Thirty million dollars a quarter

Micron Technology has settled its patent war with Netlist, the small Californian memory company that has been suing it since 2021. Under agreements signed on Monday and announced by Netlist on Tuesday, the two sides drop all pending proceedings against each other and Micron takes a five-year licence to Netlist's patent portfolio, including patents on server memory modules and high-bandwidth memory. Micron will pay $30m a quarter from the fourth quarter of 2026 to the third quarter of 2031, $600m in all.

The timing is the story. On 29 September Netlist announced that it had filed a complaint at the US International Trade Commission seeking exclusion and cease-and-desist orders against Micron and three of its customers: Nvidia, Broadcom and Google. Netlist alleged that two of its patents cover at least Micron's HBM3E, HBM4 and HBM4E products, the memory stacked beside AI accelerators. Six days later Micron signed. Six days before that, on 23 September, the ITC had instituted a separate investigation into whether Micron's DDR5 server modules should be banned from import, with Supermicro, Hewlett Packard Enterprise and Lenovo named as respondents alongside Micron. ITC cases commonly reach trial within a year, Netlist noted at the time. Netlist's release does not say why Micron settled when it did. It says only that the two sides will settle and mutually release all pending legal proceedings between them. In both ITC complaints Netlist had sought orders against Micron's customers as well as Micron.

The money is small on one side of the table and large on the other. Micron reported revenue of $54.23bn for its fiscal fourth quarter, which ended on 3 September. On Komposite's arithmetic, a $30m quarterly payment is about 0.06 per cent of that. Netlist reported net sales of $109.8m and gross profit of $22.9m for its second quarter, to 27 June. One Micron instalment is larger than that quarter's entire gross profit.

Netlist's Form 8-K adds two details the release left out. The licence covers Netlist's entire worldwide patent portfolio, not just the memory-module and HBM families, and it is non-exclusive and cannot be sublicensed. Micron has also bought 10 million Netlist shares for $1m in cash, or ten cents a share, released from a lock-up in fifths on each anniversary over five years. Netlist's shares closed at $5.65 on Monday, according to RTTNews. On that price, Komposite calculates, the stake was worth about $56.5m. Netlist had 333.9 million shares outstanding in July.

That clause is not new. In August Netlist settled with Samsung on a similar template: a five-year licence, a settlement of pending cases, and 10 million shares sold to a Samsung affiliate for $1m with the same five-year lock-up. Samsung's deal was richer. It agreed to pay $239m upfront and quarterly fees of up to $32.9m for twenty quarters, set by a revenue-based formula, before Korean withholding tax. On Komposite's arithmetic that is up to about $897m gross. Samsung also gave Netlist the right to buy up to $300m of DRAM and NAND a year from it, and signed an "ITC Cooperation Agreement" under which it agreed to provide information, documents or declarations for Netlist's future ITC actions against third parties. Micron's deal has no upfront payment and, in the 8-K, no supply or cooperation agreement. Its fee is fixed rather than tied to revenue.

Netlist's chief executive, C.K. Hong, had already said what the Samsung deal was for. "The Samsung agreement established an important industry benchmark for the value of our IP," he said when the DDR5 investigation opened. "We intend to continue our enforcement efforts against unauthorized users such as Micron." On Tuesday he said: "The agreement with Micron further validates the value of our AI memory technologies."

What Netlist gave up was a jury award that was far from certain. Netlist's latest quarterly report records that on 23 May 2024 a federal jury in the Eastern District of Texas found that Micron had wilfully infringed two Netlist patents and awarded $445m. The court denied Micron's post-trial motions in June 2025 and Micron appealed. But the Patent Trial and Appeal Board had by then found claim 16 of one of the two patents unpatentable and all challenged claims of the other unpatentable. Netlist was appealing both decisions, and the appeals were scheduled for oral argument on 9 September. The company told investors that collecting the award could depend on those appeals. Micron, for its part, had filed three suits in Idaho state court accusing Netlist of asserting patents in bad faith. The 8-K says the settlement releases "all pending legal proceedings between the Company and Micron identified therein".

The market took the settlement as good news for the smaller company. Netlist shares jumped 18 per cent in early trading, Seeking Alpha reported. Micron was trading at $1,069.60 before the bell, up 0.53 per cent, according to RTTNews.

Netlist's patent fights are not over. Its own release still lists litigation with Google as a risk, and Google, Nvidia and Broadcom were named in the HBM complaint as Micron's customers. Samsung and Micron, two of the three big DRAM makers, now hold Netlist licences that run into 2031, and both pay in quarterly instalments. Micron's alone come to $120m a year. Netlist earned $1.4m of net income in its second quarter. For Micron, each quarterly payment is less than a tenth of one per cent of a quarter's sales, and the full $600m is about 1.1 per cent of one quarter's revenue, by Komposite's arithmetic.