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To: Michael A. Gottesman who wrote (10022)	4/2/2000 12:34:00 PM
From: Michael A. Gottesman	Respond to of 60323

3/28 & 3/29 Filings by Lexar have the same reference to Mitsubishi and no other. Mike

To: Michael A. Gottesman who wrote (10022)	4/2/2000 12:50:00 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Mike, Aus, and others, there are many points to consider in the two most recent press releases. First, on the Mitsubishi claim, it may have been filed in Japan because SNDK has a subsidiary there, doing business there, and subject to the Japanese patent laws, which are different in some respects from the U.S. The suggestion that Mitsubishi wants cross licensing rights is probably the main motive. After all, pursuing a patent infringement suit takes a long time, costs a lot of money for both sides, and the outcome may be moot after all the appeals, and after the technology has changed so much that the original patents have become less valuable, if not completely worthless. The decision regarding Lexar reinforces the fact that SNDK controls the key patents in this technology. The first challenge came from Samsung, which was banned from selling CF in the U.S. by the Commerce Dept. in the long, almost forgotten past (back in 1998). This was not a patent suit but a ruling that determined simply that Samsung could not sell any flash product in the U.S. without first obtaining a license agreement from SNDK. There are several outcomes that may result from the Lexar judgment, but one outcome that remains uncertain is whether SNDK will gain very much (in monetary terms) in the near term. First, the order can be appealed, and probably will be, thus setting aside any judgment. Second, if the order is not appealed, Lexar could and probably will file bankruptcy, since it probably cannot generate enough cash to pay SNDK legal fees and compensatory costs. Third, SNDK could probably get a court order stopping Lexar from selling any more products that infringe, unless Lexar posts bond. But Lexar is a company that has not yet gone public, doesn't have a lot of cash, is still losing money, and in the end may not be able to pay anything. Furthermore, if they are prevented from producing or selling any product that infringes, it simply means they have LESS ability to pay whatever the judgment is levied against them. Put in other terms, I don't see this decision adding to the bottom line in the near future. In the long run, however, it should have a very, very beneficial impact, either by forcing Sony to make some agreement with SNDK, or by allowing SNDK access to the purportedly higher speed designs of Lexar, as noted in an earlier message, or simply be eliminating a competitor, thereby allowing the remaining companies to increase prices. Overall, then, the impact should be very positive. Art