A unique form of fight for the Third Point
Small computer chip design company R2 Semiconductor has recorded victories in a potentially major patent fight with Intel over the past few months – a dispute that would force Intel to stop selling several chip lines in Europe.
DealBook is the first to report that one among the biggest names in hedge funds is behind the R2 legal war: Dan Loeb’s activist hedge fund Third Point, the company’s majority owner, is financing lawsuits, including two recent ones against Amazon Web Services and Fujitsu which have not been previously filed.
Context: R2 sued Intel and two customers, Hewlett Packard Enterprise and Dell, in Germany, accusing the chipmaker of violating a patent regarding voltage regulation in semiconductors. (Intel protects HPE and Dell.)
District Court in February issued orders against selling not less than a few of Intel’s chips. On March 8, a better court rejected Intel’s efforts to stop the decision. Meanwhile, in the UK, a patent trial is scheduled to begin next month.
Intel says that the R2 patent applies to older generations of its chips. But R2 and Third Point told DealBook that this might also apply to Intel’s current generation of chips.
The third point made the fight possible. The company first invested in R2 15 years ago, eventually amassing a 75 percent stake. Not only did it cover R2’s legal costs, however it also plans to put aside $79 million to be held in escrow while the legal battles in Germany proceed.
Loeb’s company could gain a windfall if R2 wins licensing payments from Intel. However, the financier told DealBook that he can also be attempting to help Dave Fisher, the founding father of R2: He compared R2 to corporations like Arm, which earn royalties for his or her cutting-edge designs. “That opportunity was taken away from Dave,” Loeb said. “We plan to fix it.”
Intel will not be giving up. She dismissed R2 as “a shell company whose only business is litigation” and noted that one other patent on R2 had been invalidated in the U.S.
Loeb told DealBook: “You wouldn’t be a very good patent troll if you spent 15 years of your life developing a patent, giving up your weekends, working day and night to develop something in the hope that it would get stolen, and then I think you were going to sue court.”
Intel, Dell and Fujitsu didn’t reply to requests for comment. Amazon Web Services and HPE declined to comment.
What’s next? The German patent court will make a final decision on the validity of R2’s claim in October. A victory there may lead to a ban on affected Intel chips in Germany — at a time when the chipmaker is spending about $33 billion on construct a brand new plant there.
R2 and Third Point also suggested they might pursue claims against 38 other members of the European Patent Convention.
Here’s what’s happening
Apple is claimed to be in talks to collaborate with Google in the field of artificial intelligence. The two discuss a licensing agreement which might mean the Google licensing agreement Gemini models offer recent features on iPhone, based on Bloomberg; each have already got a lucrative exploration contract. In other artificial intelligence news: Elon Musk’s xAI released the raw computer code of the Grok chatbot; and the Department of Homeland Security is the first federal agency to include generative AI across departments through partnerships with OpenAI, Anthropic and Meta.
China sees better-than-expected production growth. Beijing said this on Monday industrial production increased by 7%. in January and February in comparison with the same period a 12 months ago. Analysts say the data suggests the country’s struggling economy is stabilizing, whilst consumer demand stays weak and the government is struggling to satisfy an ambitious 5 percent annual growth goal.
This is a very important week for central banks. The Bank of Japan, the Fed and the Bank of England are expected to determine on rate of interest policy. The drama will begin on Tuesday in Tokyo, as investors speculate that the BOJ will raise rates of interest for the first time since 2007. Meanwhile, the Fed is anticipated to maintain rates of interest unchanged on Wednesday but provide guidance on whether a June cut is anticipated.
Why Europe doesn’t follow the US on TikTok
The supporters and opponents of a bill that would ban TikTok in the US have entered law, making their case ahead of a possible vote in the Senate. One thing missing: any indication that America’s allies will follow suit, especially in Europe, which has historically been harshly critical of Big Tech.
The gap shows that many individuals don’t think TikTok or China pose the same threat, and it also reveals a more expansive view of social media regulation that would worry the app’s U.S. rivals.
Several countries have implemented limited bans on TikTok. The European Union and others prohibit government employees using the application on government devices. Canada said last week that it did launched a national security review there in TikTok’s expansion plans. But governments he didn’t often tell the public to avoid it.
Europe doesn’t see TikTok as a serious security threat. That means there may be less political will to stop it, said Max Schrems, an Austrian lawyer who has harassed U.S. social networks over their handling of user data. One reason: the relatively small scope of the application. He said the overwhelming majority of user data flows to US technology corporations. “TikTok is basically for teenagers and that’s all,” Schrems told DealBook, stating that Europeans usually tend to use WhatsApp or Instagram.
EU data protection rules and market rules cover a wide selection of social media relatively than individual applications. Regulators are already using them: last month, the bloc launched an investigation focused on TikTok’s addictive algorithm. “There are certainly things that set TikTok apart from others, but even so, many of the risks discussed about TikTok also apply to other platforms,” Julian Jaursch, a technology policy expert at the think tank Stiftung Neue Verantwortung, told DealBook. (Some in the US do insisting on a similarly broad approach.)
Europe can also be divided over China – it is a far cry from Washington, where there may be bipartisan agreement that China poses a threat. EU countries with strong trade links with China want to take care of these ties. “This makes it very difficult for Brussels to achieve the consensus needed to take decisive action that singles out China itself or leading Chinese companies,” Max von Thun of the Open Markets Institute, a contest policy think tank, told DealBook.
If the bill comes into force, this may increasingly change.
In Trump’s fundraising rush
Donald Trump is ahead of President Biden in lots of polls, but he’s seriously behind on money. On Sunday, the Biden campaign revealed it had $155 million in money available, dwarfing what the Trump camp and the Republican National Committee likely have.
The Times reports that this has increased the urgency of the former president’s fundraising efforts, including attracting deep-pocketed supporters.
Trump’s legal battles are taking a toll on his campaign. He used his campaign to finance his defense in several federal and state court battles. The costs are mounting: He recently posted a $91.6 million bond in the E. Jean Carroll defamation case and must post a $450 million bond in a New York civil fraud case against his corporations.
In an indication of the campaign’s financial difficulties, not less than two donors who made seven-figure donations to Trump were asked for thousands and thousands more.
Former president contacts potential donors, including private dinners at Mar-a-Lago in Florida. He also created a brand new joint omnibus account with the RNC (now co-run by his daughter-in-law) and the state parties to lift significant sums.
One potential point of leverage: The 2017 tax cuts he signed into law expire in 2025, and Biden has said he won’t extend them to the nation’s highest earners.
People he recently spoke to incorporate: Larry Ellison, co-founder of Oracle; Pepe Fanjul, sugar magnate; John Paulson, hedge fund manager; Steve Wynn, casino tycoon; Woody Johnson, owner of the New York Jets; Jeff Yass, billionaire investor in TikTok’s parent company; and Elon Musk (although he said yes won’t concede to either Biden or Trump).
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In other election news: Robert Kennedy Jr. he’ll most definitely select as his running mate Nicole Shanahan, an entrepreneur who paid for a Super Bowl ad promoting his independent presidential campaign (and the ex-wife of Google co-founder Sergey Brin). Trump’s economic advisers reportedly presented it to him three candidates for the head of the Fed: Kevin Warsh, Kevin Hassett and Arthur Laffer.
Your thoughts on “capital requirements”
In response to Andrew’s query last week, DealBook readers had so much to say about the debate over whether increasing bank capital requirements can prevent one other crisis. Here is a sample of the answers:
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Sanford M. Brown, a financial services lawyer, worries that higher capital requirements could impact recruiting: “As banking becomes less attractive to investors, it will become less attractive to employees, and I’m not sure we want that to happen.” to make one among the most vital drivers of the American economy less attractive to the best and brightest our country has to supply.”
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Carter Dougherty, communications director at Americans for Financial Reform (and former Times reporter), is less scrupulous about this: “With executive compensation tied to bank stock prices, you realize how incredibly selfish it is position of the banking lobby compared to greater equity capital: it lowers the banker’s remuneration.”
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Chris Kotowski, a Wall Street analyst, says the debate misses important nuances: “You have to take a look at dozens of various metrics and exposures to evaluate asset quality, liquidity and market risk, but capital boils right down to one number, and that is why each politicians and and regulators at all times wish to pull the “C” lever. They might say, “Hey, it used to be 6%, now it’s 12%. You see, we did something.”
SPEED READING
Offers
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Joann, an arts and crafts seller in crisis, filed for bankruptcy protection; after debt reorganization, the network will change into the property of creditors. (Bloomberg)
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Nelson Peltz is running an activist campaign against Disney, his investment company he was said to have suffered from investor withdrawal requests and the tension of his son Matt’s growing role. (NYT, WSJ)
Policy
The better of the rest
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“ESPN chief Jimmy Pitaro’s chaotic race to A makeover of a sports giant” (WSJ)
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Abu Dhabi’s latest efforts aimed toward change into a worldwide financial center include promising admissions for traders’ children to top-rated schools and helping hedge fund executives get into elite country clubs. (Bloomberg)
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