The never ending Rambus (RMBS) saga might one day be coming to an end. In the past several months, Rambus has won numerous battles, but they have yet to win the war. For example, the FTC has dropped their case against Rambus after Rambus won the appeal at the Court of Appeals of the District of Columbia . The European Union and Rambus have recently come to an agreement on reasonable royalty rates and the 30 day comment period granted by the EU ends on July 12th.
But the biggest news is that the Rambus case at the ITC (vs. Nvidia, Hewlett Packard and about ten others) is scheduled to start in late August and the antitrust case against Samsung, Hynix and Micron (MU) is scheduled to start in late September.
In recent days, attempts to delay these cases by Rambus opponents have failed and the cases are proceeding, this time with Rambus on the offensive.
Major news went unnoticed by the business press in late June in the ITC case when the ITC Administrative Law Judge Theodore Essex issued his claims construction ruling. The ruling was virtually 100% favorable to Rambus. In patent cases, the claims construction ruling (also sometimes referred to as the “Markman” ruling) interprets how the claims are construed or interpreted. The expert witnesses have to testify under the constraints of how the claim terms have been defined by the court. In patent cases, when you win the claims construction battle, you typically win the infringement portion of the case. The ITC case (with some patents that last past 2020) is progressing much faster than many thought possible.
Judge Essex has avoided several attempts to delay the trial. The trial start date did slip two weeks to August 31, 2009, but the rest of the schedule has remained unchanged. There is a court ordered mandatory settlement conference (their third one) which must be completed by July 13th. This coincidentally occurs just after the 30 day comment period from the European Union.
The case that really has the DRAM manufacturers worried is the Rambus antitrust case in CA State Court. In this case, Rambus has brought price fixing charges against Samsung, Hynix, and Micron and the damages have been calculated by Rambus’ expert witness at 4.382 billion dollars. This amount is subject to automatic trebling.
That makes this the biggest antitrust case in US history (as far as I am aware of). Hynix signed a plea agreement in April 2005 admitting that they fixed prices and Samsung signed a similar plea agreement in October 2005. Both companies had several executives go to jail. Micron received amnesty from the US Department of Justice because they exposed the price fixing conspiracy, but their own emails show the depth of their involvement. This story has been covered by major news media in the past and just over a year ago, Bloomberg did an expose on the DRAM Price Fixing Cartel which has intimate details of what transpired.
The damages in this antitrust price fixing case are huge. Rambus lost billions of dollars in royalties when the DRAM manufacturer’s actions convinced Intel (INTC) to shy away from RDRAM as the standard memory for future Intel PCs. Recently revealed court documents show that Rambus alleges the damages to be 4.382 billion dollars, which are then subject to automatic trebling because this is a Cartwright Act case.
Therefore, the total damages facing the DRAM manufacturers are over 13 billion dollars. With Rambus having approximately 104 million shares outstanding, that is over $120/share in past damages alone, and it should be noted that the agreement with the EU did not limit the recovery of any past damages.
There was late breaking news out of Judge Kramer’s court yesterday when court observers learned that three writs by Samsung, Hynix, and Micron were denied by the CA appellate court. These three writs were related to the favorable Delaware spoliation ruling Micron won back in January. By denying these writs, the California Appeals Court has refused to move the Septemebr start date in the trial. There are two more writs filed, one regarding "no injury proven" and one regarding "foreign commerce" that have to be ruled on by the Appellate court. I expect favorable rulings in the very near future.
The Delaware ruling by Judge Sue Robinson that Rambus lost is now under appeal and Rambus filed their blue brief in that case on July 2nd at the Court of Appeals of the Federal Circuit. Rambus attacked several aspects of the Delaware ruling, including that the case should have been transferred back to Northern District of California and never been heard in Delaware to begin with.
This would be a clean path for the Federal Circuit to rule, because if they agree with Rambus, then it would be as if Judge Robinson’s ruling never existed.
Yesterday in Judge Kramer’s court in San Francisco, Judge Kramer once again refused to move the start date of the trial scheduled for September 28th. He has refused to allow Rambus to pursue damages prior to May of 2000 due to the statute of limitations, but Rambus current damages estimate of 4.382 billion dollars (subject to trebling) didn’t even start until year 2001, so this ruling has no effect on the damages Rambus is pursuing. Evidence before May of 2000 is currently excluded, but Judge Kramer has invited Rambus to submit an estoppel motion on fraudulent concealment that would open the door to evidence from before May 2000.
Rambus has been down over the past two weeks primarily due to delta hedging of their recent convertible bond offering. But the overall market forces and the uncertainty of the September start date in California were also weighing heavily on the stock.
With yesterday’s news, it appears that Judge Kramer will not consider any delays in the September start date and the California Appeals court has denied three writs that could have delayed the case (and they did this in record time).
In summary, the ITC case against Nvidia, Hewlett Packard and others is starting next month at the ITC and the AT case is starting the month after that in California. The EU comment period is over on July 12th, and Rambus has agreed to standard royalty rates on DRAM and Controllers. Those rates, when combined with past damages, make Rambus an attractive buying opportunity at prices below $20/share. When settlements start, which could be at any time, Rambus has the potential to become a triple digit stock in a matter of weeks.
Disclosure: Long RMBS, Short MU