Rambus Inc, a designer of high-speed computer chips, is confronting Infineon Technologies AG in court in the first of a series of trials that may yield US$1 billion in patent fees and royalties.
At issue are rights Rambus claims to technology covering almost every type of memory chip for personal computers and other electronic devices. Jury selection began Friday in federal court in Richmond, Virginia.
Rambus, which doesn't make chips itself, licenses its technology to companies such as leading chipmaker Intel Corp, which uses Rambus designs in Pentium 4 microprocessors, and Sony Corp, maker of the PlayStation video-game console.
Rambus executives have been ``very aggressive in protecting their intellectual property,'' said analyst Eric de Graaf of ING Barings Research in Amsterdam, who has a ``hold'' recommendation on the company's stock.
``If they let that slip, they'll run out of business.''
The Los Altos, California-based company sued Infineon, a unit of Siemens AG, last August, contending the German chipmaker infringed Rambus's patented technology for DRAM chips -- dynamic random access memory chips -- used in bank teller machines, cash registers, computer servers and telephone systems.
``If Rambus wins this one, the share price will probably double or triple because that makes them a very serious player,'' de Graaf said.
Rambus says its technology ``applies to virtually all'' of the US$30 billion-a-year DRAM market, said Nathan Brookwood, a chip analyst for Insight 64 marketing and consulting in California.
Rambus seeks unspecified damages and an injunction from US District Judge Robert Payne to stop its larger rival from using the inventions.
Infineon, 71 percent owned by German electronics giant Siemens, says the patents aren't valid, represent old technology and weren't properly described to patent examiners.
Infineon also said Rambus lost patent rights because it used spies -- code-named Secret Squirrel and Deep Throat -- to attend meetings of the Joint Electronic Device Engineering Council, a memory-chip standards committee.
Rambus relied on this information to obtain some patents on memory-chip designs that have become industry standards, Infineon claims.
Companies representing almost half the world's memory chip sales have settled with Rambus and obtained technology licenses.
They include Hitachi Ltd, NEC Corp, Samsung Electronics Co, Mitsubishi Electric Corp, Oki Electric Industry Corp, Elpida Memory Inc, Matsushita Electric Industrial Co Ltd and Toshiba Corp.
The three holdouts are Infineon, Micron Technology Inc and Hynix Semiconductor, who claim that Rambus's definition of infringing memory chips is too broad, said Insight 64's Brookwood. ``They don't like to pay royalties,'' he said.
Rambus has also sued the three companies in Europe.
In the US, Rambus faces suits by Hynix in California and by Micron in Delaware -- alleging that it misled the chip standards group.
With favorable verdicts, ``Rambus will have the opportunity to collect from 1 percent to 5 percent royalties on billions worth of chips,'' selling for US$35 to US$1,000 or more each, Brookwood said.
In reporting fiscal second-quarter earnings last week, Rambus said costs of litigation ``increased sharply'' to US$7.3 million from US$4.3 million in the first quarter.
Rambus Chief Executive Geoff Tate said in a statement that US$23.6 million in quarterly royalty revenue ``far exceeds'' the company's court costs.
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