlling the equipment and platforms necessary to access this capability."

Xockets is seeking damages for the alleged infringement and for the court to order the companies to stop violating its patents and antitrust law. Though it's facing two of the largest companies in the country, Xockets investor and board member Robert Cote, an IP lawyer, told The Verge that Xockets has "more than enough wherewithal to take on Goliath."

Dalal is a current employee at Google, where he's a principal engineer of machine learning and AI, though Google does not seem to have an official role in the litigation. Cote said he could not comment on Google. Nvidia and Google declined to comment. Microsoft and RPX did not immediately respond.