Although Ampex was once known for its history of inventions, the latest innovation involving the Redwood City company is probably one it could do without.

In a rare move, one of the company's largest shareholders has made a hostile bid - not for the entire company, but just for its portfolio of 450 patents. The company has so far declined what is technically known as an unsolicited term sheet.

The offer is the culmination of a yearlong battle between Ampex, a company with an illustrious history now fighting for survival, and ValueVest, a San Francisco-based investment fund that owns 13.7 percent of the company's stock.

As the market for its products crumbled, Ampex has focused on identifying patents that might cover things such as digital cameras and then threatening to sue companies if they don't agree to pay licensing and royalty fees.

The strategy has had some success, but now Ampex is running out of money. ValueVest wants to buy the patents, create a new company, and invest fresh money to research which patents could form the basis of new products or a potential litigation strategy.

"There's a huge market for people attempting to purchase patents," said Ron Shulman, a patent attorney at Wilson Sonsini Goodrich & Rosati. "But I've never seen a large shareholder try to make an unsolicited offer like this."

The skirmish has thrown into doubt the future of a company that once embodied the best of the Silicon Valley mythology. Founded

in 1944, Ampex is responsible for the first commercial tape recorders. Today, the company's sole product is a data storage device used in defense systems and manufactured in Colorado.

Ampex failed to manage the transition to a digital era, and its business began to erode two decades ago. In 1987, a British investor named Edward J. Bramson bought the company for $479 million.

But Ampex continued to falter, until about three years ago. Company researchers had determined that one of its patents covered the basics of digital imaging used in just about every digital camera on the market. In 2004, companies began coughing up huge settlements and agreeing to licensing deals rather than risk lengthy and costly litigation.

As a result, Ampex reported profits of $47.1 million in 2004 on revenues of $101.5 million. In 2004, Ampex posted the single largest gain of any Silicon Valley stock, rising from 68 cents to $39.50.

But when the company went after Kodak, the biggest prize of all, the strategy unraveled. Kodak refused to settle and ultimately won a pivotal court ruling in November 2006. Ampex has appealed.

Still, the company has hundreds of other patents. What to do? It's not a simple question, and lies at the heart of the ValueVest fight.

Figuring out which patents might cover current products is a huge engineering chore that requires time and money.

Both are in short supply at Ampex.

"With patent litigation, a long time ago we could take a machine apart fairly quickly and tell you where an infringement was," said Karen Dexter, director of investor relations at Ampex. "Today, there's a question of whether you can you find it. And then can you back engineer it? And then can you prove it in court?"

Dexter said the company thought it had an plan in place that it created in partnership with with ValueVest to evaluate its patents and determine a strategy. She said the ValueVest offer came as a shock.

ValueVest is managed and co-owned by Mark B. Bakar and David Cariani. They declined to comment.

The pair began buying stock in Ampex in April 2005, just a few months after its spectacular stock run. The following year, Bakar and Cariani hired consultants to advise them about what could be done with Ampex's patent portfolio.

According to a series of letters and e-mails disclosed in securities filings by ValueVest, the fund became increasingly aggressive toward Ampex, which was still run by Bramson after almost two decades. The fund first offered to invest more money, then asked to buy the company, then finally insisted on management and board changes.

In Feb. 2007, Bramson resigned as chief executive, and the board added two ValueVest-backed directors to the board.

Since then, ValueVest's consultants have been assessing the patent portfolio, and Ampex executives thought everyone was working together toward an amicable solution.

But on July 20, ValueVest disclosed in a filing with the Securities and Exchange Commission that it had offered to buy Ampex's patent portfolio for $7 million. Based on its current market capitalization, Ampex is worth about $32.6 million. ValueVest wanted to use the patents to start a new company and would invest another $7 million in that company.

According to a subsequent filing, Ampex Chief Executive Gordon Strickland fired back an e-mail expressing his annoyance.

"I am writing to acknowledge receipt of your confidential proposal dated July 18, 2007, and to express my dismay at your determination that it was necessary to publish this proposal," he wrote. Strickland said the company could not properly evaluate ValueVest's offer until it received the report from the consultants evaluating its patent portfolio.

It's unclear what will happen next. Ampex's stock, which is thinly traded, jumped nearly 24 percent Wednesday, or $1.98, to close at $10.40.

Richard West, an analyst for Dutton Associates of Sacramento, may be the last analyst who follows Ampex's stock. No matter who wins, West is worried that the fight has put the company in a kind of limbo where no decisions or actions will be taken.

"Right now, I think everyone is waiting for someone else to do something," West said. "This whole thing has created a a vacuum. This is a company that needs some decisions, and a resolutions, if it's going to move forward."