Shares of Rambus, Inc. (RMBS) plunged 39% on Friday as the U.S. District Court of Delaware ruled that the company cannot pursue its claims of patent infringement against Micron Technology Inc. (MU) due to spoliation, a legal term for the destroying of evidence in pending or reasonably foreseeable litigation. Judge Sue L. Robinson, in her opinion, found that Rambus executed its document retention policy during a time when it anticipated litigation.
Attorneys for Rambus strongly disagree and said they will appeal the decision at an appropriate juncture. They noted that the opinion of Judge Robinson is highly inconsistent with the findings of the Court in the Northern District of California which said there was nothing improper with Rambus’ document retention practices when it looked at the same conduct.
“We are confident in the strength of our position and will continue to vigorously pursue fair compensation for the use of our patented inventions,” said Tom Lavelle, senior vice president and general counsel at Rambus.
Rambus, one of the world’s premier technology licensing companies specializing in the invention and design of high-speed memory architectures, helps companies solve their most challenging interface problems. Its products enable state-of-the-art performance in PCs, video game consoles, printers, digital TVs, set-top boxes, video projectors network switches and routers.
The current ruling means that Rambus can’t enforce 12 of its patents in claims against Micron. Micron also believes that the ruling in Delaware applies to a California suit against it and expects to file a motion with the California Court seeking a ruling of unenforceability based on the Delaware Court’s decision.
Rambus is no stranger to the inside of a courtroom. In March, Rambus won a major victory when a federal jury in San Jose, CA exonerated the company of fraud charges brought against it by Micron and Hynix Semiconductor.
Owning RMBS shares is a risky play on the result of its appeal. Pick the right time to own the shares and you can make some fast money, but an adverse decision against the company can mean equally fast losses.
The shares trade for very high price-to-sales and price-to-book ratios, but its balance sheet ensures it can withstand some adverse rulings. Below $10 seems like a good entry point for the stock.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com. James F. Dlugosch contributed to this article.
