Rambus dips further; judge questions patents
Friday March 16 05:31 PM ET
By Timna Tanners
LOS ANGELES (Reuters) - Shares of memory chip technology company Rambus (RMBS) fell hard for a second consecutive day today, after a Virginia judge questioned the scope of Rambus' patents in a pre-trial ruling.
Rambus stock lost 34 percent or $8.29, to $15.80 on the Nasdaq amidst a wider market sell-off. Shares hit their lowest level since October 1999.
Those losses add to a 32 percent decline on Thursday amid rumors that the decision had already been released and had been negative for Rambus.
In a pre-trial ruling in the lawsuit with Infineon Technologies (IFX), U.S. District Court Judge Robert Payne said Rambus' definitions of key terms defining the scope of their patents were not supported by claims made by inventors in seeking the patents.
A decision against Rambus in the Infineon case would preclude Infineon from paying Rambus royalty payments on SDRAM technology. The trial is scheduled to start on April 10.
The bulk of Rambus' revenues are composed of royalty payments from the chipmakers who use its synchronous dynamic random access memory (SDRAM) and Rambus dynamic random access memory (RDRAM) technology.
Rambus is engaged in lawsuits with several chip makers who use SDRAM, a slower and cheaper option to its proprietary technology, that Rambus says infringes on its patents. Six of the 10 chip makers who use SDRAM have agreed to pay Rambus.
"I think the Street is extrapolating somewhat that this will mean Rambus will lose this one, and some of the existing relationships related to non-Rambus technology will be retroactively invalidated," J.P. Morgan analyst Eric Chen said.
He said that roughly 50 percent of Rambus royalty payments come from SDRAM, with the other half from Rambus's proprietary technology.
"If you assume all the non-Rambus (proprietary) income would disappear overnight, then the stock's bottom level should be $17, according to our analysis," Chen said.
In a worst-case scenario, a negative ruling for Rambus could also nix pending cases in which Rambus is suing to collect royalties from Hyundai Electronics and Micron Technology (MU), and could negate other SDRAM royalty payments, said Chen.
JUDGE QUESTIONS PATENTS SCOPE
In the ruling, released by the court clerk's office on Friday, Judge Payne said Rambus had a "general, and disturbing, tendency ... to distance its current constructions from what the inventors said in making the claims ..."
Payne, who is hearing Rambus' claims that Infineon infringed on four of its patents, said testimony from Rambus's expert, "was generally at odds with the statements made by the inventors in the (patent) claims and specifications."
Rambus in a terse statement said it maintained its allegations that Infineon had infringed on the four patents. Company spokeswoman Kristine Wiseman said the judge's ruling was not a setback but declined to comment on the implications of the ruling for Rambus.
J.P. Morgan's Chen noted that the judge had not yet decided on the suit. "I certainly wouldn't go so far as extrapolating it as (Rambus) having lost, or that they will lose ongoing legal battles or ones already settled."
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