Patent law protects elements of chip designs and production processes that are useful, novel and non-obvious. The Chip Act essentially protects the topology of original mask works fixed in a chip. Patent protection is the strongest type of protection, but is more difficult and expensive to implement. A single chip is likely to require the IP of multiple owners. Traditionally, merchant chip companies have been in different functional or application market segments.
Some companies offer only digital devices, while others offer only analog devices.
Most companies will not have IP ownership or licensing rights to incorporate all of these disparate functions. IP provides the best opportunity for differentiation in the marketplace because the owner may exclude others or use such rights to bargain for other needed rights. At some point, a vendor may not implement the next stage of integration on a chip because of the lack of such rights. Ninety percent of an integrated solution is not enough. An IP portfolio provides leverage to obtain cross-licenses to obtain rights for such integration, and also encourages favorable settlements of disputes when the owner is allegedly infringing another parties' rights.