Tessera

Olin College Professor David Kerns, Case Director

Carl Hedberg, Case Writer

Arthur M. Blank Center for Entrepreneurship

© Babson College, 2007. Revised January 2009.

Abstract

For nearly a year, Tessera, Inc, a venture-backed company in San Jose, had been trying to reach an agreement with an aggressive Fortune 500 company that was ignoring Tessera’s patent claims on a key technology used in semiconductor chips. The semiconductor industry, while not lawless, was a ruthlessly competitive frontier where only the strong (and quick) survived. It wasn’t surprising; therefore, that this intellectual property (IP) challenge had coincided with revelations that Tessera was struggling financially—and in the midst of a top-down reorganization and leadership change. It was January, 2000, and the company was at a critical strategic crossroads. Some industry players believed that Tessera had neither the will nor the resources to take decisive action against a major firm like Multinational Semiconductor Inc. On the other hand, a legal win could send a clear message across the globe that the company was prepared to defend its IP rights against all comers. That strategy was not without significant risk, and the Tessera leadership did have alternatives to consider. Still, with smaller firms beginning to ignore Tessera IP as well, it was time to make some fundamental strategic decisions. Teaching Objective: To present an example of a high-technology venture that must defend its IP while at the same time struggling with financial and management issues.

Key Words: Patents, Research & Development, IP rights, IP defenses, Semiconductors, Licensing/Commercializing advanced technologies, Entrepreneurial leadership, Opportunity recognition, Value chain, Component suppliers, Strategic partnerships

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