On Friday, May 30, 2008, U.S. Court of Appeals for the Eighth Circuit affirmed the dismissal of a shareholder class action accusing nanotechnology company NVE Corp. of misrepresenting its intellectual property in a scheme to defraud investors. The court ruled that the plaintiffs’ complaint did not satisfy the pleading requirements for falsity, scienter and materiality under PSLRA. The court also denied the shareholders' claims that the district court erred in denying their request to amend their complaint since the deadline for seeking leave to amend had not passed. The lower court did not allow the amendment on the basis of futility. Circuit Judge Diana E. Murphy stated in her opinion, “Although Federal Rule of Civil Procedure 15(a) provides that leave to amend should be freely granted 'when justice so requires,' appellants have not articulated any changes they wish to make, much less demonstrated how revision would address the numerous pleading deficiencies identified by the district court.”
On August 1, 2007, the plaintiffs filed a Notice of Appeal to the Eighth Circuit Court of Appeals.
According to a press release dated July 5, 2007, NVE Corp., which makes sensors used in aerospace and automotive applications, said Thursday a Minnesota district court dismissed a consolidated class action lawsuit against the company. The complaint against NVE and certain individuals claimed NVE issued press releases with materially false and misleading statements pertaining to its computer memory technology starting on May 22, 2003. NVE licensed its MRAM technology to other companies, including Cypress Semiconductor Corp. "The court order to dismiss supports our long-standing position that the lawsuits were wholly without merit," Baker said in a statement.
On July 19, 2006, the Court entered the Order granting the motion to consolidate the cases and approve lead plaintiffs and lead plaintiffs’ selection of lead counsel. On September 18, 2006, the plaintiffs filed an Amended Consolidated Class Action Complaint, and the defendants responded by filing a motion to dismiss the Amended Consolidated Class Action Complaint. On December 26, 2006, the defendants filed an amended motion to dismiss.
The original Complaint charges defendants, NVE Corporation and certain officers and directors, with violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Specifically, the complaint alleges that during the Class Period, NVE issued a string of press releases related to Magnetic Random Access Memories (“MRAM”), which was touted as having the potential of combining the speed of semiconductor memory with the nonvolatility of magnetic disk drives -- and thus could eventually replace conventional memories. NVE primarily licensed its intellectual property (the patents it held on MRAM technology) to other companies (most notably, Cypress Semiconductor Corp.) for the development of products. NVE would then purportedly receive royalties from the licenses for, as well as revenues from its sales of, these products. However, on February 14, 2005, Cypress Semiconductor announced that the development of anything other than a small niche market for MRAM technology was not economically feasible.
The complaint further alleges that on this news, the price of the Company’s common stock began to decline from a February 11, 2005 closing price of $28.36 to a closing price of $17.04 on April 19, 2005, when the Company finally issued a press release commenting on the Cypress Semiconductor announcement. The Company’s stock price has yet to return to the February 14, 2005 price of $25.32 per share and has been trading lately at around $17.00 per share.