Nuke John

Rambus: Legal Battles Continue

The AT Case is now scheduled to start on Jan 11, 2010 and it is expected to last 7-8 weeks. Of course some people expect settlements before the evidence is allowed to come out in open court. I don't think the Jan trial will be delayed again, and I think the stock price will be above $24 by February, so your Feb Calls should be okay.


On Aug 24 10:48 AM GypsyDRB wrote:

> Nuke John can you comment on the mean length these trails run? I
> bought 20 contracts in 2 separate Feb2010 calls w/ a break even of
> approx. $24.
>
> As stated above, the two sides could settle, but before I buy additional
> calls I was wondering if you might provide any insight into the length
> of these types of trials.
>
> Thanks in advance.
>
> Gypsy

Rambus: Legal Battles Continue

Now Rambus will drift with the market, with a slight negative bias for a few weeks as the traders who were expecting a September trial start date get out. I would not expect it to go lower than 13-14 (barring a market crash), but I could see it get down into the 13 range.

In my opinion, it was a travesty to delay a trial that everyone was ready for (except one ill lawyer for Samsung). But, this is the way it seems to go with Rambus. Now, the ITC trial against Nvidia is next up. Unfortunately, the Judge that Rambus has in the ITC Case is a novice patent judge and he has ruled aginst Tessera three time in the past year (two of those times he was overturned by the ITC Commission and I think he will be overturned a third time.

I expect the EU and Rambus to finalize their agreement sometime between Mid Sept. and Mid Oct.

While that will be good for Rambus, it doesn't guarantee that anyone starts paying those rates right away. Why should they (when no one else is paying)? There was an opt out clause after one year, which, in my belief, was something offered by Rambus to assure the parties that they had valid IP that lasted long after the Farmwald /Horowitz patents expire in April 2010. Of course, at the time Rambus agreed to tentative terms with the EU, they were expecting an August ITC Trial (which was moved to October). This tentative agreement was also negotiated before the ITC Staff took the position that the Ware patents are invalid. Things have changed a great deal for Rambus over the past 3 months when the EU tentative agreement was announced. One of the things that just changed two days ago was a 3 month delay in the Price Fixing AT Case in San Francisco.

Unfortunately, I don't believe that any parties will just automatically start paying Rambus when the EU-Rambus agreement is finalized. Why should they? They can just sit back and wait on the ITC and the AT Case and see what happens. In retrospect, it is probably a good thing that Rambus issued a new convertible note offering in June....because before this mess is over they're going to need that money.

Rambus: A New Day for High-End Memory

The author didn't call the DRAM manufacturers a cartel....but that is exactly waht they are (or were). Read the link below for more details.

www.bloomberg.com/news...

When the evidence is presented in the Price Fixing Antitrust case in San Francisco, you will see the truth.

Rambus has made a lot of stupid decisions, but they weren't crooked. They just want to get paid for their IP, which revolutionized an industry.


On Aug 25 12:50 AM bolshaya_kartina wrote:

> Got to put it to you Rambus-ees. Memory cartel...that's such a cute
> way to describe an industry that's so fiercely competitive that they've
> been in a perpetual arms race that's nearly bankrupted every member
> save one. They did such a good job of manipulating prices--in the
> alleged Rambus-crushing timeframe, they were all losing money--which
> is more typical than not, actually. I suppose that was part of the
> strategy...still must be. They want Rambus to lose SO BAD that they'll
> drive themselves to extinction. Rambus can do no evil. Rambus played
> fair all along. Rambus is not a patent troll, for there's no such
> thing. Go Rambus!

Rambus Litigation Update: The Price Fixing Case Goes Forward

Rambus is at 17 because Judge Robinson in Delaware threw a monkey wrench into the infringement triakl in CA and delayed the AT case (until now). Many investors vhave becomne so accustomed to Rambus getting screwed by delays in the court, they have come to expect that every case will be delayed. Well, it looks loike all that changed last week and the Price Fixing AT case will finally start next month.

Rambus should only settle if it is settlement on their terms. The AT case has "joint and several" damages, so if one party settles (say for example Hynix settles), then the other parties (Samsung and Micron) would still be liable for the 4.832 Billion dollars which would be automatically trebled because this is a Cartwright Act case. Rambus has about 500 million in the bank (and $400 million in a bond and collateral from Hynix). They have ~140 Million in debt coming due in Feb 09.

Current revenues are low because they are only being paid by a few Japanese companies (Sony, Toshiba, Panasonic, NEC, etc.) along with some small payments by AMD, TI, and a few others. This will all change soon and they should be getting well in excess of $5/share after tax when the DRAM manufacturers and controller manufacturers are all paying.



On Aug 16 09:36 PM mutual wrote:

> interesting post.
>
> why is rmbs at $17 after the dozen good things that have happened
> in the past 3 years - when it was $36 in 1/06 and $11 in 2/00?<br/>
>
> after this long slog, why should rmbs settle when it is only a few
> months from a $13 billion jury verdict in a slam dunk - as the defendants
> have been convicted and jailed for various related felonies?
>
> aside from the $120/share rmbs will receive from the AT trial, what
> are rmbs' other assets and revenues worth?

Rambus: Legal Battles Continue

Sorry, just saw your comment. No.....the Korean government will likely be a party to the settlement discussions (in some form or fashion). If there is no settlement, then Rambus will just win in court and if they want to do business in the US....they will have to pay up. What the Koreans want is to drive a few more smallier DRAM companies out of business so they control over 60% of the world DRAM market. Paying Rambus a measley 2% will still allow them to make a fortune...they will just pass the royalty on down the value chain.

On Jul 28 04:11 PM Robert0713 wrote:

> That's chance of blowback , and Korea did the same thing. In sum,
> is Rambus in danger of winning, then having said governments pull
> the rug out from under?

Rambus: Legal Battles Continue

I have followed the Rambus saga for 10 years and thus far there is a track record for writs at the CA Appeals Court. They ahve all been denied. These last two are on very weak arguments to begin with. The CA Appeals Court knows this is just a stall tactic. Their logic on writs is almost always to tell the party asking for the writ that the issue can still be appealed after the case is over.

Tom Lavelle, General Counsel for Rambus confirmed today that Judge Kramer was intent on keeping the trial on track. He also confirmed that the damages are 4.3 Billion subject to trebling (which is automatic).

We also learned on the Rambus CC that the ITC trial has been pushed back to October 13th (from August 31st).


On Jul 21 09:44 AM Robert0713 wrote:

> >> I think the cartel is out of delay tactics once the last two writs
> are denied by the CA appellate court
>
> You seem certain. Why?

Rambus: Legal Battles Continue

As of right now, the ITC trial is scheduled to start on August 31st and the antitrust price fixing case against the cartel is scheduled to start in San Francisco on Sept. 28th. I think the cartel is out of delay tactics once the last two writs are denied by the CA appellate court, which I expect within the next few weeks (could be any day).

NJ


On Jul 17 08:30 AM JCC wrote:

> Nuke John - I would appreciate it if you would provide us with commentary
> on the next steps for Rambus.
>
> Are they still on tract to start the case against Nvidia, Hewlett
> Packard and about ten others still scheduled to start in late August
> and the antitrust case against Samsung, Hynix and Micron (seekingalpha.com/symbo...)
> is scheduled to start in late September.
>
> These court actions can be a treacherous situation, and you knowledge
> of the subject is helpful.

Rambus: Legal Battles Continue

Nvidia doesn't have any court victories over Rambus. These articles about the USPTO rejections border on being irresponsible by the news media. They simply don't understand the process the USPTO goes through on Inter Partes and Ex Parte reexaminations.

The initial officve action by the USPTO is always to initially state that there is a substantial new question of patentability, then they start a 2-5 year process of evaluating the claims at the USPTO. But, their first step is always to reject all the claims. This is very misleading when it is reported in the Press, because the Patent holder is typically able to defend the majority of the claims and ultimately the patent winds up stronger. This has been the case thus far with Rambus patents.

The key thing to note is that the patent is deemed valid throughout the whole reexam process, and the patent can't be invalidated until the entire process is completed and that includes an appeal at the CAFC. The total length of time for this is 5-8 years, and I am not aware of any patent that has ever been rejected after going through this entire process (if the patentee appealed to the CAFC). Most courts are not willing to stay their cases during this process.

271patent.blogspot.com...

The CAFC has the final say in Patent cases....and in the case of Rambus v. Nvidia et. al at the USPTO, the CAFC will eventually get the case (if they don't settle) long before the USPTO's Board of Patent Appeals & Interferences even gets the case.

Just a side not, in recent reexams by the USPTO, Rambus has had over 58% of their claims eventually validated (and they are still challenging the others). All of those claims were initially rejected in the examiner's first office action.

The recent press release by Nvidia was not really news...it is standard procedure at the USPTO.

NJ



On Jul 16 03:42 PM User 428547 wrote:

> Hi Huke John,
> what is the significance of the Nvidia's court victories?
> www.marketwatch.com/st...
>
> Appreciate your analysis. Commments from others also welcome
> Frank

TiVo: Waiting for Echostar Saga to Settle

Most of the sales in the past two months were automatic sales (which occur when the stock rises to certain price) or were options exercises and sales. The two largest holders are Tom Rogers CEO and Michael Ramsey, Director. They each hold almost a million shares. Ramsey hasn't sold any since 2007 and Rogers only sold 38,000 shares.

In any event, those sales took place before Judge Folsom decided to forge ahead with the sanctions hearing, which is very good news for TiVo and bad news for Dish.

NJ

On Jul 15 02:55 PM GC39 wrote:

> Management of Tivo doesn`t seem to have the same confidence as you
> that the game has changed in favour of Tivo. Insider sold nearly
> 3 million shares, or nearly one third of their holdings, according
> to Yahoo finance, in the last two months.
>
> What do you think is the reason fo this heavy insider selling.<br/>
>
> GC39

Rambus: Legal Battles Continue

Rambus attorneys want to introduce all the evidence of the price fixing scheme to kill RDRAM, and a lot of that evidence occurred before May of 2000. There is a 4 year statute of limitations, and Rambus filed this case in May of 2004, so the evidence from before May of 2000 would normally be excluded. However, while this was being argued, Judge Kramer mentioned on several occasions that he could only rule on the matters before him. The Rambus attorney argued that Rambus has a fraudulent concealment claim, and they want an Estoppel as to the Statute of Limitations (ie, the statute of limitations wouldn't apply if the cartel fraudulently concealed their price fixing activities). Judge Kramer issued his order "without prejudice" and recognizes that Rambus can file a motion for estoppel which would allow the evidence from before May of 2000 in the case, since this was part of an ongoing crime. In a previous hearing, Judge Kramer even used an analogy about a train coming down the track when he talked about the evidence, so IMHO, I think the pre 2000 evidence will be allowed in.

But even if the pre May 2000 isn't allowed in, Rambus still has tons of evidence after May of 2000 that will show the jury what the cartel did.

NJ




On Jul 07 07:17 PM FloridaBoy2 wrote:

> The judge will allow RMBS to submit a motion to allow evidence before
> 2000. This is advantageous to RMBS.
>
> Elpida is getting a big loan from the Japanese government. I don't
> think they have a lot of fight left in them.
> dealbook.blogs.nytimes.../
>
>
> Hynix is not doing well financially. Here is a link to a statement
> by Hynix about the bond.
>
> hsma.hynix.com/hsma/pr...
>

Rambus: Legal Battles Continue

Hynix did post the bond. This was on the docket in case # 00-20905 in Northern District of CA a little over a week ago. They were forced to do this if they wanted to pursue the appeal at the CAFC.

IMHO, Hynix, Samsung and Elpida all want revenge on Micron for turning them in to the US DOJ in exchange for amnesty. It is highly possible that Micron will be the last man standing in the AT case.


On Jul 07 09:51 AM JGKopp wrote:

> Well said Nuke John.
>
> You left out details of Hynix to date. They were required to post
> a bond and give Rambus a lien of said manufacturing plants. I think
> the deadline for posting these items has already passed. How did
> that go down?
>
>
> When does the media get a hold of this story?
>
> John

The Rambus Convertible Notes Offering

Your numbers aren't too different from mine except for controllers, past damages and dilution. Let's assume that the controller market which Sharon said was in the "hundreds of billions" is only 100 Billion and Rambus only licenses 40% of that market in the first year (I think >40% will sign because Rambus will just force those who fight to ultimately pay more). That's 40 billion X 2.65% or over 1 Billion in controller royalties alone (note, the rate drops to 2.0% after April 2010 so we can use a weighted average of ~2.5% for the first year). So, we have 1 billion in DRAM controller revenue, 120 million existing revenue, 340 in DRAM royalty revenue, and now we have to look at past damages. For the DRAM companies, 4 billion is a very conservative estimate for past damages (and this doesn't include anthing for the AT damages) . For the controller companies, we can use a very conservative estimate of 4 Billion in past damages (Intel and AMD are covered by existing agreements). That's 8 billion spread out over five years (I assume none of those companies will be able to pay past damages up front....so they will want payment terms). Let's say Rambus forgives about 40% of past damages, so the total past damages are only 5 Billion. Spread that out over 5 years and you get 1 + 1 + .34 + .12 = 2.46 billion per year in royalties les 200 million in opex = 2.26 billion. I think there will be about 130 million shares when fully diluted. That's 17.4 dollars/share pre tax or about 10.44 post tax (but remember Rambus has a lot of tax credits befor ethey start paying full corporate taxes).

Also, please note that there are at least two other technologies that I am aware of that Rambus has not even started trying to collect on while they clean up this DRAM mess. We'll get into those at a later date.

Also, in 2-3 years when DDR4 is being sold, I expect Rambus to be getting at least 4.25% on DDR4 and I expect the market will be at least 40 Billion
(prices will almost double after the shakeout and they need to for the DRAM manufacturers to make money). So in about 3 years time Rambus will be getting about 1.6 Billion in DRAM royalties instead of 340 million. I think they will be getting at least 3% (maybe 4.25%) on DDR4 controllers, and I am not sure that Intel's current license covers some of the technologies that will be in DDR4. AMD's license expires in Jan 2011, and they will have to pay standard rates going forward.

ARLTR,

NJ


On Jun 24 05:13 AM covarient wrote:

> Nuke John, I just do not understand where you get $10 eps in 6-12
> months. Sounds WILDLY optimistic to me. Let's do some back of the
> envelope realistic arithmetic. The dram market is about $25 billion
> and let's assume the cartel has about 90% of that and further that
> it is not the old dram which is free of royalty. We are looking at
> an approximate $23 B subject to EU rates of 1.5% which translates
> into about $340 million. Add to that about $120 million in revenues
> that RMBS already has. Then add conservatively another $460 million
> for controller and other revenue. This adds up to about $920 million.
> At existing opex the company runs at about $180 million where about
> $50 million is for legal expenses. Even with settlement or legal
> closure this legl expense will not disappear but may average about
> $12 million per year since Rambus is an IP company and need sto protect
> its rights. Rambus will also increase quarterly expenses by new hires,
> etc. So we can assume that opex should remain in the $200 million
> per year level because the company will spend money on other things.
> We then have about $720 million which is subject to a 40% tax rate.
> Net is about $430 million. Let's further assume with all the dilution
> that there are 150 million shares outstanding. This then equates
> to about $3.00 eps.
>
> Of course, this above calculation does not assume any damages. Let's
> suppose that in the interests of quick settlement, Rambus agrees
> to a 5 year "payback" and applies the 4.25% US market WW. This would
> mean about $1 billion on an average $25 billion dram market. Applying
> a similar rate to controllers, this translates to another billion.
> Revenues then are about $2 B per year. Opex will probably reach say,
> $400 million. That leaves $1.6 billion with net at about $960 million.
> Outstanding shares are say at 150 million so eps are about $6.40.
> Even if opex stays at $200, eps are at about $7.20. Realistically,
> I think eps could reach $5 or even $6.
> Applying a conservative pe of 20 you still get a triple digit pps
> at or over $100. But eps of $10 is only possible if Rambus goes all
> the way and no settlements. I see settlements as the only reasonable
> alternative for the cartel unless the fix is in or they can delay.
> Funny things happen, The STSI case is a perfect example. It was thought
> to be a slam dunk. They had the best lawyers and against the tobacco
> industry--RAI-- in a jury trial. Guess what, STSI lost because the
> jury found the patents invalid on prior art over the significant
> presumption that the USPO got it right!!! Sammie and the rest may
> believe in miracles too!

Is Rambus the Next 27 Bagger?

The DDR2 Patent trial in Northern District of California has been stayed pendiung the outcome of the CAFC appeal of the DE ruling by Judge Robinson. However, the attempts to stay the AT case inn CA state court and to stay the ITC case (against Nvidia, HP, et al.) have both failed. Judge Kramer has ruled that DE spoliation ruling has no effect on his case and he is proceeding. Likewise ALJ Essex at the ITC has ruled the same.

One thing you may wish to note is that Judge Robinson's remedy goes against established case law, and, IMHO, will be overturned at the CAFC. She ruled the patents were unenforceable. She tried to stretch a spoliation ruling into an inequitable conduct ruling (which is really fraud on the patent office). Fortunately for Rambus investors, inequitable conduct has a much higher burden of proof. The DRAM cartel wasn't even able to prove spoliation in a fair court (HJW's court), so there is no way the CAFC will allow Robinson to stretch a "questionable" spoliation ruling into a "fraud on the patent office" inequitable conduct ruling. Also, the Aptix ruling (see below) has already stated that unclean hands are not justification to make the patents unenforceable.


www.ll.georgetown.edu/...

excerpt.....

The district court, however, abused its discretion in rendering the patent unenforceable for unclean hands. While unclean hands based on litigation misconduct may serve as a basis for sanctioning the litigant engaging in such conduct, it does not infect, or even affect, the original grant of the property right. Unclean hands based on litigation misconduct differs from inequitable conduct in the procurement of the patent right because the latter taints the property right itself and provides a basis for rendering the patent unenforceable by any party. The district court abused its discretion by extending the sanction for litigation misconduct beyond Aptix - the party who engaged in unclean hands - and rendering the property right unenforceable.




On Jun 23 09:32 AM vmax wrote:

> Also, I read that Firsthand liquidated all of their Rambus holding
> because of the verdict in January that Rambus could not enforce patents
> on Micron. That verdict resulted in a trial stay for patent infringement
> in the California court against the other dram manufacturers which
> was scheduled for February 17.
>
> Anyone know what is going on with these 2 cases?

Is Rambus the Next 27 Bagger?

On Jun 17 04:21 AM fun_guy_ir wrote:

> NJ,
>
> Clearly you are long on RMBS, but if you trully believe what you
> write ... what percentage of your personal $$ has been invested into
> RMBS?

About 25%...it is my largest holding by far....with TiVo second at about 10% and TSRA third at about 8%.

Tessera's Rise Has Just Begun

I think the minor pullback we saw in TSRA was, in fact, due to the selling of stock by insiders. All of the selling except for Bruce McWilliams was rule 10b5-1 selling (preplanned selling at certain price targets) and in those cases the executives only sold a relatively small % of their total holdings. McWilliams, the former CEO and now COB, is looking to start a new technology company and one can only speculate that he wanted his funds to pursue another opportunity. Tessera will resume it's climb in the near future as new licensees start signing. I still believe it is grossly undervalued at $25-26 a share, but this minor pullback from $27 offers an excellent opportunity to add to your position.

NJ


On Jun 15 06:26 AM nautilus508 wrote:

> oops.- checking j3sg.com it appears sales took place over 5 days,
> not all on June 12 alone - which would have crashed the stock.