Rambus Steams Ahead
Why all the interest in Rambus (RMBS) lately? In a previous piece I mentioned several "streams" of activity spurring the investment world to take another look at this small company with such large disruptive technology. Today's article concerns the recently finalized Hynix vs. Rambus case (00-20905) from the Northern District of California. The Rambus story involves huge back damage payments, as well as, significant forward reaching licenses. These realities make the stock somewhat recession proof. This is one of the reasons for current interest in the company. Another primary reason is the impeccable work of Judge Ronald Whyte in his court in San Jose.
Critics often point to Rambus as a litigious patent company, but this chapter of the saga begins in the year 2000 with a conspiracy pincer litigation move by two of Rambus' antagonists, Hynix and Micron (MU). Here's what Judge Whyte wrote:
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Micron sued Rambus for declaratory judgment 8-24-00 in Delaware, Hynix sued Rambus for declaratory judgment the next day in San Jose, California. Persuasive circumstantial evidence suggests Micron and Hynix coordinated the filing of the declaratory judgments . See Conduct Trial Tr.4006:8-4008:12 (Mar.5,2008) (former Hynix employee Farhad Tabrizi admitting to his belief in 2000 prior to litigation with Rambus that Hynix would litigate "to the end of Rambus Company").
Finally, after almost a decade, the Hynix/Micron litigate-to-death strategy has backfired in California. Judge Whyte's recent final judgment has issued. The three part trial was a shutout in favor of Rambus. In Phase 1 Hynix sued Rambus claiming their patent infringement claims were barred by the doctrine of unclean hands; the court ruled entirely for Rambus. Phase 2 was a jury trial where Rambus alleged that Hynix infringed many of its patents. On April 24th, 2006, after very short deliberations, the jury unanimously ruled Hynix was guilty of infringing 37 patents. Phase 3 was another jury trial, this one concerned Rambus' conduct (issues of spoliation, so-called deception at JEDEC, among other issues were considered). Once again Rambus triumphed thoroughly.
Judge Whyte was meticulous throughout giving Hynix a wide berth to attempt to prove their charges, but to no avail. The rulings in all three phases are crafted eloquently and buttressed with numerous findings of fact. Judge Whyte, widely considered the preeminent patent judge in the U.S. is almost never overturned on appeal due to his attention to minute detail, and his precise language in written summations.
Rambus was awarded 397 million in past damages and Hynix was ordered to start paying 4.25% on most varieties of DRAM going forward. Hynix has indicated they will appeal, but they will have to scrape the bottom of the barrel to find any grounds. They have until approximately March 27th to make good on this threat. Should they appeal, they will have to put in place a bond in at least the amount owed to Rambus, nearly 400 million dollars. Hynix claims to not have that kind of money. They also stated that under current credit conditions they will not be able to raise it. So, what will happen?
Back to the boiling pot. In addition to an approching blockbuster antitrust case, Rambus has reached final judgment of infringement against one of the major Memory Manufacturers (MMs). Hynix must pay 400 million, or guarantee that amount to Rambus with bond. Within the next week or so we will know if perhaps Rambus has come to settlement terms with Hynix. The least painful path for them maybe an amortized payment scheduled granted by Rambus. Such an arrangement would not only pad the Rambus bottom line for years to come, but might bring the other infringers to heel. This domino effect occurs when litigants know they are doomed to lose, when prior court rulings preclude victory due to collateral estoppel or other precedential features.
Complex litigation, such as the cases Rambus has been involved in, can seem to go on forever. The only realistic conclusion is settlement between the parties. This transpires because of a "business solution". Early in the Hynix case Judge Whyte stated that this case cries out for a business solution. Unfortunately, extension of the litigation process has been part of the strategy of one of the parties (ie. the MMs). Nonetheless, there is always a point at which continuing to litigate becomes more expensive than settlement. Hynix seems to have reached that point.
What other parallel streams favor Rambus ascendency? Stay tuned.
seekingalpha.com
follow up comment- from Nukjohn
On January 9th, Judge Sue Robinson of the Delaware District Court issued a ruling that Rambus was guilty of spoliating documents. Her remedy for this ruling was to rule Rambus patents unenforceable against Micron. On March 11th, Rambus filed a notice of appeal of this ruling to the Court of Appeals of the Federal Circuit (CAFC). This same spoliation issue was considered by Judge Ronald Whyte of the Northern District of California, who ruled that Rambus was not guilty of destroying any material documents. Here is Judge Whyte’s ruling which completely exonerated Rambus of any wrongdoing. It is likely that these cases will be combined at the Federal Circuit
investor.rambus.com
Judge Robinson has had 32 of her cases appealed to the CAFC. Of those, 17 were reversed or vacated in whole or in part. Judge Whyte has only had four cases appealed to the CAFC. Of these he had 3 cases affirmed and 1 case reversed (this was a non technical reversal on a jurisdictional issue). Furthermore, Judge Robinson’s remedy of rendering Rambus’ patent rights unenforceable is a ruling that goes against established case law in the Aptix case. The Aptix ruling (see below) stated that unclean hands are not justification to make the patents unenforceable.
ll.georgetown.edu
excerpt.....
The district court, however, abused its discretion in rendering the patent unenforceable for unclean hands.While unclean hands based on litigation misconduct may serve as a basis for sanctioning the litigant engaging in such conduct, it does not infect, or even affect, the original grant of the property right. Unclean hands based on litigation misconduct differs from inequitable conduct in the procurement of the patent right because the latter taints the property right itself and provides a basis for rendering the patent unenforceable by any party. The district court abused its discretion by extending the sanction for litigation misconduct beyond Aptix - the party who engaged in unclean hands - and rendering the property right unenforceable. |
