Startup Claims Nvidia and Microsoft Violated Patents and Conspired to Form a Cartel

A Texas startup, Xockets, co-founded by a former Yahoo executive and the CTO of Intel, has filed a lawsuit against Nvidia and Microsoft. The company accuses them of infringing on its patent for a critical innovation in AI chips and participating in a buying cartel aimed at artificially lowering technology prices.

Xockets claims that Nvidia has violated its patented data processing unit (DPU) technology, which enhances cloud infrastructure efficiency by accelerating data-intensive workloads. The lawsuit alleges that Nvidia inherited this infringement through its 2020 acquisition of Mellanox, which Xockets contends initially infringed on the patent following a public demonstration of the DPU technology at a conference in 2015. Specifically, Xockets identifies three of Nvidia’s DPUs—BlueField, ConnectX, and NVLink Switch—as being based on its patented innovations.

Furthermore, Xockets accuses Microsoft of patent infringement, stating that as an Nvidia client, Microsoft has “privileged access” to Nvidia's infringing GPU-enabled server systems and components designed for AI. The startup claims it alerted Nvidia to the alleged infringement in February 2022 when Parin Dalal, a founder and board member at Xockets, raised the issue with Nvidia's DPU business VP.

The lawsuit also asserts that Nvidia employs a strategy of “efficient infringement,” meaning it prioritizes immediate use of technology while leaving legal repercussions to be addressed later.

Additionally, Xockets alleges Nvidia is monopolizing the GPU server market for AI, collaborating with Microsoft in a buying cartel through an organization known as RPX. This claim suggests that RPX was established at the request of major tech companies to form buyer cartels for intellectual property, enabling firms like Nvidia and Microsoft to collectively suppress innovations like Xockets’ technology and reduce prices.

Xockets seeks damages for the alleged patent violations and a court order to stop Nvidia and Microsoft from violating its patents and antitrust laws. Despite facing two of the nation's largest companies, Xockets’ investor and board member, Robert Cote, an IP lawyer, expressed confidence in their capacity to confront this challenge.

While Parin Dalal currently works at Google as a principal engineer focusing on machine learning and AI, there is no indication that Google is involved in the litigation. Nvidia and Google have declined to comment on the matter, and Microsoft and RPX have not responded.