RAMBUS HEARING UPDATE
04/27/04
A brief update on the hearing today inRichmond, Virginia.
The start of the trial has been moved to September 27th.
Judge Payne has every intention of allowing the piercing of Rambus’ attorney client privilege beyond the parameters of the first trial. An order is expected late this week or early next week. The trial is delayed because Judge Payne assumes Rambus will seek relief from the federal circuit (CAFC).
The judge commented that Rambus would appeal the decision though he is skeptical that they would actually prevail.
The issue of Infineon’s spoliation (document destruction) is also yet to be ruled upon. Rambus presented numerous documents that third parties produced in the FTC trial that Infineon should have produced in the first trial. Infineon still has not produced these documents and it greatly suggests Infineon has destroyed evidence material to Rambus’ defense.
There also was no ruling or argument on the 17200 issue though by all appearances that will continue to be a part of the case. Oral argument on the 17200 issue occurred previously.
Judge Payne commented that he would carry the issue of document destruction out to its full conclusion this time. He actually commented that he would have continued the trial the first time had he been aware of the breath of spoliation
Judge Payne also instructed Infineon to request documents and testimony from the FTC. Infineon was instructed to tell the FTC that Judge Payne wants testimony and depositions of Rambus employees and former employees for his proceedings. Rambus’ request for similar witness testimony from the FTC was met with “just depose them again”. This issue has to do Infineon not being a party to the FTC proceedings.
Infineon wants as remedy an anti-suit injunction and a remedy for spoliation.
It remains to be seen whether Judge Payne is as concerned with missing documents from the first trial from Infineon as he is with Rambus’. From his performance we are also rather convinced that though he may request evidence from the FTC, he has little interest in considering the findings of facts and conclusion of law that resulted from that trial. Sadly, that observation is simply based on the fact that the former could damage Rambus whereas the latter would favor Rambus. In our view, the reality of Rambus as litigant before Judge Payne is about that stark.
We can only await an order to be issued from this one-sided-ruling judge; but based on the proceedings we anticipate the following:
Judge Payne will pierce additional Rambus attorney/client documents.
Judge Payne will allow Infineon to introduce additional evidence or testimony from the FTC proceedings.
Judge Payne will ignore the decision of the FTC Administrative Law Judge resulting from that very testimony.
Rambus will appeal the attorney/client decision and most likely other elements of the pre-trial orders related to the introduction of California unfair competition (17200) statute in the remand.
Orders detrimental to Infineon will be minimal if any.
The reason we can offer such a one-sided view of what we “expect” the Judge will do in this case, is because his performance up to now has been one-sided to many observers. From rulings on evidence to be allowed or disallowed, numerous motions, opinions and orders to date, and the Judge’s general courtroom statements, Judge Payne has the appearance of simply disfavoring Rambus as a litigant in his courtroom. How such a one-sided performance will be viewed in the anticipated appeal to the CAFC remains to be seen.
We believe the case in Virginia is proceeding as more of a repeat of the first trial’s fraud allegations and a rehash of the FTC case than it is an infringement trial. The Judge’s seeming disdain for Rambus’ document retention policy and for Rambus’ witness performance in the first trial has been commented on in more than one occasion.
We view receiving a positive result from the Richmond courtroom, without intervention from the CAFC as unlikely. In our view, the Judge’s rulings thus far have the effect of placing Rambus once again in the role of defendant more so than plaintiff of an infringement suit. In addition numerous evidentiary motions have the effect of tipping the evidence of the “facts available” in Infineon’s favor.
We do believe however that Rambus is correct in the view that the limited remand has strayed far from the course intended by the appellate court. Judge Payne seems bent on forcing the appellate court to rule on the path of these proceedings otherwise Rambus can expect nothing but one sided trouble from his courtroom.
While we are rather dismayed by the proceedings in Richmond, we believe that Rambus ultimately will prevail. Unfortunately the specter of dealing with appellate issues from Virginia seems to be the path to expect. Whether those appeals are successful prior to the September start of the trial is the main question in our minds. If the case proceeds as the judge intends, expect another long road to justice from this particular venue.
We believe the situation is fairly simple in the big picture. Rambus has already been cleared of four findings of fraud from Payne’s court. Every claim construction decision Judge Payne made in the first trail was against Rambus. Every claim construction error he made was reversed in Rambus’ favor. Rambus has already been tried for “unfair competition” under a lower burden of proof standard than fraud at the FTC. In that trial the ethereal words of “good faith” and “unfair” were put to bed and dismissed by the FTC’s Administrative Law Judge (ALJ). Despite now being couched under a state law statute, the issues before the FTC and related to California 17200 are actually the same subject matter.
Although the favorable ALJ initial decision is being appealed back to the full commission, the facts of the initial decision will allow Rambus to prevail in the long run in our view. What is more disturbing is what we would have expected Judge Payne to do if the ALJ decision was actually adverse to Rambus. He would likely give it as much weight as the law would allow. In our view, that simple dichotomy raises serious questions about the overall fairness of the judge. We only hope that sentiment is shared by the appellate court in reviewing the serpentine course of this case remanded for infringement consistent with the new claim definitions.
Ironically, we view the prospects in the California court, where these vague California 17200 statutes are properly tried, as much more favorable for a near term positive resolution. We believe the Judge there may actually rule summary judgment of infringement in Rambus’ favor.
We have had numerous questions about our 2007 estimate of Rambus. Obviously a significant portion of the estimate depends on favorable resolution of litigation. We do expect Rambus to ultimately prevail in its litigation. To that extent we stand by the analysis presented with the litigation caveats present. To the extent that a favorable litigation result would be delayed, obviously the timing of receiving revenue associated with industry payments of DRAM royalties would be similarly impacted.
Hager Technology Research/CurrinResearch Update
Today's In Play (28-Apr-04)
10:13 RMBS Rambus downgrade details (20.96 -0.15)
AmTech downgrades RMBS to Hold from Buy based on the following factors: 1) continued delays in the Infineon infringement trial in Virginia, which they think is likely go against RMBS and stretch out the time frame for RMBS getting paid to beyond 2006; 2) DRAM "holdouts" (IFX, MU, Hynix) have no incentive to settle, with legal costs largely sunk and the possibility that damages could be limited to royalties; 3) the DOJ investigation has no direct linkage to RMBS; and most importantly 4) there is a big question-mark as to whether RMBS collects royalties on DDR2, the emerging new standard. Target is $19.
Andamento altalenante per l’azionario nell’ultima settimana, con l’attenzione già proiettata alle riunioni delle banche centrali dei prossimi giorni.
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