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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: Michael G. Potter who wrote (8392)	10/16/1998 8:26:00 PM
From: Simon Cardinale	Read Replies (2) \| Respond to of 16960

S3 vs. nVidia skinny [disclaimer - I'm not a lawyer or anything; I'm a geologist. Take my reading for what it's worth. Much of the language was readily understood (which surprised me) but some wasn't. Most of the technical details were far beyond me, and I'm sure I missed stuff a lawyer would have been looking for since I don't know what I'm doing and this was my first time in an actual courthouse.) Oakland Branch of the U.S. District Court of Northern California Case #98-1938 SBA (Judge Saundra B. Armstrong) S3 alleges nVidia is infringing on US Patent #s: 5,581,279 ; 5,402,513 ; 5,625,379 [note: 5,581,279 appears to be the one referred to in the papers (as '279)] [Small Bits of the Docket] 05/26/98 - Request for preliminary injunction [against sale of Riva 128] 06/01/98 - Counterclaim; jury demand by defendant NVIDIA Corporation against S3 07/24/98 - Preliminary Injunction denied all dispositions heard by 3/23/99 pre-trial conf. on 4/27/98 jury trial 5/3/99 est. 12 days duration discovery cutoff 2/1/99 designate experts by 2/8/99 expert discovery cutoff 3/16/99 [A fax letter to give you an idea of the tone of some of the exchanges] From Kirke M Hasson (S3 lawyer) to Tharon Lanier (nVidia lawyer) on May 22, 1998: "In light of the harm being inflicted on S3 by nVidia's infringement, it is understandable why, for commercial reasons, nVidia would prefer to delay the preliminary injunction hearing for several months to September 22, as nVidia proposes." ... "nVidia certainly does not need to conduct discovery from S3 in order to know whether its own devices infringe a published patent." ... "so long as nVidia agrees that S3 may depose soon a person familiar with nVidia's analysis (or lack thereof) of the '279 patent" [note: parentheses are theirs] [My understanding of nVidia's defense] -S3 is in financial trouble and is suing for purely economic reasons. -S3 has not suffered economic damage because they did not develop the patented devices, but only bought them. -The patents are too vague: it doesn't explain the internal structure of the elements ("VGA controller", "RAM", "DAC"). This is the "indefiniteness defense". -They're not infringing on the patent. -The patents are invalid. -nVidia needs to do discovery to uncover S3's motives. -an injunction would be terminally damaging to nVidia because Riva 128 is their only product (at the time) [My understanding of S3's side] -Who cares why we're suing, the patents are ours. -"VGA controller", etc. are well known elements understood by qualified people (Texas Instruments case referred to). -nVidia doesn't need to conduct discovery of S3 to figure out if they are infringing on the published patent. -S3 is being damaged by nVidia, who is a competitor. nVidia claims they are a big threat to S3 in public statements. S3 should get an injunction against sale of Riva 128. [The judge says] -Most of the "VGA controller" is understood by qualified individuals, except maybe the DAC. nVidia's "indefiniteness defense" may not hold up in the long run, but they've raised substantial doubt. -"at this early stage nVidia presents a substantial question with respect to the definiteness of Claim 1". [I'm not sure if this means nVidia says the patent is too vague or that they haven't infringed on it.] -In order to grant an injunction it has to be in the public good. S3 hasn't shown this. -so it'll have to go to trial. [My questions] -Why was Exhibit 4 a Voodoo2 tech sheet from www.3dfx.com?? I couldn't figure out who had entered it or what they meant to draw from it. -Is S3's motive really important? If the patent is good and nVidia's infringing on it, who cares if S3 is in trouble?

To: Michael G. Potter who wrote (8392)	10/16/1998 8:32:00 PM
From: Simon Cardinale	Read Replies (4) \| Respond to of 16960

3Dfx vs. nVidia skinny San Francisco Branch of the U.S. District Court of Northern California Case #98-3627 (Judge Marilyn Patel) [From the Docket - which is all I got to see from the Oakland branch] Demand is listed as $0,000] Filed 09/21/98 Same nVidia lawyers as the S3 case (Tharan G. Lanier) 09/21/98 - Complaint by 3Dfx against nVidia 09/23/98 - First amended complaint by 3Dfx 10/14/98 - "ANSWER to first amended complaint and COUNTERCLAIM by defendent against Plaintiff" The clerk said this looked like nVidia is countersuing. The docket reports nVidia as a counter-claimant and 3Dfx as a counter-defendant in addition to the initial plaintiff/defendent stuff. I'll try and get over to the SF courthouse on Tuesday, though no guarantees. Truthfully I got most of the good information on the S3 vs nVidia thing from the Judge's denial of the preliminary injunction. Since 3Dfx doesn't appear to have asked for one I may not get as much info. Are there any things I ought to be looking for in the 3Dfx suit that I missed in the S3 one? Any important details I don't know are important? These (S3 and 3Dfx) are the only suits against nVidia that have ever been filed in the District Court of Northern California (and maybe any District Court, I don't know.) The clerk said other suits (like the SGI suit) may be filed at the county level. A buddy of mine says the Santa Clara county patent court is pretty sharp, so maybe it's there. I don't know. As for the Creative Labs Diamond thing... I don't know how much time I can give to this! Plus I have no idea where it was filed. If you want to do some of the initial work you can call the clerk(s) yourself. You can get numbers for the northern california district court at: ndcal.stanford.edu Simon

To: Michael G. Potter who wrote (8392)	10/16/1998 11:58:00 PM
From: Michael G. Potter	Respond to of 16960

If you're looking for an article that discusses the "system integrator" market mentioned in the conference call, check out: forbes.com Forbes has long been my favourite business magazine, and the above is an interesting article. Michael

To: Michael G. Potter who wrote (8392)	10/17/1998 3:13:00 PM
From: c-horse	Read Replies (1) \| Respond to of 16960

Finance questions: I'm going to call 3dfx next week and ask a bunch of finance-type questions. Anything else the 3dfx-group here at SI would like me to ask? I would love to hear details about the way they record sales. I believe TDFX records sales when they make them to the board maker (or mboard maker if/when it comes to that). I remember that IOM used to only record sales when the board maker sold the board - and treated all of the stuff at the board maker as being finished goods inventory "in the pipeline". I wonder about the merits of each (something I'm sure we can discuss here!) - it seems like they have an impact on things like the recent diamond fiasco. For TDFX MGMT, I wonder how they plan to do the accounting moving forward (not looking for a defense of previous accounting methods, but insight into what and why going forward). Thanks to ALL the great people who really contribute - not only do I believe it will be good financially, but it fosters a sense of community. OT : got my new machine, trying to get all situated. For due diligence, am I viable with a 56K modem, NT5server beta 2 (directX6), and a 8m riva 128 (came with the box, sorry - I'll be part of the solution next month). C-horse