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To: Bilow who wrote (59132)	10/29/2000 3:39:44 PM
From: blake_paterson	Read Replies (1) \| Respond to of 93625

Carl(a), re: "What you are suggesting is that NEC and Hitachi will have to pay royalties on DDR chips manufactured for Elpida, and then Elpida will also have to pay royalties when they sell it to customers." whassa matta, you no speaki english? The royalty is paid by the producing entity (Hitachi or NEC). NOT Elpida. They (Elpida) absorb all costs of unit production, fixed or variable (this part includes things like % royalty pymts) by paying the transfer price for the chip. Entendiou? I don't need Zeev to explain royalty agreements to me, thanks; I've written a few of them meself. BP

To: Bilow who wrote (59132)	10/29/2000 3:40:11 PM
From: Sam P.	Respond to of 93625

Blow, Have you and Zeev got a Jerry Lewis and Dean Martin thing going?

To: Bilow who wrote (59132)	10/29/2000 4:00:39 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 93625

Carl, you are right, it is rare that royalties are paid twice. Most Licensing agreements do go into the description of "what are sales" (another what "is" is <g>). In essence selling price is often determined as the first "arm length" transaction, namely, if NEC makes the chips and sell them to a company in which it owns more than 10% (Elpida), it would not be "arm-length", and the selling price will be determined once the chips are sold to either an independent distributor, or let say to a PC assembler, like NEC (g). That is where the Agreement often dictates that when the end user is the licensed company itself (NEC uses RDRAM in their own PC), or an affiliate (a company in which the licensee has a substantial interest, like 10% or so), the "transfer price" for royalties determination purposes is determined by the price paid by a truly independent third party in a co-temporal transaction. Like what did Compaq pay during the same period for similar quantities. Zeev