Another interesting post from Yahoo
by: harfar01
04/20/03 10:14 pm
Msg: 484865 of 484977
By way of background, I made my first purchase of Rambus stock on 8/18/99 ($87/share), and continued to build a position throughout the remainder of that year. Lucky enough to have decided to sell it out on 3/15/00 ($405/share). Of course, during that time, there were countless stocks that were generating huge returns, so this was not some stroke of genius on my part. It merely establishes that I have followed the Rambus story for quite some time now. Since then, I have intermittently held long positions in RMBS (sometimes winning, sometimes losing), but have never been short. Barring any unexpected news, it is likely that my next meaningful position will be as a short. So all of you fanatical longs can immediately discount everything I am about to say.
I will attempt to explain why, and voice some thoughts and ideas along the way. This is actually an absolute waste of my time, because it has no possibility of helping me in any way. Just fulfilling a need to put in my two cents worth, I suppose. If it helps some lurker (and I have been one for years) to understand the story, so much the better. I fully expect to be attacked by those that seem to be emotionally involved with this company and/or their investment, but that is fine by me. I just try to see it as it is. Hats off to BUMPSTEER for his efforts, and apparent ability, to do the same thing. By the way, I am probably one of the few here that knows what the heck bumpsteer is anyway. Only a racer….
First of all, let me say that I am glad that Farmwald and Horowitz sold their inventions, took the money, and avoided all the mess that followed. Rambus’ efforts to capitalize on those inventions mean very little to me either way, other than whatever opportunities it may offer for capital gains along the way. It seems the world has been dead set against Rambus since day one (well, at least since Intel anointed them), but the company has made some critical errors along the way. Those errors may lead to their demise, or they may very well survive those errors, and fly above it all. I have no crystal ball to foresee the ultimate outcome.
Apparently, nearly everyone that is familiar with the history of Rambus agrees that joining JEDEC has turned out to a mistake. I disagree with that opinion. I believe that Rambus joined JEDEC with hopes of getting RDRAM adopted as the next mainstream DRAM, and there was nothing wrong with that. I feel that the mistake was made in remaining a member of JEDEC when it became apparent that JEDEC had no intention of adopting RDRAM, but had every intention of incorporating a significant portion of the Rambus intellectual property. In my opinion, that was MAJOR MISTAKE #1.
Upon discovering what was actually happening at JEDEC, Rambus apparently decided to fight fire with fire. Instead of clearly and unequivocally stating that royalties would be demanded on any memory product that infringed on any current or future patents held by Rambus and then immediately withdrawing, they remained as a member of JEDEC. As of that point it appears that it (their membership) became nothing more than a spying mission. I can think of no other meaningful reason for them to remain at that point. The sad part of it is that their legal counsel told them they were creating a problem, and corporate management was too mule-headed to listen.
MAJOR MISTAKE #2 has been allowing the world in general to make such a distinction between RDRAM and SDRAM. Do not be misled, RDRAM is a synchronized memory (narrow bus), and SDRAM is nothing more than a wide-bus form of RDRAM. After sucking Rambus into their JEDEC game, the memory manufacturers have blithely appropriated virtually every Farmwald/Horowitz invention, and have given themselves a damn good chance of getting off scot free (no offense to that ethnic group intended) in the process. That is a prime example of the little newcomer getting sheared in plain view of the world. Somehow, Rambus had to make everyone understand that RDRAM is SDRAM, and that JEDEC’s SDRAM is nothing more than a simplified version of RDRAM.
Anyhow, the past is the past. Now for the current situation. The memory makers (Somehow, Infineon and Micron got appointed to lead the war, and Hynix just ended up along for the ride. But make no mistake, all the others are into it up to their necks) wanted to avoid paying royalties to Rambus, and managed to give themselves two chances at doing that. First chance was Federal Court, with hopes of even getting the entire company squashed. The other chance to accomplish that goal was to go whining to the Federal Trade Commission, and hope that the FTC would do the dirty deed for them.
The first chance is shot to hell. I was truly stunned at the totality of the Rambus victory at the Court of Appeals. The Appeals rulings virtually guarantee a Rambus victory upon remand, and I firmly believe the Supreme Court is going to laugh off the Infineon appeal. I say this simply because the entire matter is not yet ripe to be heard. There are too many loose ends, and the evidentiary record is nowhere near complete. Once the retrial in Richmond is over, the FTC has wrapped up their proceedings, and the Dept. of Justice investigation has been completed, I think there is a good chance the entire mess will end up in front of the Supreme Court. Nonetheless, the Federal Court proceedings may be nothing more than a hollow victory, depending on the outcome of the FTC proceeding.
I hold no hope for anything positive for Rambus from the DOJ investigation. Even if they find price-fixing, and smack the memory makers up side the head, it will be difficult for Rambus to get anything out of it. All of that is so far down the road that I can see no reason to pin much hope on that proceeding.
The memory maker’s big remaining chance is the FTC proceeding, and I believe they are going to get everything they want there. I think McGuire’s (wonder if he is a Scot?) order denying the Rambus motion for summary disposition is a good preview of the outcome of the administrative hearings there. Following are some excerpts:
“Respondent ((Rambus)) frames the issue to be decided at hearing narrowly: whether Respondent had any duty under JEDEC patent disclosure policies to disclose its patents or patent applications…..The ((FTC)) complaint alleges that Respondent engaged in anti-competitive practices “in violation of JEDEC’s own operating rules and procedures – and through other bad-faith, deceptive conduct. As a result, the question the Court must address is far broader that that which Respondent suggests. Whether Respondent engaged in a pattern of deceptive, exclusionary conduct by subverting an open standards process; whether Respondent utilized such conduct to capture a monopoly; and whether the challenged conduct violates well-established principles of antitrust law are material questions of fact to be resolved at trial.” ((that, my friends, is a prelude to a screwing))
the Court notes that the Federal Circuit found that JEDEC members treated the language ((contained in JEDEC documents)) as imposing a disclosure duty and that the Federal Circuit concluded this language imposed a disclosure duty”
“a reasonable trier of fact in the instant proceeding, might find from JEDEC’s JEP21-I patent policy statement that a duty to disclose under JEDEC’s rules arose while Respondent belonged to JEDEC”
“Mr. Tabrizi (the JEDEC committee chairman)) unambiguously testified that the refusal of a JEDEC member to provide information about patents that could effect ((I think he meant to say affect, not effect)) a standard is a violation of JEDEC patent policy”
“There is sufficient evidence that Respondent’s conduct/silence might have been relied upon by other JEDEC participants regarding the scope of its patent claims…” ((And I just bet FTC counsel can dredge up all the JEDEC members they want to testify they did.))
“Farad Tabrizi similarly indicated that he did not think that Respondent would not abide by JEDEC patent policy until it actually withdrew from JEDEC” ((I hate double negatives.))
“A conclusion that might ultimately be drawn from this assertion could be that Respondent structured its patents and patent applications so that JEDEC participants could not have known what Respondent now asserts are the true scope of its patents relating to SDRAM and DDR SDRAM” ((huh?))
“The failure of Respondent to come forward with a proposal after this admonition might be interpreted by a reasonable trier of fact as indicating that Respondent knew or should have known that it could not remain a member of JEDEC and simultaneously create a situation where JEDEC DRAM standards would provide it with pecuniary benefits”
“the failure of Respondent to give notice to JEDEC of its ‘327 patent ((involves dual edge clock technology, which is the basis for DDR DRAM)) might lead a reasonable trier of fact to conclude that Respondent attempted to mislead its fellow JEDEC members”
“There is sufficient evidence that Respondent might have used knowledge obtained from its participation in JEDEC S42.3 to engage in anti-competitive conduct concerning DDR SDRAM”
“the Court in particular notes evidence that some of the JEDEC S42.3 members believe that Respondent took the ideas for some of the patents that Respondent now claims are infringed upon by the JEDEC DDR SDRAM standard from discussions it was privy to at JEDEC meetings.”
“there certainly appear to have been informal discussions during JEDEC S42.3 meetings of many of the design element issues that ultimately were incorporated into JEDEC’s DDR SDRAM standard” ((note that this actually means that it is JEDEC’s standard, not JEDEC’s DDR SDRAM…that had already been invented)).
have scoured McGuire’s 13 page order, and cannot find one single, solitary statement the favors Rambus in any shape, form or fashion. My philosophy is, if someone has a loaded gun pointed at your head, you gotta expect that they intend to shoot you. After weeks of administrative hearing, and countless post-hearing filings, I fully expect to see slightly reworded versions of most of those quotes contained in the final order. That being the case, Rambus is down to having to win an appeal of the FTC order to collect royalties on anything other than RDRAM (not considering their other IP, which currently generates very little revenue).
As for the future, I anticipate that getting the FTC order overturned will be a tough proposition. While not being a lawyer (and probably wouldn’t admit it if I were one), I have had extensive experience dealing with regulatory agencies and administrative hearing processes. I believe that Federal Appeals Courts are much more willing to overturn a Federal Circuit Court (which they view as being their underlings) than they are to overturn a regulatory agency. My impression is that on appeal from Federal Circuit, you merely have to show that the Circuit ruling was flawed, but on appeal from a regulatory agency, you have to show there was no reasonable basis for the action the agency took. It is a much higher burden to overcome in order to win on appeal.
There is another reason that I foresee the FTC prevailing in this matter. As several Rambus supporters have repeatedly pointed out, Rambus can literally put anyone who has not already licensed the technology out of business. Believe it or not, that is a really scary situation to anyone other than a Rambus long (bagholder, to the hardcore shorts). Assume that Rambus wins it all, and look down the road a few years. If any of the IP is still required when the current license agreements expire, Rambus could demand any royalty rate they desired…..5%......10%......how much can be considered to be reasonable? That situation is exactly what the FTC is charged with preventing, and you can rest assured that it will not be allowed to happen.
Most of all this is stuff that has been bouncing around in my head for some time now. It has probably came out all disjointed and disorganized, but maybe there is a tidbit or two for someone. As for my current plan, stay out of Rambus till nearly time for the FTC ruling to be issued, and then go short. Although everyone seems to expect an adverse FTC ruling, the stock will still take a big hit if it actually happens. If I turn out to have been wrong about the FTC ruling, I will eat my short losses, and go long, ‘cause it will go to the moon.
If Rambus wins the Federal Court proceedings, and loses the FTC proceedings, I think the whole mess may end up as a landmark case in front of the Supreme Court. Time will tell.
OK, back to being a lurker. |
