Pigs Fly: Rambus V. Micron Goes to Trial

A saga stretching back to the spring of 2004 is gearing up for the big finale.

The antitrust lawsuit that Rambus (Nasdaq: RMBS  ) filed against Micron Technology (Nasdaq: MU  ) seven years ago has finally moved into a jury trial, with jury selection happening last week and the opening statements happening as we speak. Don't expect heavy media coverage -- one forlorn request to "photograph, record, or broadcast" the proceedings was summarily denied by Judge James McBride, so this drama will largely play out behind closed doors.

According to presumably hand-scrawled notes by Bloomberg and Reuters, there aren't any big surprises so far anyhow. "The defendants did not want to share the DRAM market with Rambus ... so the defendants cheated," Rambus attorney Bart Williams said in his opening statement. Micron and Hynix said in their own respective opening statement that the RDRAM technology at issue simply failed in the open market. This trial is part of Rambus' "continued attempts to place blame on third parties for its failure to compete successfully in the marketplace."

None of this is news to anyone watching the legal case, as both sides hold their long-defended positions. Rambus wants $4.3 billion in damages from its two opponents, which would then presumably triple under California law to $12.9 billion. That's a game-changing pile of cash for everyone involved.

If Rambus wins a large sum, I believe there'd be a huge special dividend coming up rather than reinvestment in running the business. Rambus has never paid a dividend, but then again, the largest settlement so far was a relatively tiny $700 million from Samsung, to be paid over a five-year period along with a further $200 million investment in Rambus stock. Rambus simply wouldn't have much else to do with a multibillion-dollar result, so a special dividend would make sense.

Mind you, the start of a jury trial doesn't necessarily mean the end of the case. For a recent example, consider how TiVo (Nasdaq: TIVO  ) and DISH Network (Nasdaq: DISH  ) danced through multiple trials, court decisions, and appeals before finally settling it all in the middle ground. Moreover, there will be plenty of conjecture from supporters of both sides, but we won't really know who's winning until McBride slams the gavel, setting the stage for appeals.

Rambus may very well win big, though I still think the company is exploiting a broken patent system. Wireless communications technologist VirnetX (NYSE: VHC  ) is treading the same path, also to a rabid following of fervent investors -- making money in the courtroom looks like a quick and easy way to instant riches, so the whole idea is easy to love. I just don't.

Love or hate Rambus' strategy, you can follow the company's trials and tribulations by adding it to My Watchlist. Then drop down to the comments box to tell me where this lawsuit is going; I'm sure you have a strong opinion.

Fool contributor Anders Bylund owns shares of TiVo but holds no other position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 22, 2011, at 1:48 PM, LBoccherini wrote:

    Anders, you have posted two articles and linked to a third on MF saying Rambus is exploiting a bad patent sytem. None of the articles actually say what you think is broken about it or how you would fix it. Do you have an actual point or are just trying to smear Rambus?

  • Report this Comment On June 22, 2011, at 3:00 PM, Andersafool wrote:

    Anders, your comment of Rambus exploiting a broken patent system is completely off base. First of all, this trial has nothing to do with Rambus suing over patent infringement. Even if you are lacking in brain capacity to understand that the Sdram and DDR techs were cherry picked from Rdram, this trial has NOTHING TO DO WITH THAT! This trial is about forcing Rambus's proprietary technology from the market with ILLEGAL collusion. What does the patent system have to do with a technology design that Rambus designed themselves? Absolutely nothing. Why don't you try reading a court transcript or two and look at some of the EVIDENCE being submitted before you make a further ass of yourself.

  • Report this Comment On June 22, 2011, at 7:13 PM, russfischer1013 wrote:

    Spend a few hours reading this if you think Rambus and RDRAM ever had a chance. Rambus is a neck in the bottle of prograss.

    http://www.ftc.gov/os/adjpro/d9302/exhibits/Printed%20061220...

  • Report this Comment On June 23, 2011, at 12:06 AM, pk22901 wrote:

    Anders,

    Watch the news coming out of this trial and be sure not to miss any of the damning cartel emails.

    And then, after considering the evidence and facts for a while, please stand for your reputation and write an article giving your sincere apology to every member of the Rambus organization.

    (There's nothing like smearing the victim while defending the thugs.)

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