MOSAID (pronounced MOS AID) has undergone significant changes lately. They have a new CEO and President in Jon Lindgren and a new CFO in Joseph R. Brown. They concluded the sale of certain assets of its Systems Division's ATE business to Teradyne, Inc. for $20 million in cash. MOSAID also announced that is considering the potential sale of its Semiconductor IP product business. The expressed intent is to focus on their core patent licensing competencies. Mr. Lindgren has extensive experience semiconductor patent licensing and litigation. I recently had an opportunity to interview him about MOSAID and also patent licensing in general.
The timing of this interview could not have been better. Synopsys and Magma settled their patent disputes whereby Magma will pay $12 million. Further, the Supreme Court just announced two major decisions (Microsoft vs AT&T and KSR vs Teleflex) on issues related to patents that could impact our industry.
Background on United States Patent Office (USPTO)
In an appearance before Congress on April 5, 2006 Jon Dudas, Under Secretary of Commerce and Director of USPTO, testified
Would you provide us a Brief bio?
In fiscal year 2005, we received over 400,000 patent applications -- an eight percent increase over the previous year. Of equal significance, the complexity of patent applications is growing. A greater percentage is now filed in more complex areas such as biotech and telecommunications. These require many more hours to examine than traditional areas, such as general mechanical and chemical. So, our number of hours needed to examine the average application filed is increasing as well.
It is now taking our office an average of 21.1 months to take first action on a patent application, and 29.1 months to issue a final decision. The vast majority of that time does not represent actual examination but rather a waiting-in-line status. Without policy and operational changes, our backlog would have continued to grow to unacceptable proportions.
At then end of 2004 there were fewer than 4,000 examiners. The USPTO has hired 1,000 and plans to hire 1,000 more in fiscal 2006 and every year thereafter.
I spent the first 20 years of my professional career at Texas Instrument. I was in Dallas for all of those years except for two years, 1999 and 2000, when I was in Tokyo working as General Council for TI of Japan. I started at TI as an engineer. I was in the failure analysis group working on ASIC chips. Then I started to do a bunch of failure analysis and reverse engineering of competitive parts that the law department would deliver to me to see if they infringed our patents. They convinced me to come across the street and be a TI lawyer. They sent me to law school. I worked part time at TI during that time period to get my law degree from SMU. Then I spent a decade or so working exclusively on patent licensing deals. TI made billions of dollars over the years licensing their portfolio, primarily DRAM technologies and semiconductor processing technologies. That’s what got me very interested in the culture. I moved from patent licensing position to more general legal position and took the job of General Council for TI in Japan for a couple of years. I was heavily involved in continuing patent licensing projects including managing litigation in Tokyo District Court on a couple of cases. After that I moved back to Dallas and continued my general legal side of things by taking on overall responsibility for the Asia Pacific legal support for world wide TI operations and trade compliance as well as transactional support for one of its largest businesses that was responsible for 25% of TI’s overall revenue. It was application specific products including TI’s catalog DSP group and broadband communication stuff. During that period of time I was involved in patent licensing because the broadband communications group had a portfolio of patents that we bought along with the whole business from Amati Communications in California. They were viewed by many as the founders of ASDL technology and the original creators of the standards. We had an excellent portfolio that we asserted against many companies. I ran that program until I left. I have been here (MOSAID) on the ground as General Council for the first four and half months. Since last week I have been President and CEO.
Are you fluent in Japanese?
I would not go that far. I can get around. However, business discussions are the ones that throw me the most because the vocabulary that is needed for very specific things with semiconductor technology. I know the word for semiconductor and a few other things. But when they start to talk about implantation and things like that I get lost in the vocabulary. But I can get around in restaurants and cabs.
If a lawyer passes the bar in say New York, he is not licensed to practice in California. How do you practice law in Japan? Do you have to pass a bar exam in Japan?
I do not know if you are knowledgeable about the bar and legal field in Japan but they set the passing rate for the bar artificially low. They do not want to encourage that particular industry. It is something like 2% of the applicants that pass every year. They keep it at 2% no matter how many people apply. The vast majority of corporate law is practiced by people who either never took the bar exam or did not pass it. They will attend undergraduate school to get a degree in law and go right into corporate practice. You are not required to be a licensed attorney if you are not in a law firm where you are practicing corporate law. The same applies to foreign professionals. So I can be licensed fully in Texas and with the US Patent and Trademark Office (USPTO) but it does not matter whether I have any license credentials for me to practice for a corporation in Japan. And luckily it is the same in Canada. I do not have to pass the Canadian bar as long as I am practicing for a corporation.
What caused you to leave TI and come to by comparison tiny MOSAID?
The job opportunity just crossed my plate soon after I had reached my 20th service anniversary at TI. At the time I had been thinking about my future. The unfortunate thing was we had a very good and very young general council and that was the only place left for me to move up within TI. That was not going to happen anytime in the short term horizon. So I was looking at other opportunities. This one just came across my plate. It fit my skill set almost to a tee. Not only was its big focus on patent licensing but it was licensing the same players that I had already licensed for the majority of my career, the big Taiwanese, Korean and Japanese semiconductor manufacturers. Even on top of that it was the same technology. I have been spending the majority of my career licensing DRAM patents. This company, MOASAID, has an excellent DRAM portfolio that it has been licensing for so long. A perfect fit.
MOSAID has been around for 20 plus years. Can you give me a little background on the company?
It is more than 30 years actually. When it was founded it was more of a design services kind of company where they would design primarily early DRAMs. They started at the 4K DRAM. They did designs essentially as products that they could offer primarily to Japanese companies who wanted to get into the industry but who also wanted a head start and did not want to develop their own products for the first generation. They would license the entire design from MOSAID. They did DRAM designs like that all the way through 256 Meg level. They made money in design services. They picked up a tester business that helped them do their IPO and go public in the early 90’s. This tester business has always focused on the engineering segment not on production. It has been memory testers, DRAMs and flash testers. They tested finished devices as well they can link probe stations and put them inline for wafer lot testing. We just announced that we sold the assets of that tester business to Teradyne ($20 million) and are going to shut down the remaining portion of the business April 30th. We are exiting that. The other business we had along the way was a fables semiconductor effort that was not successful. We tried that for a few years. It never got traction. The peak investment was when the semiconductor market crashed in 2001. Then we moved on but the good thing about it was that it generated a lot of good patents particularly in the networking and encryption areas. We developed full chips and got some good stuff out of it for which we have high hopes in the future. The other large business is semiconductor IP which is basically transistor block licensing. We just announced that this is not going to be part of our future at MOSAID. In fact it is on the blocks. We are looking for a partner to come and buy the assets or the business.