Joe, the reason most of us are optimistic about the outcome of the Lexar litigation goes back to Harari's remarks at the conference call discussing the most recent quarterly financial statement. At that time, he mentioned that the judge presiding at a preliminary hearing on the Lexar claims had said that he thought SanDisk would prevail. The purpose of a preliminary hearing is to help bring the opposing parties to a point where the dispute can be resolved without the added expense of a trial. Lexar, the plaintiff in the case, was told, in effect, that it didn't have a very good case. One would suppose they would heed the warning, but sometimes they do just the opposite. On top of the patent litigation, Lexar recently filed another lawsuit charging unfair advertising and a number of related issues. Lawsuits are expensive. This one looks even worse than the patent suit, but the purpose in filing it may be to gain leverage by offering a deal where Lexar drops all its claims in return for not having to pay SNDK for lost sales. If Lexar actually loses these suits, the company will probably go broke, and SanDisk won't get anything. SanDisk undoubtedly knows this and is trying to do what it can to maximize the compensation it is probably entitled to.
If you look at the recent patent settlement between QUALCOMM and ERICSSON, you can find a parallel. Ericsson agreed to a settlement shortly after the court released its findings resulting from the preliminary hearing. QUALCOMM was aided, however, by a ruling from the U.S. Patent Office, which affirmed the key digital cellular patent owned by QUALCOMM, adding 19 additional attributes to the already approved 49 attributes. Ericsson knew when to fold, but was able to negotiate a face saving deal, buying QUALCOMM's infrastructure unit that was losing money, and gaining access to some, but not all of QUALCOMM's patents.
Another reason why it's likely SNDK will prevail in the Lexar suit is the earlier ruling denying Samsung access to any U.S. markets unless they agreed to pay royalties to SNDK. This ruling established, for practical purposes, the legitimacy of SNDK flash memory patents. So, taking all these things into consideration, it is not speculative to predict that SNDK will prevail. The main question remains when, not whether. |
