Rambus Goes on the Warpath
Strikes back at Micron, Hyundai, hits Infineon again
By Steven Fyffe and Paul Kallender
Rambus Inc. dropped a series of legal bombs accross the globe last week, blasting Micron Technology Inc. and Hyundai Electronics Industries Co. Ltd. in Europe and the United States with countersuits, and redoubling its attacks on Infineon Technology AG.
Rambus also announced a victory of sorts, as the fourth-largest memory maker NEC Corp. agreed to license the SDRAM and double data rate (DDR) technology that Rambus claims it invented.
Rambus started the week with a bang, launching off lawsuits against Micron and Hyundai in Germany and petitioning a French court for a seizure order against the two companies on Monday. It took a week for the Mountain View, Calif.-based intellectual property (IP) company's army of attorneys to swing into action following Micron and Hyundai's legal broadsides last month, with which both seek to squash Rambus' patent claims on widely used SDRAM and DDR chips and interfaces.
But perhaps the biggest bomb was the complaint Rambus filed against Hyundai with the U.S. International Trade Commission (ITC) on the same day. The complaint claims Hyundai has "engaged in unfair acts ... through unlicensed importation ... and sale" of SDRAM and DDR, and asks the ITC to stop Hyundai from importing SDRAM and DDR into the United States immediately.
If the ITC upholds the complaint and Hyundai is shut out of the United States, the entire U.S. PC market would suffer, according to Bert McComas, founder and principal analyst at InQuest, a market research firm.
"The ripple effect is horrific," McComas said. "What happens if you shut down the second-largest Korean electronics firm and stop it from importing its highest-revenue product on which all U.S. manufacturers are dependent? You shut down 15 percent of the DRAM supply coming into the United States and (then) all the DRAM goes to Taiwan. The price of DRAM plummets in the rest of the world and in the United States it goes through the roof. It could turn out to be a messy thing."
This is not the first time Rambus has asked the ITC to punish foreign memory makers who refuse to consent to pay it royalties. Earlier in the year, Rambus lodged a similar complaint against Japan's Hitachi, asking the ITC to stop imports of Sega's Dreamcast game console on the grounds that the SDRAM interface inside, made by Hitachi, violated Rambus' patents. Hitachi capitulated soon after and inked an out-of-court licensing deal with Rambus covering SDRAM and DDR, but refused to admit that Rambus owned the rights to SDRAM or DDR.
Rambus is hoping the tactic will work again with Hyundai, according to Nathan Brookwood, principal analyst at Insight 64. "The ITC moves a little bit more quickly than the courts, and if they could in fact stop imports, that puts an awful lot of pressure on the other side to settle," Brookwood said. "The threat of ITC action seems to have played a big role in getting Hitachi to settle. Clearly Rambus is trying every possible avenue to drive its point home."
Rambus said it expects the ITC case against Hyundai to come to trial in six to eight months.
Hyundai put on a brave face in spite of the threat. "We're not going to back down from our original filing," said Jerold Olson, director of corporate affairs at Hyundai. "If the ITC upheld their filing, then we would be blocked from selling SDRAM and DDR in the United States. That would be something we wish to avoid. We are concerned, but we don't believe that it will happen. We continue to believe that their patents are unenforceable and invalid."
Micron was undeterred by Rambus' counterstrike. "For us at Micron, it's business as usual … we're just moving forward," a Micron spokesman said.
Geoff Tate, Rambus' chief executive officer, recited what has become the litigious IP company's mantra in a statement issued last week. "IP is our business and we will not hesitate to protect our IP when it is being used without a license," Tate said.
For an encore, Rambus followed up on Tuesday with an announcement that NEC had signed a licensing deal covering SDRAM, DDR and next-generation direct Rambus DRAM (RDRAM).
Analysts' opinions were divided over the importance of the deal. On one hand, Jim Handy from GartnerGroup Inc.'s Dataquest unit said the NEC signing was a coup for Rambus. Now, with NEC, Hitachi, Oki and Toshiba all signed up, Rambus has about 22 percent of the memory market as it stood in 1999 sewn up, he said. "It seems like the Rambus licensing effort is snowballing. NEC is the fourth-largest DRAM manufacturer, and this is the first time we have seen someone of that level sign," Handy said.
But appearances can be deceptive, Insight 64's Brookwood said. The agreement was little more than a stopgap measure to grease the wheels as NEC's memory division joins with Hitachi to create a new memory company on Jan. 1, he said. "Come the end of the year when NEC effectively exits the DRAM business, I'm not sure that the agreement has much value," Brookwood said. "It does create, at least at first glance, the appearance of a trend—big DRAM companies going along with Rambus' demands for royalties. But I don't think it really means that."
An NEC spokesman said the as-yet-unnamed joint venture would have to negotiate its own deal with Rambus, but some aspects of the NEC deal might be extended to the new company. "The deal is not just a three-month deal," he said. "I would be surprised if it was just a stopgap measure. There are some elements we have to have if we are going to be producing Rambus logic interfaces. The relationship with Rambus is a long and very complicated one."
Rambus also said it filed a patent infringement suit in England on Tuesday.
Rambus rounded off a busy week with a renewed legal attack on Infineon. Late on Wednesday, Rambus announced it was seeking injunctions to stop Infineon from making and selling SDRAM and DDR. A trial date has been set for Dec. 22 in the District Court of Mannheim, Germany.
Rambus had already filed suit against Infineon in the Eastern District Court of Virginia in August.
Rambus' latest move was part of a strategy to force Infineon back to the bargaining table, said Chaz De La Garza, a partner with the law firm of Fulbright & Jaworski in Austin. If Rambus was successful in gaining an injunction, it would put Infineon "in a world of hurt" as the company would be unable to ship parts until it had proven that it had not infringed Rambus' patent, he said.
Moving to Europe could certainly speed up proceedings, as German courts in particular require far less discovery than their U.S. counterparts, he said. Similarly, the ITC has a statutory period after which cases must come to trial and has a reputation for working fast, De La Garza said.
Legal teams from all the warring DRAM factions are now trying to outflank each other and stake out the higher ground, Handy said. Rambus may feel stronger in Germany because its patents there are several years older than its U.S. patents, he said. When Rambus originally applied for patents, the German ones sailed through, while the U.S. patents were mired for years in a bureaucratic backlog, he said.
"It makes it very hard for Infineon ... to look clean," Handy said.
The move was also an attempt to show that Rambus has not been guilty of "submarine patents," Handy said. Micron's antitrust case against Rambus hinges on the accusation that Rambus took patents on SDRAM and DDR that were being established as open standards by the Joint Electron Device Engineering Council (JEDEC) and filed them behind the other members' backs.
Rambus rebuffed the claims at its Developer Forum in San Jose last week, saying it had informed JEDEC of its 1990 patent applications. Memory makers who fought Rambus in court would pay more for licensing fees, warned Neil Steinberg, vice president of IP at Rambus.
Extending the fight against Infineon to Germany was a way for Rambus to cover all its bases, said Marc E. Brown, a partner and IP expert at Oppenheimer, Wolff & Donnelly LLP, a law firm in Los Angeles. Even if Rambus beat Infineon in the United States, the court's ruling would only cover U.S. patents. It would not stop Infineon selling the "offending" parts under German patents, he said.
As far as Hyundai is concerned, Rambus is trying to avoid a fight with Micron on its home turf at all costs, choosing instead to attack the U.S.-based company in the European courts, Hyundai's Olson said. But Rambus thinks it has the home-court advantage over Korea-based Hyundai, he said.
"The interesting point is there's been no U.S. retaliation against Micron. (Rambus) hasn't countersued here," Olson said.
Rambus' ambitious DRAM land-grab is a desperate effort to keep revenue rolling in now that Intel Corp. has reneged on its promise to use RDRAM as the only memory in its forthcoming Pentium 4, according to Brian Matas, vice president of market research at IC Insights, Scottsdale, Ariz. |
