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Dan Loeb joins the chip wars

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A small computer chip design company, R2 Semiconductor, has scored victories in recent months in a potentially major patent fight against Intel — a dispute that could force Intel to stop selling several chip lines in Europe.

Behind R2’s legal war is one of the biggest names in hedge funds, DealBook first reported: Dan Loeb’s activist hedge fund Third Point, the company’s majority shareholder, is funding the lawsuits, including two new ones against Amazon Web Services and Fujitsu, which ‘ not previously reported.

The context: R2 sued Intel and two customers, Hewlett Packard Enterprise and Dell, in Germany, alleging the chipmaker infringed a patent on voltage regulation in semiconductors. (Intel indemnifies HPE and Dell.)

A regional court in February orders issued against the sale of at least some Intel chips. And on March 8, a higher court rejected Intel’s attempt to halt the decision. Meanwhile, a trial over the patent will begin next month in Britain.

says Intel that the R2 patent applies to older generations of its chips. But R2 and Third Point told DealBook it may also apply to current-generation Intel chips.

Third Point made the fight possible. The company first invested in R2 fifteen years ago and ultimately acquired a 75 percent stake. In addition to paying R2’s legal fees, it also plans to put the $79 million needed to be held in escrow while legal proceedings continue in Germany.

Loeb’s company could see a windfall if R2 receives royalty payments from Intel. But the financier told DealBook that he’s also trying to help Dave Fisher, R2’s founder: He compared R2 to companies like Arm that earn royalties for their cutting-edge designs. “That opportunity was taken away from Dave,” Loeb said. “We intend to correct this.”

Intel isn’t giving up. It dismissed R2 as “a shell company whose sole activity is litigation” and noted that another R2 patent had been invalidated in the US.

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 weekends, working day and night to develop something, hoping it would be stolen, and then I think you’re going to file a lawsuit against it.”

Intel, Dell and Fujitsu did not respond to requests for comment. Amazon Web Services and HPE declined to comment.

What now? The German patent court will make a final decision on the validity of R2’s claim in October. A win there could lead to a ban on affected Intel chips in Germany — just as the chipmaker is in the process of spending about $33 billion on build a new factory there.

R2 and Third Point also suggested they could bring claims against the 38 other members of the European Patent Convention.

Apple is said to be in talks to collaborate with Google in the field of artificial intelligence. The two discuss a licensing agreement that would mean Google’s Gemini models provide new features on the iPhone, according to Bloomberg; the two already have a lucrative search deal. In other AI news: Elon Musk’s xAI has released the raw computer code behind its Grok chatbot; and the Department for Homeland Security is the first federal agency to integrate generative AI across a range of divisions through partnerships with OpenAI, Anthropic and Meta.

China reports better than expected industrial growth. Beijing said this on Monday industrial production increased by 7 percent in January and February from the same time a year ago. Analysts said the data suggested the country’s struggling economy was stabilizing even as consumer demand remains weak as the government tries to meet an ambitious 5 percent annual growth target.

It’s an important week for central banks. The Bank of Japan, the Fed and the Bank of England will make decisions on interest rate policy. The drama starts on Tuesday in Tokyo, as investors speculate that the BOJ will raise interest rates for the first time since 2007. The Fed is expected to leave rates unchanged on Wednesday, but will provide clues as to whether a cut is in the works in June.

The donors and opponents of a bill that could ban TikTok in the U.S. is in effect, putting their case ahead of a possible vote in the Senate. One thing is missing: any indication that America’s allies will follow suit, especially in Europe, which has traditionally suffered greatly from Big Tech.

The divide shows that many don’t think TikTok or China pose a similar threat, and also reveals a broader view on social media regulation that could worry the app’s U.S. rivals.

Several countries have implemented limited TikTok bans. The European Union and others have banned this stopping state workers from using the app on government apparatus. Canada said last week that this was the case launched a national security investigation in TikTok’s expansion plans there. But the governments generally haven’t told the public to avoid it.

Europe does not see TikTok as a security threat. That means there is less political will to rein it in, says Max Schrems, an Austrian lawyer who is pursuing US social networks over their handling of user data. One reason: the relatively small reach of the app. The vast majority of user data flows to U.S. tech companies, he said. “TikTok is really for teenagers, and that’s it,” Schrems told DealBook, saying Europeans are more likely to use WhatsApp or Instagram.

EU data protection and market rules cover the whole range of social media instead of individual apps. Supervisors are already using it: last month the bloc opened an investigation aimed at TikTok’s addictive algorithm. “There are certainly things that set TikTok apart from others, yet many of the risks discussed about TikTok apply to other platforms as well,” Julian Jaursch, a tech policy expert at the think tank Stiftung Neue Verantwortung, told me. to DealBook. (Some in the US are insist on a similarly broad approach.)

Europe is also divided over China – a far cry from Washington, where the two sides agree that China is a threat. EU countries with strong trade ties with China are keen to maintain their ties. “This makes it very difficult for Brussels to reach the consensus needed to take tough measures that exclude China itself or leading Chinese companies,” Max von Thun of the Open Markets Institute, a competition policy think tank, told DealBook.

If the bill becomes law, that could change.

Donald Trump is ahead of President Biden in many polls, but he is badly behind in terms of cash. The Biden campaign announced Sunday that it had $155 million in cash on hand, dwarfed by what the Trump camp and the Republican National Committee likely have.

That has made the former president’s fundraising more urgent, The Times reports, including recruiting deep-pocketed backers.

Trump’s legal battle is weighing on his campaign. He has used his campaign to fund his defense in half a dozen battles in federal and state courts. Costs are rising: He recently posted a $91.6 million bond in the E. Jean Carroll defamation case, and must post a $450 million bond in the New York civil fraud case against his companies.

In a sign of the campaign’s financial troubles, at least two donors who made seven-figure pledges to Trump have been asked for millions more.

The former president tries to reach potential donors, also during private dinners at Mar-a-Lago in Florida. He has also opened a new joint fundraising account with the RNC (now co-led by his daughter-in-law) and state parties to raise significant sums.

One potential leverage point: The 2017 tax cuts he signed into law expire in 2025, and Biden has said he will not extend them for the nation’s highest earners.

Those he has spoken to recently include: Larry Ellison, co-founder of Oracle; Pepe Fanjul, the sugar magnate; John Paulson, the hedge fund manager; Steve Wynn, the casino magnate; Woody Johnson, the owner of the New York Jets; Jeff Yass, a billionaire investor in TikTok’s parent company; and Elon Musk (although he has said that he will not give to either Biden or Trump).

  • In other election news: Robert Kennedy Jr. will likely choose Nicole Shanahan, an entrepreneur who paid for a Super Bowl ad promoting his independent presidential candidate (and the ex-wife of Google co-founder Sergey Brin), as his running mate. And Trump’s economic advisers reportedly presented him three candidates for the Fed chairmanship: Kevin Warsh, Kevin Hassett and Arthur Laffer.

In response to Andrew’s question last week, DealBook readers had plenty to say about the debate over whether raising banks’ capital requirements could avert the next crisis. Here’s an example of the responses:

  • Sanford M. Brown, a financial services attorney, is concerned that higher capital requirements could impact hiring: “As banking becomes less attractive to investors, it will also become less attractive to employees, and I’m not sure we have a of the key drivers of the American economy are less attractive to the best and brightest our country has to offer.”

  • Carter Dougherty, the communications director at Americans for Financial Reform (and a former reporter for The Times), has less of a problem with this: “With executive pay tied to bank stock prices, you realize the incredibly self-interested case the banking lobby makes against more equity: it reduces pay for bankers.”

  • Chris Kotowski, a Wall Street analyst, says the debate leaves out important nuances: “You have to look at dozens of different ratios and exposures to get a handle on asset quality, liquidity and market risk, but capital boils down to one single number, and That’s why both politicians and regulators always like to pull the ‘C’ lever. They can say, “Hey, it used to be 6%, now it’s 12%. Look, we did something. ”

Offers

  • Joann, the controversial arts and crafts dealer, filed for bankruptcy protection; the chain will be owned by the creditors after reorganizing the debts. (Bloomberg)

  • While Nelson Peltz continues his activist campaign against Disney, his investment company reportedly suffered of investors’ withdrawal requests and the tension over the growing role of his son Matt. (NYT, WSJ)

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