For the second week in a row, investors were caught up in the pretrial activity between
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Thursday, as details of some recently admitted Infineon documents sparked speculation that Rambus' position in the patent infringement case is stronger than previously thought.
In addition, a research report indicating that the two companies might settle instead of going to trial on April 10 provided further fodder for Rambus shares, which gained 33% on the day. The move comes after a sharp decrease in the stock last week as a pretrial ruling seemed to limit Rambus' chance for success.
"At one time Rambus moved up and down depending on which way
breathed, and now it's which way the court battles go," said Gary Harmon, Rambus' chief financial officer. Indeed, Rambus' stock has a history of rising and falling 20% in a day on the mere hint of news. Harmon said there's been no change in plans to go to trial. Infineon wasn't available for comment.
Rambus is a semiconductor design company that's suing German chip-fabricator Infineon for royalties on two types of memory chips that Infineon makes. In addition to the trial planned for U.S. District Court in Virginia, Rambus is also suing Infineon in Germany and France and has cases against
under way in the U.S. and Europe.
looked at the status of those cases and how the uncertainty around them could affect the stock.
The uncertainty's affect on the stock is obvious in the Virginia case, where last week the tide swung against Rambus, and this week has swung for it -- for now. Rambus lost more than 50% in two days last week. Thursday it gained $5.67 to close at $22.96, still below the $35.35 it traded at prior to the judge's seemingly anti-Rambus ruling last Thursday.
On March 15, the judge in that case defined a handful of terms that are used in the four patents at the center of Rambus' case. The judge's definition of these terms was designed to provide guidelines for the jurors, who may not have the technical expertise needed to understand terms regarding the construction of dynamic access random memory included in Rambus' patents. Rambus produces its own proprietary DRAM called Rambus DRAM, which isn't at issue in the lawsuits. Infineon makes synchronous DRAM and double-data rate DRAM, and Rambus believes those are based on its patents. The judge's definitions of some of these technical terms seemed to limit Rambus' ability to prove patent infringement.
Then on the morning of March 16 the judge met with Infineon and Rambus lawyers and heard news that some Infineon documents had only recently been discovered and provided to Rambus. He agreed to Rambus' request for a delay and set the trial's start at April 10 instead of March 20. According to the transcript of that session entered into the public docket on March 21, Rambus asserted that the Infineon documents specifically pertain to Infineon's plan to use Rambus technology to produce a mass-market DRAM.
In a note to clients Thursday morning,
Morgan Stanley Dean Witter
analyst Mark Edelstone wrote, "Based on the new evidence, we believe that the potential for Infineon to want to settle out of court has increased significantly." And Edelstone went on to say that this turn of events was "quite positive" for Rambus given the collapse in the stock last week surrounding the judge's decision about the patents. (Morgan Stanley underwrote Rambus'
initial public offering.)
Now it's just a matter of waiting for the next turn in the trial of Rambus and Infineon.