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Fri, Aug 04, 2006 - Page 10 News List

Rambus guilty of deceit in patent case

CONTROL BID The US Federal Trade Commission found the company secretly amended patent applications to ensure they would meet an industry standard

BLOOMBERG

Rambus Inc engaged in "deceptive conduct" in a bid to control patents for high-speed computer-memory chips, the US Federal Trade Commission said in a ruling that may reduce the company's ability to collect royalties. Rambus shares fell 26 percent, the most in four years.

The full commission said today that Rambus unlawfully monopolized four aspects of the industry standard for memory chips. The 5-0 ruling overturned an agency judge's previous decision to dismiss the case. Rambus said it will appeal.

Rambus, which gets more than 80 percent of revenue from royalties, was accused of attending industry standard-setting meetings in the early 1990s and then secretly amending patent applications to ensure they would meet the standard. The FTC rejected Rambus' argument that it was the victim of an industry that colluded to steal the company's technology.

"Rambus was able to distort the standard-setting process and engage in anticompetitive `hold up' of the computer memory industry," the FTC said in its decision. "Conduct of this sort has grave implications for competition."

Rambus shares fell US$4.33, or 26 percent, to US$12.65 at 4pm New York time in NASDAQ Stock Market composite trading after falling as low as US$11.80. Today's drop was the biggest since a 36 percent drop on June 19, 2002, when the FTC filed its complaint.

In South Korea, top computer memory maker Samsung Electronics Co rose as much as 1.6 percent, while Hynix Semiconductor Inc gained as much as 2.6 percent In Taiwan, shares of chip producers including Nanya Technology Corp (南亞科技) and Powerchip Semiconductor Corp (力晶半導體) advanced.

John Danforth, senior legal adviser for Los Altos, California-based Rambus, said on a conference call that the company was "disappointed" with the ruling and that it won't affect the company's antitrust lawsuits against other chipmakers.

The commission withheld a decision on what penalty would be appropriate in the case. The company and the FTC staff have to submit arguments by Sept. 15 on whether Rambus should be barred from getting royalties on memory chips that comply with the standard.

The FTC staff contends that Rambus shouldn't be allowed to collect royalties on the patents, issued in 1999. Rambus earned US$34.7 million, or 83 percent of its revenue, from royalties in the fourth quarter.

"We're really going to be focusing our attention on what the appropriate remedy should be and I think we can establish that our rates are reasonable," Danforth said.

Sean Royall, an antitrust lawyer who led the FTC trial against Rambus, said Rambus' actions would effectively mean a tax on memory chips that would result in higher prices for consumers.

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