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Friday, March 24, 2023

Netlist, Inc. (OTCMKTS: NLST) Major Runner as Patent Player Set to Start Jury Trials in Texas on April 17 with Final Pretrial Conference Set for March 27

Netlist, Inc. (OTCMKTS: NLST) continues to rocket northbound with power as we get closer to jury trial in Texas against Samsung starting in April. NLST has quickly emerged as the number one most traded stock on the otc bulletin boards with dollar volume topping $3.5 million on a slow day on Friday. Just 2 years ago NLST was the darling of small caps rocketing over $10 per share, now after dipping below $1 in December, NLST is once again red hot with huge buying and little selling the stock hit highs near $4 earlier this month. After some consolidation NLST Is once again moving northbound with power; a break over $4 and NLST really takes off. NLST does not dilute, and the stock has virtually the same share structure as it did in 2021. 

This is a really exciting time for Netlist as the jury trial in Texas against Samsung starts on April 17 with a final pretrial conference moved back a day and now set for March 28. The trial is expected to last about a week. Netlist CEO CK Hong recently said: “We’ve invested extensively over the years in the IP enforcement process and look forward to seeing the fruits of our labor and the validation of our intellectual property in the coming months. As the Company’s revenues continue to grow recently topping $161 million in 2022, Netlist continues to WIN in court. The upside is enormous as the aggregate of the multiple infringement lawsuits Netlist is pursuing against Samsung, Micron and Google both in the US and in Germany could very well yield significant settlements and we could see multiple resolutions in 2023. Much more on the upcoming court dates below. We will be updating on NLST when more details emerge so make sure you are subscribed to newsytrends.com by entering your email below. 

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Netlist, Inc. (OTCMKTS: NLST) headquartered in Irvine, California, provides high-performance memory solutions to enterprise customers in diverse industries. The Company’s products in various capacities and form factors and its line of custom and specialty memory products bring leading performance to customers in a variety of industries globally and cloud service providers. Netlist licenses its portfolio of intellectual property, including solutions relating to volatile memory, storage memory, and hybrid memory. Netlist owns registered or unregistered trademark rights to NVvault®, HyperCloud®, HybriDIMM™, EXPRESSvault™, PreSight™, “memory at storage capacities, storage at memory speeds”™, and Netlist. As of December 31, 2022, Netlist had approximately 100 full-time and part-time employees globally. 

The Company manufactures memory subsystem products at its facility in Suzhou, China which is certified in International Organization for Standardization (“ISO”) 9001:2008 Quality Management Systems and ISO 14001:2004 Environmental Management Standards. Netlists’s in-house manufacturing function, combined with its engineering and design capabilities, allows it to assemble its memory subsystems quickly and in high volume. The Company’s manufacturing facility is capable of surface mount assembly, subsystem testing, system-level burn-in testing, programming, marking, labeling and packaging. Manufacturing cycle times for its memory subsystem products, from receipt of order, are typically one week or less and in some cases as short as two days. 

Netlist holds a valuable intellectual property portfolio with at least 130 patents issued and pending U.S. and foreign patents, many seminal, in the areas of hybrid memory, storage class memory, rank multiplication and load reduction. The Company developed its portfolio of patents over many years of bringing disruptive new products to market. Netlist’s strategy is to leverage its unique board-level intellectual property with a thorough understanding of semiconductor building blocks and system-level applications to deliver performance, cost, and time-to-market advantages to OEMs. Netlist invented the NVDIMM almost a decade ago and since then, it has shipped over 500,000 units, more than every other supplier combined. Netlist holds over 27 issued and pending patents on the technology, many of which are seminal covering the fundamental architecture of NVDIMM.

Netlist is led by CEO C.K. Hong, who brings over two decades of high-tech management experience to the Company. He most recently served as President of Infinilink, a DSL equipment manufacturer, and as executive vice president of Viking Components, Inc. Prior to that, he spent 15 years with LG where he held various senior management positions in the U.S and Korea. 

Netlist recently reported Q4 and full year 2022 financial results. Revenues in Q4, 2022 fell compared to Q4 2021 however for the full year the Company saw growth reporting revenues of $161.6 million in 2022, compared to revenues of $102.4 million for the full year ended January 1, 2022. Net loss for the full year ended December 31, 2022, was ($33.4) million, or ($0.14) per share, compared to a net income in the prior year period of $4.8 million, or $0.02 per share. 

Memory, Technology, IndustryAs Netlist product sales continue to grow, the other more exciting part of the Company’s business is its patent infringement lawsuits against Samsung, Micron, Google and others such as Monolithic Power Systems Inc. The financial prospects of Netlist patent infringement lawsuits are significant.  Some of the biggest in history are Intel vs VLSI Technology (2021) – $2.18 Billion and Pfizer vs Teva Pharmaceuticals (TEVA) & Sun Pharma (2013) – $2.15B. In June 2020 in a landmark case for the Company, Netlist was victorious in a 12-year battle in the patent courts against Google. A 3-judge panel at the US court of appeals, in a unanimous rule 36 decision, upheld the decision of the lower court and found in favor of Netlist. Google “Waived” their appeal rights to SCOTUS and the 912 patent was reissued with 78 claims upheld.

Following that, Netlist won against SK Hynix in a deal that included a $40 million signing bonus, a $600 million dollar supply agreement at advantageous terms, a patent sharing agreement that gives netlist access to Hynix portfolio of 5000 patents free of charge, and now Hynix is Netlists partner. Also, Netlist won an important court decision in their favor in the Google case however as Samsung had supplied the patent-infringing memory modules to Google, the Judge decided things could wait while the court in the Netlist-Samsung case decided if Samsung had violated Netlist’s patent. More recently Samsung filed an amended complaint against Netlist which was dismissed and as the Company stated: “The partial dismissal means Samsung cannot pursue a separate action on the patents Netlist first asserted in Texas, and now cannot carry out its alleged obligation to protect Google from the ‘912 Patent in Delaware.”

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During the conference call on February 21 Netlist CEO CK Hong talked extensively on the Company’s lawsuits stating: 

“Netlist made significant progress in 2022 with its Global IP Enforcement campaign. Our continuing goal is to ensure our innovations are secured by high quality patents and that those patents are being fairly licensed by marketplace implementers…In Netlist’s action against Samsung in the Eastern District of Texas, there were a number of favorable developments in 2022 and now in 2023, we approach the culmination of this case in the form of a jury trial. As a reminder, this case addresses Samsung’s infringement of six Netlist patents covering LRDM, DDR5, and high bandwidth memory, or HBM. In December, the court issued a claim construction order, largely adopting Netlist’s position for many of the claim terms at issue, creating the basis for establishing Samsung’s infringement. More recently, Judge Gilstrap rejected Samsung’s second motion to stay the case and allowed Netlist’s request for additional deposition, testimony and fact discovery. 

This case has now proceeded into the conclusion of the expert discovery phase with a final pretrial conference set to start for March 27. The jury trial was moved up two weeks to accommodate the court’s schedule and is set to begin April 17. We expect the jury trial to last approximately one week. Judge Gilstrap is also presiding over Netlist’s case against Micron for infringement of the same six patents. Claim construction is scheduled for that case for July 2023. The jury trial is scheduled for January 2024. There’s a second set of cases against Samsung and Micron in the Eastern District of Texas. Judge Gilstrap consolidated these cases because each involves a 912 patent. The 912 patent and related child patents, claim constructions for that consolidated case is set for October, and a trial date for both is set for April 15, 2024. 

Mr. Hong noted that Netlist’s case against Google in the Northern District of California remains stayed pending the outcome of the second Eastern District Texas case against Samsung. The Netlist case against Micron in the Western District of Texas remains stayed pending the resolution of the four remaining IPRs Micron filed against Netlist patents, but will eventually proceed to a jury trial given the PTAB’s denial of institution on Micron’s IPR petition against the 608 patent. On October 2020 Netlist will have a claim construction hearing and the declaratory action that Samsung brought against it in Delaware. The jury trial for this case has been scheduled for 2025 and now includes Google as a party to the proceedings. 

The cases in Germany against Google, Samsung and Micron are also moving ahead as expected. Final one day oral hearings are set for upcoming May 3 for Micron, September 5 for Samsung and October 9 for Google, all in Dusseldorf….We view Samsung’s latest attempt to invalidate an important 912 claim on Google’s behalf as an abuse of the IPR process. In the past several months, I’ve written a couple of articles in the industry publications about our thoughts on the detrimental effects of IPR abuses on the patent system and the broader innovation economy. These are available on the company’s website. We’ve also visited with Congress in recent months in order to provide our input as they consider much needed legislative reforms on the current patent law. On January 5, 2023, USPTO Director, Kathi Vidal exercised her authority and brought Samsung’s 912 IPR proceedings under her review. Director Vidal cited the importance of the case to both the USPTO and the patent community, and deciding to take this under her personal review. 

She stayed the 912 IPR pending the outcome of her review, and on February 3, she entered a decision requiring the assigned PTAB board to reevaluate Netlist’s request for discovery on the admitted relationship between Samsung and Google. She also ordered that if the Board determines Google is a real party of interest under Samsung’s petition, the Board must vacate its institution decision and deny Samsung’s petition. We’re pleased that the Director Vidal elevated this request to her review and hope that the board will take a closer look at all the facts underpinning Samsung and Google’s relationship. In summary, we’ve invested extensively over the years in the IP enforcement process and look forward to seeing the fruits of our labor and the validation of our intellectual property in the coming months.”

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Currently trading at a $800 million market valuation NLST os is 233,663,197 shares outstanding. Netlist has a strong balance sheet with $43 million in cash and restricted cash, $77 million in assets vs. $38 million in liabilities and the Company does not dilute the stock. Netlist has been reporting one record breaking quarter after another as the Company’s semiconductor business has more than doubled over the past year. The Company just reported record 2022-year end results with $161 million total revenues. With the jury trial starting in Texas on April 17 against Samsung NLST is rocketing northbound with a power the stock has not seen since 2021. The upside on Netlist is enormous as the aggregate of the multiple infringement lawsuits Netlist is pursuing could very well yield significant settlements and we could see multiple resolutions in 2023. We will be updating on NLST when more details emerge so make sure you are subscribed to newsytrends.com by entering your email below.

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Disclosure: we hold no position in NLST either long or short and we have not been compensated for this article.

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