A. Summary of Netlist’s Approach
Netlist engaged Mr. Sidak to determine a range of royalties for its LRDIMM
SEP portfolio that would be consistent with its RAND commitment to
JEDEC. Mr. Sidak, in turn, applied the logic of the Top-Down Approach
I employed in Innovatio, adapted to the available data.
First, Mr. Sidak determined the incremental value of the feature of
support for LRDIMM. To do so, he used an econometric analysis known as
“hedonic regression.” This technique compares pricing data, which shows
consumers’ willingness to pay, over time, for products with similar, but
varying, feature sets. Differences in feature sets accompany differences in
pricing, from which the regression model calculates what consumers were
willing to pay for each given feature.
The additional features of LRDIMM over the base case have attendant
costs as well, namely, the nine distributed buffers included in a module. To
account for this, Mr. Sidak estimated the cost to the module manufacturer of
incorporating the buffers, about $20. The incremental profit of LRDIMM
over RDIMM, then, was about $80 ($100 – $20).
Then, Mr. Sidak apportioned this $80 incremental profit between Netlist
and other owners of patents declared essential to the LRDIMM standard.
JEDEC maintains a repository of all patents and applications its members
declare essential to its standards. Mr. Sidak searched this JEDEC repository
692 The Criterion Journal on Innovation [ Vo l . 2 : 6 8 7
and identified a total of fifty patents, including Netlist’s seventeen, declared
essential to LRDIMM and valid as of January 1, 2017. Consequently, by
a simple arithmetic patent count, Netlist’s SEP portfolio constituted 34
percent of the patents declared essential to the JEDEC standards. Mr. Sidak
appropriately did not stop there. He ranked all fifty patents by certain
metrics, including forward-citations11 of the fifty identified SEPs listed in
subsequently issued patents and forward-citations exclusive of self-citations,
meaning a particular patent holder citing its own patents in its subsequently
issued patents. Mr. Sidak determined that the Netlist portfolio accounted
for 30.77 to 42.96 percent, or $24.55 to $34.27 of this $80 incremental profit
per module.
Based on this analysis, Mr. Sidak concluded, a license to Netlist’s
LRDIMM-essential portfolio at a royalty in the range of $24.55 per unit
would be consistent with Netlist’s RAND obligation.
Emil Nolde
