DRAM lawsuits put Rambus under siege
Sep. 01, 2000 (Electronic Engineering Times - CMP via COMTEX) -- SAN MATEO,
CALIF. - Rambus Inc. was once the darling of the memory world, with a
proprietary, high-bandwidth architecture anointed as the future of PC main
memory by Intel Corp. But under nagging cost pressures and rising legal
disputes, the tide is turning.
Intel executives took a neutral stance on memory architectures late last month,
and last week two memory-chip makers went on the attack against Rambus rather
than pay royalties on patents that Rambus claims cover both RDRAMs and competing
synchronous DRAMs.
Micron Technology Inc. and Hyundai Electronics Industries Co. Ltd. filed
separate lawsuits against Rambus, claiming that several of the company's memory
patents are invalid. Both actions stemmed from attempts by Rambus to seek
royalties from the two companies for SDRAM sales, based on the notion that
Micron and Hyundai designs infringe Rambus' patents. Micron also asserts that
Rambus' actions have been anticompetitive and is accusing the company of
antitrust violations. Although the suits are similar, both plaintiffs said there
is no relation between them.
"Our basic complaint against Rambus is that the patents they are accusing us of
infringing upon are invalid and unenforceable," said Jerold Olson, director of
corporate affairs for Hyundai's American branch in San Jose, Calif. Hyundai
filed its suit on Aug. 29 in U.S. District Court in San Jose.
The suit filed by Micron echoes that sentiment and asserts that "Rambus has
engaged in illegal and anti-competitive acts to acquire and maintain control
over the SDRAM technology market." The Micron case was filed on Aug. 28 in U.S.
District Court in Delaware.
Rambus had earlier contacted both companies to negotiate for royalties based on
SDRAM technology. Although the main technology developed by Rambus is a
high-speed chip-to-chip interface, the company contends that fundamental SDRAM
architectures use techniques that are covered in its RDRAM patents. It had thus
asked Micron and Hyundai to agree to pay a per-chip royalty on all SDRAM sales.
One source, a former Rambus employee who remains closely related to the company,
said while Rambus holds patents relating to single-data-rate SDRAM, its most
valuable intellectual property relates to double-data-rate technology.
"Rambus developed key technologies, starting in 1990, which are fundamental to
double-data-rate memory technology, including delay lock loops, low-impedance
packaging and other technologies. Rambus taught the DRAM industry how to do
these things for RDRAMs, only to see certain companies adopt the technology for
DDR DRAMs," the source claimed.
When Rambus saw companies such as Micron take the Rambus technology and push DDR
SDRAMs, Rambus opted to assert its IP, he argued.
He theorized that if Rambus had succeeded in establishing the RDRAM technology
in the market, the push for DDR SDRAM would have been much weaker from the DRAM
companies. In that scenario, Rambus would have recognized that it had more to
gain from establishing RDRAM than from taking the DDR proponents to court.
Rambus has already successfully pursued SDRAM actions against Toshiba, Oki and
Hitachi, all of which have come to agreements with Rambus in recent months.
Details of those deals remain confidential.
But relations between Rambus and Micron, the only SDRAM producer based in the
United States, have been rancorous for years. Micron pushed the Synclink (later
the SL-DRAM technology) Consortium. While Micron has supported an RDRAM
development effort, in part funded by a $500 strategic investment from Intel,
the heart of its focus has been DDR technology.
"This is all about control and power," the former Rambus employee said "Who
controls DRAM technology is a lot more important to Micron than the basic
economics."
Once Rambus began demanding patent-licensing agreements early this year, what
had been rancor turned to outright wrath in the DRAM industry. "I think Rambus
is doing a wonderful job of bashing themselves," said Sherry Garber, memory
analyst and senior vice president with Semico Research Corp. (Phoenix). She said
she wasn't surprised to see the lawsuits.
Hyundai's Olson said a key element of the case revolves around industry trade
group Jedec, which has long been a forum for different companies to introduce
technological elements that are adopted as part of industry-wide, open
standards. Hyundai contends that Rambus participated in the group but that it
later patented some of the ideas that were used to create the SDRAM format.
"They either patented material that they learned about from Jedec, or they had
their own patents in process and did not disclose them at the time that they
were discussed at Jedec," he said.
Steve Cullen, principal analyst for memories at Cahners In-Stat Group, noted
that some of the Rambus patents in question were initially filed with the
government back in the early 1990s but later amended. "Some of the DRAM
companies have inferred that the reason for the amendment is that they [Rambus]
were hustling some of the Jedec information into those patents," he said.
A Rambus spokeswoman declined to respond to any of those allegations. But in
public statements released last week, the company said it is preparing a
response to the two lawsuits and that it expects to prevail in the litigation.
Cullen said the suits were not unexpected. While Rambus has touted its
agreements with Toshiba, Hitachi and Oki as vindication for its position that
its RDRAM patents also cover SDRAM architecture, Cullen noted that both Oki and
Hitachi have been moving to de-emphasize their SDRAM positions, which would
minimize the size of any royalty payments they would have to make. Hitachi is
also poised to complete a merger of its DRAM business with NEC Corp.'s, and
Cullen said that the Hitachi royalty agreement with Rambus may not be valid once
that deal is in place toward the end of this year. He said the companies may
have signed the agreements because the pacts were the least expensive way to
deal with Rambus' contentions, not because they agreed with Rambus' position.
While Toshiba sells a significant amount of SDRAM, it is also one of only two
memory chip vendors that is also selling RDRAM devices in any kind of volume.
Because the terms of the agreements remain confidential, Cullen again speculated
that Toshiba may have received very favorable terms and that the ability to tout
the Toshiba deal may be of more value to Rambus than any cash payments it is
receiving.
In contrast, Micron and Hyundai are two of the biggest SDRAM vendors, and a
royalty rate of even 1 or 2 percent on their total chip output could represent a
huge sum. "These are the companies that stand to have the biggest cash drain
from any royalty on SDRAM," he said. "It's pretty clear that they will fight to
the bitter end to avoid that."
Samsung, like Toshiba, also produces RDRAM in volume and may not necessarily be
asked to sign the same type of royalty agreement that Rambus has pursued against
Micron and Hyundai. Both Micron and Hyundai hold RDRAM licensing agreements, but
Micron is not producing any of the chips now, while Hyundai's Olson said RDRAM
represents less than 3 percent of its output this year.
The actions come as RDRAM's ascension to mainstream status-once considered
inevitable-has been called into doubt. Although the chips' bandwidth is higher
than that of standard SDRAM, they are difficult to produce, and most vendors
have seen lower yields than with their mainstay memory products. The chips'
larger die sizes and the expensive R&D efforts required to build them have
further conspired to keep Rambus prices high.
Speaking at the Intel Developer Forum two weeks ago, Avo Kanadjian, vice
president of marketing at Rambus, said that a 128-Mbyte module using RDRAM chips
now costs between $220 and $250. He estimated the premium for a Rambus memory
module over an SDRAM module at $100. Kanadjian expects to see that premium
shrink to 5 percent over SDRAM prices as DRAM vendors move to 256-Mbit RDRAM
chips.
Analyst Garber estimates that RDRAM sales will represent only 0.8 percent of the
total memory market this year, or some 35 million discrete units. That figure
will rise to just 1.3 percent next year, or some 58 million chips. A year ago,
when the future of RDRAM deployment seemed more rosy, she was estimating that 80
million RDRAM chips would ship this year and 150 million in 2001.
"We expected to see some limited success in the high end of PCs, but that simply
has not materialized," she said.
At present, only Samsung and Toshiba are producing the devices. Most of
Toshiba's output is committed to Sony for the Playstation 2 systems, which
consume 32 Mbytes of RDRAM each, so Samsung is the only vendor that can support
a PC OEM in high volume.
With no viable second source, PC vendors are skittish about designing RDRAM into
their platforms, and it appears some may be selling off inventories.
Complicating matters, Intel appears to be backing away from Rambus. Earlier this
year, the company was insisting that its upcoming Pentium 4 chip would only run
in systems also using RDRAM. But Intel recently reversed that position and is
developing a chip set to link the Pentium 4 with standard SDRAM, and at least
two of the independent Taiwanese chip set vendors are designing product that
will link the processor to DDR SDRAM.
At the Intel Developer Forum, Intel CEO Craig Barrett said RDRAM remains the
preferred memory format for the chip but that it would be "up to the
marketplace" to decide the mainstream memory solution of the next few
years.-Additional reporting by David Lammers.
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