Patent Dispute Against TSMC Emerges in U.S., but Settlement Seen as More Likely Than Sanctions Despite Political Pressure

NPEs Under Fortress Umbrella File Complaint With U.S. ITC
Republican Lawmakers Join Calls for Action
TSMC’s Critical Role in Semiconductor Supply Chains Raises Odds of Settlement

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, has become embroiled in a U.S. patent dispute. Although some lawmakers in Washington are calling for punitive measures, industry observers argue that the likelihood of severe action remains limited given TSMC’s outsized importance to the U.S. semiconductor supply chain and artificial intelligence (AI) industry. Analysts note that TSMC’s previous patent battle with GlobalFoundries and Samsung Electronics’ long-running patent disputes ultimately ended in settlements, suggesting that the current case is more likely to be resolved through negotiations than prolonged courtroom litigation.

Irish Patent Firms File Complaint

According to U.S. media outlets including Axios on June 14 (local time), TSMC is currently facing proceedings before the U.S. International Trade Commission (ITC) over allegations of patent infringement. The plaintiffs are Longitude Licensing and Marlin Semiconductor, two Ireland-based non-practicing entities (NPEs). Both firms are subsidiaries of IPValue Management, which is owned by Vector Capital, a major private equity firm based in San Francisco.

The plaintiffs allege that semiconductors manufactured using TSMC’s most advanced process technologies infringe upon their patents. Marlin Semiconductor, in particular, reportedly acquired a portion of the relevant patents from TSMC rival United Microelectronics Corp. (UMC) in 2021. While Apple, Broadcom, and several other major technology companies are referenced in the complaint, industry observers believe TSMC is effectively the primary target because of its dominant position in the global advanced semiconductor supply chain.

The case has drawn additional attention as members of the U.S. Congress have called for strict enforcement measures against TSMC. According to a letter obtained exclusively by Axios, Republican Representative Ryan Zinke and other lawmakers urged ITC Chair Amy Karpel to block imports of foreign-manufactured chips found to infringe U.S. patents. The lawmakers argued that robust patent enforcement is essential to protecting American competitiveness and that strategically important companies should not receive preferential treatment. Earlier, U.S. President Donald Trump remarked in an interview that “Intel should have been the biggest company in the world,” pointing to TSMC’s market dominance as a contributing factor.

In contrast, Democratic senators and representatives from Arizona, where TSMC is building manufacturing facilities, have strongly defended the company. TSMC has pledged approximately $165 billion in investment in Arizona. In a separate letter to the ITC, the lawmakers warned that legal actions affecting TSMC could disrupt semiconductor production, AI development, national defense capabilities, and Arizona’s economy.

TSMC and GlobalFoundries Reached Peace After Two Months of Litigation

From Washington’s perspective, TSMC is not an easy target for punitive action. Company disclosures show that 75% of TSMC’s revenue last year came from North America, while its share price has risen 96% since the start of the year amid the AI boom and semiconductor shortages. TSMC also remains a key partner for President Trump, who used tariff leverage to secure major investment commitments from the company.

Although TSMC’s Arizona expansion was initially launched under former President Joe Biden, the project expanded significantly after Trump announced an additional $100 billion investment at the White House in March last year. TSMC plans to invest $265 billion to build 10 semiconductor manufacturing facilities across the United States, including in Arizona.

The fragility of the U.S. semiconductor supply chain, exacerbated by global chip shortages and tensions with China, further limits Washington’s ability to take aggressive action against TSMC. In addition, Taiwan agreed to have its companies invest $250 billion directly in the United States in exchange for reducing tariffs on Taiwanese products from 20% to 15%, a concession viewed as particularly costly. Any substantial damage to TSMC, often regarded as Taiwan’s national champion, could prompt a response from the Taiwanese government as well.

As a result, industry observers believe a negotiated settlement remains the most likely outcome. Settlements are common in semiconductor patent disputes. A notable example involved TSMC’s own patent battle in 2019, which concluded through an agreement. That dispute began in August 2019 when GlobalFoundries filed suit alleging that TSMC had infringed 16 of its patents. GlobalFoundries stated at the time that the litigation was intended to block the export of chips produced using the allegedly infringing technologies into the United States and Germany.

GlobalFoundries also filed similar lawsuits against more than 10 customer companies that purchased chips manufactured by TSMC. The defendants reportedly included not only prominent U.S. fabless semiconductor firms but also Greater China companies such as Hisense and MediaTek. TSMC responded in October of the same year by alleging that GlobalFoundries had infringed 25 of its patents. In comments reported by foreign media, TSMC stated, “TSMC has invested tens of billions of dollars in process development,” adding that it would protect its roughly 500 customers through the litigation. Although analysts at the time suggested the dispute between Chinese-speaking-region and U.S. foundry companies could evolve into a proxy battle within the broader U.S.-China trade conflict, the two sides ultimately withdrew their lawsuits and reached a settlement after two months of intense legal confrontation.

Samsung Also Closed the Chapter Through Settlement

Samsung Electronics likewise has a history of resolving lengthy patent disputes through settlement agreements. One notable example involved U.S. flash memory company Spansion. In 2008, Spansion filed lawsuits in the United States, Japan, and other jurisdictions, alleging that Samsung had infringed patents related to flash memory technology. Samsung responded with countersuits, leading to years of legal battles. The dispute was widely regarded as a major patent war involving core memory semiconductor technologies, including NAND flash.

The four-year dispute concluded in 2011 with a cross-licensing agreement. Under the settlement, the two companies agreed to share access to each other’s patent portfolios for seven years. Samsung also agreed to pay Spansion a total of $150 million in patent licensing fees over a five-year period beginning in 2011. Industry observers viewed the settlement as a pragmatic decision aimed at reducing litigation costs and supply chain uncertainty while preserving the business relationship between the two companies.

The semiconductor FinFET technology dispute between the Korea Advanced Institute of Science and Technology (KAIST) and Samsung Electronics also ended through settlement. In November 2016, KAIST Intellectual Property (KIP), a technology transfer subsidiary responsible for managing KAIST’s intellectual property assets, filed suit in the U.S. District Court for the Eastern District of Texas, alleging that Samsung had used FinFET-related patents without paying licensing fees. FinFET technology, which employs a three-dimensional transistor structure to improve semiconductor performance and power efficiency, is considered a foundational technology for advanced application processors (APs) and cutting-edge system semiconductors.

The central issue was whether Samsung had incorporated the technology into its advanced semiconductor manufacturing processes and products. KIP argued that Samsung infringed its patents in the production of chips used in the Galaxy S8, S8 Plus, S8 Active, S9, S9 Plus, Note 8, and Note 9. Although Qualcomm and GlobalFoundries were also named in the litigation, liability for damages was concentrated on Samsung.

In June 2018, a Texas jury found that Samsung had infringed KIP’s FinFET patents and awarded $400 million in damages. In February 2019, KAIST IP filed another patent lawsuit against Samsung, arguing that the company continued to design, develop, and commercialize products incorporating the infringing technology despite the jury verdict.

Samsung appealed the damages ruling, and subsequent court decisions modified portions of the judgment. In February 2020, the trial court ordered Samsung to pay $200 million in damages to KAIST. Although the original $400 million jury award was not upheld in full, Samsung continued to face substantial legal exposure for patent infringement. In September 2020, however, the two sides withdrew their lawsuits and settled the dispute. The specific terms of the agreement were not disclosed, but the parties reportedly entered into a patent licensing arrangement.