pomp:
Even Jack the Ripper is seeing one of the reasons why the Bus is making roadkill out of MU today
ebns.com
OEMs urged to examine supply contracts as Rambus asserts patent position
By Jack Robertson and Andrew MacLellan
Electronic Buyers' News
(09/01/00, 09:34:14 PM EST)
Rambus Inc.'s royalty campaign should be placing PC makers and other OEMs on alert, according to observers, who urge companies to protect themselves by insisting on air-tight clauses in their supply contracts.
Such indemnity clauses are routine in most purchase agreements, and come in the form of broad, catch-all phrasing, or boilerplate. But while such language typically serves as a legal fire wall, OEMs would be advised to cover themselves in the event their vendor is charged with intellectual-property violations.
“[My] advice, which is unfortunately retroactive, is the first thing you do when you buy anything from a supplier is to have a warranty and indemnity clause,” said James M. Burger, an attorney at Dow, Lohnes & Albertson PLLC, Washington, D.C.
Rambus, Mountain View, Calif., has caused a stir with its licensing crusade, in which it laid claim to the synchronous interface used to connect a huge number of memory devices, microprocessors, and core-logic chipsets. While a variety of components could fall under the company's legal scrutiny, it has chosen so far to focus on vendors making SDRAM and double-data-rate SDRAM.
By forcing suppliers into licensing contracts, Rambus would reap a royalty windfall from the billions of SDRAM chips sold each year. More to the point, by padding SDRAM tags, the company could offset the price of its proprietary, but costly, Direct Rambus DRAM interface, according to Danny Lam, an analyst at Fisher-Holstein Inc., Wilmington, Del.
Adding teeth to its licensing plan, Rambus is suing Infineon Technologies AG over the German chip maker's refusal to negotiate terms. Put on the defensive, the DRAM industry responded last week with separate complaints filed by Micron Technology Inc. and Hyundai Electronics Industries Co. Ltd.
But why should OEMs concern themselves with a squabble between suppliers and a lone IP design house? The answer rests both with an earlier lawsuit initiated by Rambus and with the potential turmoil a series of protracted legal battles could introduce to the DRAM market.
In January, Rambus charged Hitachi Ltd. with unauthorized use of its synchronous interface in SDRAM, DDR SDRAM, and the Super-H family of microprocessors. In a surprise, Rambus also named Sega Enterprises Ltd. as a defendant, because it uses the SH processors in its Dreamcast game console.
Though all charges were dropped after Hitachi agreed to an out-of-court settlement, Rambus' willingness to involve a leading Hitachi customer in the complaint sent shock waves through the industry.
“It's one thing to pay royalties, but another to receive an injunction where you have a warehouse of chips you can't use,” said Gene Tabachnick, a Pittsburgh-based attorney who specializes in intellectual-property law.
And until Rambus' patents are either invalidated or honored by every DRAM maker, OEMs face a dilemma: risk legal incrimination by buying SDRAM-based chips, or pay a premium for Direct RDRAM.
“Quite often the customers are left out of the fray while the big boys duke it out,” Tabachnick said. “But maybe the last thing Rambus wants to do is sue customers and lose them as potential customers, which is not uncommon in patent litigation.”
PC OEMs face an additional issue unfolding around Intel Corp.'s decision to widen its patent suit against Via Technologies Inc. over Via's use of Intel technology in chipsets that support Athlon processors. The Athlon, made by Advanced Micro Devices Inc., is expected to be a big driver of DDR SDRAM sales next year.
Of course, the issue is not so stark, and the likelihood that Rambus -- or Intel for that matter -- would begin issuing subpoenas and risk alienating customers is remote. But OEMs looking to guard themselves would do well to examine their supply contracts.
Burger suggested contracts meet three criteria: that an indemnification clause be present; that the clause be distinct and not part of the contract's limitation of liability or exclusion of damages clause; and that it include provisions to cover legal costs, travel, and related expenses.
“We use boilerplate because there's no need to reinvent the wheel. The standard stuff we use works,” Burger said. “But every company is in a unique position and they should make sure they look at their indemnity agreements.”
Suppliers may be less than eager to take on any added liability, Burger noted, and OEMs already locked into contracts may have little negotiating room. However, where possible, Tabachnick suggested OEMs buying SDRAM include an indemnification clause that expressively identifies the patent litigation.
As the DRAM supply base decides its next move, OEMs may still encounter an unsettled market if a large-scale legal battle erupts. Bob Merritt, an analyst at Semico Research Corp. in Redwood City, Calif., said OEMs who are already trying to keep up with rapid technology changes are loathe to confront new uncertainty surrounding the legal state of their memory chips.
“OEMs already were facing confusing decisions over an array of memory choices in designing PCs for next year,” he said. “The escalating legal battle over Rambus synchronous DRAM patents only makes their memory decisions more complex.”
Additional reporting by Bruce Gain |
