stockcharts.com[h,a]daclyimy[d19980501,20010510][pb50!b200!f][vc60][iut!ub14!la12,26,9!lp14,3,3!lf!lc20!lg]
What's next for Rambus?
By Ken Popovich, eWEEK
May 10, 2001 12:19 PM ET
In a major setback for Rambus Inc., a federal jury this week found the company guilty of fraud in its efforts to claim rights to a popular memory technology, awarding $3.5 million to German chip maker Infineon Technologies AG.
The ruling was a stinging rebuke for Rambus, which initiated the litigation in U.S. District Court in Richmond, Va., accusing Infineon of infringing on patents related to synchronous DRAM, a memory technology found in most PCs today, and double-data-rate (DDR) DRAM.
While Rambus is known for its self-branded technology, called RDRAM, currently packaged with Intel Corp.'s Pentium 4 processors, the company also claims its patents cover the more widely used and less-costly SDRAM.
Last week, Rambus lost an important judgement when the court dismissed its patent infringement claims against Infineon, a ruling Rambus immediately appealed.
This week, the court heard Infineon's countersuit, in which the German company accused Rambus of having improperly based its patents on information it obtained from trade group meetings to develop open industry standards.
The meetings were held during the early '90s by the Joint Electronic Devices Engineering Council.
"We said that Rambus attended JEDEC meetings and then drafted the (patent) claims onto the JEDEC standard intentionally, and the jury agreed with us," said John Desmarais of the law firm Kirkland & Ellis, which represents Infineon.
Rambus, based in Los Altos, Calif., said it would appeal the fraud ruling and planned to continue pursuing legal action against memory makers to enforce its patents.
"We will vigorously defend our patent rights against any company that attempts to use our innovations without compensation," said Geoff Tate, the company's CEO, in a statement issued following the verdict.
In rejecting the fraud ruling, Tate also admitted that rules governing the JEDEC meetings were "confusing."
"Rambus abided by JEDEC's rules," Tate said, "despite the fact that these rules have been shown to be confusing, conflicting, poorly communicated and generally not complied with by other JEDEC members."
Sound familiar?
This isn't the first time memory makers have accused Rambus of abusing its access to JEDEC meetings.
In March 2000, Hitachi Ltd. laid out similar allegations in a countersuit after Rambus took the Tokyo-based company to court over claims of patent infringements.
"Instead of participating in the JEDEC standard-setting process in good faith, Rambus subverted the process," Hitachi claimed in its filing at the time.
But the case was settled out of court, with Hitachi agreeing to make undisclosed royalty payments. Analysts speculated that Hitachi was pressured to settle in order to clear the way for a merger of its DRAM business unit with NEC Corp.
Over the last year, Rambus also secured contracts with Samsung, NEC, Toshiba and Oki Electric.
But other major memory makers aside from Infineon have balked at paying royalties to Rambus, including Micron Technologies and Hyundai Electronics Industries (which recently changed its name to Hynix Semiconductor).
"I would assume it's not over yet," said Sherry Garber, vice president of Semico Research in Phoenix, following this week's ruling. "But it's a very big decision."
While cross-licensing and patent agreements are commonplace among memory makers, Rambus' efforts to seek royalties was unusual, Garber said, since DRAM makers felt the company took advantage of them.
"One of the things that has kept the development of DRAM progressing is the JEDEC committee and the amount of information that's shared," Garber said. "They didn't go out and patent technology and try to hold the industry hostage."
Others off the hook?
While it's unclear how long it could take before the court hears Rambus' appeal, the more immediate threat to the company is that the judgment could spur those who have already agreed to pay Rambus royalties to stop making payments.
"According to testimony that came out Monday, Samsung's agreement has a clause that says if the patents are held to be unenforceable, then Samsung is off the hook on paying royal-ties," said Nathan Brookwood, principal analyst with Insight 64 in Saratoga, Calif. "That raises the question whether the current court decision counts or whether a ruling has to be made at another level."
Overall, while Rambus has its own undisputed proprietary technology to fall back on, RDRAM, the company's future may hinge on drawing revenues from SDRAM sales.
"Originally, their hope was that RDRAM was going to take over the volume segment of memory market, which hasn't happened," Brookwood said. "There are still a lot of people who believe that it will eventually. Certainly Intel believes that. ... But SDRAM is still the leader right now and it's hard to predict how it will play out."
In testimony last week, Rambus executives revealed that the company was seeking to charge a 3.5 percent royalty on DDR DRAM.
Rambus executives disclosed that the company charges memory chip makers a 0.75 percent royalty on SDRAM chips and a 3.5 percent royalty on DDR DRAM.
Mark Edelstone, a market analyst with Morgan Stanley Dean Witter in New York, estimated that Rambus could earn up to $1 billion a year by 2003 through its licensing agreements -- but that those earnings projections hinged on how the Infineon case is resolved.
"If Rambus loses the Infineon case, the stock loses its catalyst," Edelstone said in a statement earlier this week. |
