Just wanted to reiterate what most of us already know, and what we believe to be the likely outcome along with a very bright future for Netlist.......
Who’s/What’s Netlist?
Netlist holds several patents in server, storage, and hybrid memory, as well as rank multiplication and load reduction.
What’s goin on here (the main course anyways)?
Netlist has been in litigation with Googs since 2009 over allegations that Googs infringed upon Netlist’s seminal 912 hardware patent. Netlist alleges that Googs infringed the patent by building servers using the 912 patent technology. Netlist sued Googs on December 2009 in the US District Court for the Northern District of California. The judge in the case ordered a random cross section of servers to be examined which showed that Googs indeed was using technology described in the 912 patent. Googs then asserted that the patent was invalid. In 2010 Googs requested an Inter Partes Reexamination of the 912 patent by the USPTO’s (United States Patent and Trademark Office) PTAB (Patent Trial and Appeal Board). While the reexamination was going on the Northern District Court granted a joint request made by both companies to stay the 912 patent infringement lawsuit until the USPTO made its findings. On January 2019 the PTAB upheld the validity of Netlist’s 912 patent. In April 2019 Googs appealed this decision to the United States Court of Appeals for the Federal Circuit. In June 2020 the US Court of Appeals upheld the PTAB’s decision on the validity of the 912 patent. Because of the Covid-19 pandemic Googs was granted a 6 month extension to decide if it wanted to appeal this decision to the United States Supreme Court. Googs did not choose to appeal. On February 16, 2021 Netlist moved to lift the stay in the Northern District of California so the patent infringement lawsuit could continue. The Court granted the request and ordered that both Netlist and Googs shall appear for a telephone Case Management Conference on March 11, 2021.
So, what’s the big deal?
Netlist has a seminal patent. A seminal patent is defined as a patent that describes an invention so impactful that it creates or shifts the technology space. Netlist believes that the teachings of the 912 patent can be found in various DDR3 and DDR4 server DIMMs (Dual Inline Memory Module) as well as future products that will be produced under the DDR5 server DIMM standards currently being established by the industry. Furthermore, Netlist asserts that the 912 patent enabled Googs to build servers with high capacity and rapid memory that allowed servers to store an entire Oracle database in memory which allowed lightning fast search results. The 912 patent played a large part in Googs dominance in search engine capability. Right now, it is not a question whether Googs infringed the 912 patent. That has already been established. Now, Googs is at the stage where it can settle with Netlist or go to a jury trial to determine damages.
What are the damages? Are they substantial?
Damages will take into account both the product itself (internal factors) and the environment (external factors) in determining pricing. In this case Netlist will argue that the 912 patent established Googs dominance in regards to their search engine, which allowed monopolist profits that funded Goog’s entire ecosystem. While at the same time, Goog’s infringement of the patent prevented Netlist from establishing itself in the server memory marketplace. Netlist will most likely seek billions in damages. Also, the prospect of treble damages is in play as Netlist will allege willful infringement on Goog’s part. The most likely scenario is Googs will settle the case rather than risk going in front of a jury. A settlement would include a large lump sum plus licensing of the patent going forward.
Anything else going on?
Yeah you bet! Netlist also sued Inphi for infringement of the 912 patent in the US District Court for the Central District of California. That case was also stayed pending the Court of Appeals decision, and now that the 912 patent was upheld it is expected Netlist will resume court proceedings once it is finished with the Googs case.
Also, on March 2020 Netlist filed a patent infringement lawsuit against SK Hynix in the US District Court for the Western District of Texas based on the infringement of Netlist’s 218, 523, and 595 patents in SK Hynix’s RDIMM and LRDIMM server memory products. SK Hynix petitioned the United States Court of Appeals for the Federal Circuit (“CAFC”) to change the venue from Texas to California. This petition was denied and the case will be tried in Texas. The Markman hearing was set for March 4, 2021 with Jury trial set for July 6, 2021. The Western District of Texas is notorious for being very pro-patent holder friendly. Recently, on March 2, 2021 in this very same court under the same judge that will be preceding over the Netlist case, Intel was found guilty of infringing on two of VSLI’s patents and the jury awarded $2.1B in damages.
What can Netlist shareholders most likely expect?
Once Netlist either settles or wins cases against these three defendants other infringers will quickly move to settle. Netlist will have established itself as a necessary licensor for pretty much any high speed server memory product, much like Qualcomm did with its patents in cellular technology. This would enable Netlist to become a very lucrative gatekeeper. The shares are still greatly underpriced at under $2 as of March 9, 2021, but that won’t last long as the market becomes aware of Netlist and its strong position in the lawsuits it is currently engaged in. Large settlements or jury awards will quickly drive the share price up as the market cap currently is only roughly $300M. There is also a poison pill set in place at the price of $6.56 which would come into play in the event of a hostile takeover attempt.
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