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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: pompsander who wrote (40945)	4/26/2000 3:55:00 PM
From: Dave B	Respond to of 93625

Why isn't there a huge uprising about Sun charging royalties (3%-5%) and claiming IP on memory modules. All of you folks worried about protecting the "little people" from Rambus royalties should be much more worried about this... -------------------------------- forbes.com COMPUTERS The folks at memory maker Kingston Technology are famed for being nice guys. Except when it comes to Sun Microsystems. Sun vs. Sun By Seth Lubove KINGSTON TECHNOLOGY cofounder David Sun has no reserved parking for himself and he works in a humble Dilbert cubicle. Okay, those gestures are commonplace in the tech business. But this is an uncommon gesture: When Sun sold the outfit in 1996 he gratuitously handed over $100 million of the proceeds to employees. "It's just like a family. I feel like I'm home," swoons Kevin Wu, international business development director. But there is one topic on which David Sun drops his Nice Guy act: Sun Microsystems and its celebrated chairman, Scott McNealy. "From my eyes, I see Sun is a totally arrogant company," he growls in clipped English. Scoffing at McNealy's long-running jihad against Bill Gates, Sun lobs a few more grenades: "That is a sick mind. Lying, cheating, misleading. I would feel ashamed of myself." What would cause Sun to get so nasty? A patent infringement lawsuit filed by Sun against Kingston that would cost Kingston all of $5 million to $15 million in annual royalties. Sun Microsystems' lawsuit claims that Kingston's primary product, add-on computer memory modules, is infringing on a Sun patent. Kingston, with sales last year of $1.4 billion, is the world's largest maker of the after-market modules, which are used to expand memory in computers. Sun claims the unique right to assemble memory chips into modules. To Kingston, this patent claim is akin to patenting electrons. Memory modules, or DRAM modules, are ubiquitous and a commodity, amounting to a total market that Dataquest estimates will reach $30 billion this year. Worse, David Sun sees sinister motives in Sun's action: Once Kingston capitulates, Sun will go after every maker of memory modules from "Apple to Z," resulting in a huge toll on the computer business if Sun, as seems likely, asks for a 3%-to-5% royalty on revenues. Things weren't always so hostile. In fact, Kingston agreed to pay royalties on earlier versions of the patents in 1994. The company didn't necessarily agree that the patents were valid, but it was a small price to pay to get Sun's blessing on the memory modules Kingston was making for computers using Sun's Sparc processors. It's also the way that David Sun likes to do business: handshake deals that are good for the other guy. "You want a million, I give you a million. We become friends," he says, recounting a recent deal in which he signed off on buying $1 billion of components without bothering to read the deal memo (he forgot his reading glasses). Kingston claims that Sun refused to hand over specifications and even discouraged customers from purchasing extra memory from Kingston and others. Then Sun came back in 1998 to tell Kingston it had three more "continuations" on the original patent, for which Kingston needed to agree to another licensing deal. But the way Kingston saw it, Sun's latest patents went beyond memory for Sun's machines and applied to industry standard designs. "I said, 'No way!'," Sun thunders. "We said, 'Give me a deal. But don't sell me this patent. You don't have to be arrogant'." Sue me, Sun said. But there was a problem. Kingston is so nonlitigious that it doesn't even have an in-house lawyer. The company had to call around for legal referrals, settling on a former federal criminal prosecutor, Dean Dunlavey of Latham & Watkins. (This firm is involved in another case testing the limits of intellectual property) . Kingston's legal position is that Sun is getting rich off a bogus patent. "We have smoking gun documents that establish that Sun didn't invent what it claims were the principal aspects of its quote, unquote, invention, and that Sun knew it," Dunlavey intones, accusing Sun of dumping 3,000 pages of materials on a hapless patent examiner on just one day. The four-handicap Sun informally offers the 3.3-handicap McNealy-the top corporate golfer in a recent ranking-an out: a golf match to determine the winner of the legal battle. No word from McNealy, other than a flack's terse response that Sun "remains open to resolving this dispute amicably."