Live by the sword, die by the sword. That may be the lesson for high-speed memory maker Rambus, which has chosen the court room to do to battle with its rivals.
The US company is suing its competitors in an effort to make its product -- Rambus memory -- the industry standard, or to have them pay as much as US$1 billion in royalties for manufacturing a competing technology, double data rate (DDR).
In addition, to the hoots and howls of others in the chipmaking industry, the company also claims it owns the patent for the present generation of memory -- synchronous DRAM, or SDRAM -- and should be paid a fee.
To that end, Rambus spent US$7.3 million in its most recent quarter on legal fees in suits against Infineon Technologies, Micron Technology Inc and Hynix Semiconductor for the alleged violation of its DDR and SDRAM patents.
At the same time, the company has entered into agreements with companies such as Samsung Electronics, Mitsubishi Electric, NEC, Hitachi and Toshiba -- who have chosen to pay Rambus the royalties it says it's due rather than fight in court.
But in a court ruling last week that could prove crippling to Rambus, a US judge threw out the company's claims in its patent infringement suit against Infineon, Europe's largest chipmaker.
Rambus 0, chipmakers 1
In effect, the ruling found that Infineon doesn't have to pay Rambus a royalty for every SDRAM or DDR chip it sells. That has led to speculation that other companies being sued by Rambus will also prevail.
The court case had been closely watched in Taiwan because roughly 11 percent of the world's DRAM is manufactured here. ProMOS Technologies Inc (
What's more, many Taiwan memory makers such as Nanya Technology Corp (
The 3.5 percent royalty Rambus collects from makers of DDR chips is about three times the industry average -- and many market watchers say Rambus has set the fees so high to encourage the use of Rambus memory over DDR.
As a result of last week's ruling, those who have entered into licensing deals with Rambus will probably be giving those agreements some further thought. As well, makers of DDR or SDRAM who have refused to pay licensing fees will likely feel more emboldened in their fight against Rambus.
"A loss in the Infineon trial will clearly call Rambus' existing SDRAM and DDR royalties and earnings into question," an analyst for Morgan Stanley wrote in a research note to investors. "In addition, we believe it will be significantly more difficult for Rambus to sign up additional licensees."
Round two
The next phase of Rambus vs. Infineon should prove the most interesting.
Infineon is counter suing Rambus, alleging that Rambus inappropriately kept its synchronous patent applications hidden while a member of the industry group that was meeting to draft an open SDRAM standard.
In essence, Infineon is arguing that Rambus illegally duped the US patents office into giving it monopoly protection for a standard that much of the industry views as open.
That portion of the trial starts this week, and the judge will have to decide whether Rambus' SDRAM patents are unenforceable under US antitrust laws.
What's at stake are the royalties Rambus had intended to collect from SDRAM and DDR chips in addition to its Rambus product line.
During testimony last week, it was revealed that Rambus charges its license holders a 0.75 percent royalty for every SDRAM chip sold and a 3.5 percent royalty for every DDR chip. That adds up to about US$1 billion annually in potential royalties.
The outcome could mean something for companies such as Nanya, which claims to be the first company in Taiwan to mass produce DDR chips and has moved early in the hopes that the industry will eventually choose DDR as its preferred high-speed memory.
Winbond Electronics Corp (
Some market watchers believe that instead of litigating its way to the No. 1 spot, Rambus will ultimately have to let the marketplace decide which will be the next generation of memory, not the courtroom.
Intel Corp, which had originally planned to make its Pentium 4 processor compatible only with Rambus chips, now plans to make them compatible with DDR as well. The chip is cheaper to manufacture than Rambus memory, which may help make it the eventual industry standard.
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