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By MATT WICKENHEISER, Staff Writer Wednesday, October 11, 2006

A California jury has decided against Fairchild Semiconductor in the first phase of a patent infringement trial, the South Portland-based company said Tuesday.

The jury awarded Fairchild rival Power Integrations about $34 million in damages.

Fairchild on July 20 reported sales of $406.3 million in its second quarter and profits of $23 million. The company is set to release its third-quarter financials Oct. 19.

Fairchild said in a release Tuesday that it "was disappointed by the jury's verdict in the first phase, but that it has yet to present all of its defenses to Power Integrations' claims."

Fairchild said it believes the patent claims are invalid, and arguments along these lines have yet to be heard by a jury.

The first phase of the three-phase trial was held last week. That phase dealt with infringement, the willfulness of any infringement and damages, Fairchild said. The second phase is set to begin Dec. 4 before a different jury, said Fairchild. That phase will be on the validity of the Power Integration patents.

Fairchild said it believes it has found inventions and publications that predate the Power Integrations patents, which may invalidate them.

The final phase of the trial will be before a judge and will deal with the unenforceablity of the patent claims. Fairchild said final resolution in the case wasn't expected until next year.

It was unclear if the outcomes of the next trial phases would affect the $34 million judgment in any way. Calls to Fairchild and Power Integrations were not returned late Tuesday.

Fairchild said it will continue offering the products in question, known as pulse-width modulation devices. According to a Power Integrations release, the devices are found in consumer products including cell phone chargers, DVD players, TV set-top boxes, LCD monitors and others.

Fairchild said it "continues to believe it will prevail "

Power Integrations said that if it prevails in the second phase of the trial and Fairchild fails to prove the patents are invalid, it would ask the court to stop the South Portland chip maker from manufacturing and selling the devices. It also would ask for an enhancement of the damages already awarded, Power Integrations said.

"Power Integrations respects the intellectual property of others, and we expect our competitors to do the same," said Balu Balakrishnan, Power Integrations' president and chief executive officer, in a release. "We are the leader in our market thanks in large part to the intellectual property that we have worked hard to develop over nearly two decades. This is our third successful effort to protect this intellectual property against unlawful infringement by our competitors, and we will continue making every effort to protect it going forward."

Power Integrations on July 31 reported second-quarter profits of $41.5 million. On the same day, Power Integrations also said it would be delisted from the Nasdaq because it didn't expect to become current in its Securities and Exchange Commission filings. "The company has recently been advised to submit its accounting treatment to the SEC for review prior to filing its restated financials," the company said in explanation.

Fairchild said in April that it had filed a patent infringement suit against Power Integrations, separate from the one currently proceeding. That suit also deals with pulse-width modulation products.

Fairchild has 9,000 workers worldwide, including roughly 1,025 at its headquarters building and a fabrication facility in South Portland.