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Diablo-Netlist IP dispute set for jury showdown next week

SanDisk ponders whether to just buy its piddling little tormentor and be done with it

Next week is decision time in the Netlist-Diablo trial. A jury will rule whether Diablo unlawfully used Netlist's IP in developing technology includedin SanDisk ULLtraDIMM faster-than-PCIe-flash storage products.

ULLtraDIMM tech, which speeds server processing of data by lowering access latency, has been licensed to Lenovo, Huawei and SuperMicro, but shipments are on hold until this dispute resolves in Diablo’s favour. Alternatively, if the jury finds in Netlist’s favour, then Diablo will have to license the tech IP from Netlist or develop its MCS technology afresh – which could take months, possibly years – leaving SanDisk and its three OEM clients high and dry.

Earlier settlement talks failed. Netlist has also had three relevant patents upheld after the United States Patent and Trademark Office (USPTO) rejected attempts by SanDisk to invalidate them for the second time. The patents cover aspects of the high-performance memory modules operating in the memory channel, particularly hybrid memory that combines the benefits of DRAM and flash.

Commentators such as Howard Marks have wondered why SanDisk simply doesn’t buy Netlist and have done with it. SanDisk and Netlist have had talks about this as part of the case. However, there is a gulf in valuation ideas between the two companies, with Netlist CEO C.K. Hong wanting more than SanDisk is prepared to pay. His Nasdaq-traded company has a market capitalisation of $56.7m compared with SanDisk’s $17.7bn, so basic affordability isn’t the issue.

In El Reg’s view, it’s about whether the ULLtraDIMM technology is going to be a sustainably lower-latency flash access method compared to PCIe, whether ULLtraDIMM capacities are high enough – and TLC/3D flash might contribute here – and whether server OEMs are really enamoured of it.

So far, SanDisk has got promising OEMs on board, but not Foxconn, Dell, HP or Cisco.

Now SanDisk has to get answers to a few questions:

  • Is ULLtraDIMM tech a can of nasty, wriggling worms with no possibility of the lid ever being put back on?
  • Can the supply deal with Diablo survive a Netlist trial win?
  • Can any working relationship between Netlist and Diablo survive a Netlist trial win?
  • Does Netlist want to work with Diablo ever again, as in can C.K. Hong and Diablo CEO Riccardo Badalone shake hands, rinse away the bad blood and start afresh?
  • Can Badalone survive as Diablo CEO if Netlist wins its case?
  • Does Netlist have a wildly unrealistic view of its valuation, such as believing it’s worth $4/share instead of the current $1.28/share, valuing it at $177 million?

If Diablo loses, SanDisk has to ask how much the ULLtraDIMM business is worth over the next few years and then invest in it or walk away. Diablo might appeal if it loses next week, but then SanDisk will surely get hacked off and make its own go/no-go decision. ®

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