Rambus Inc has lost a court battle to protect its patented design for high-speed computer chips, threatening a stream of royalties potentially exceeding US$1 billion.
US District Court Judge Robert Payne, who had thrown out 54 claims in the case on Tuesday, dismissed the remaining three Friday in Rambus' patent infringement suit against Infineon Technologies AG, Europe's No. 1 chipmaker. Rambus shares plummeted after the ruling, falling as much as 29 percent.
"It will be increasingly hard for Rambus to establish that what it has is defensible," said Nathan Brookwood, an analyst with the market research firm Insight 64 in Saratoga, California. "Rambus' future has been increasingly linked" to its ability to collect royalties, he said.
Still left in the case are counterclaims by Infineon that Rambus isn't entitled to patent protection because it used spies to obtain information from a memory-chip industry standards group, the Joint Electronic Device Engineering Council, according to EBNews.com and Fredhager.com Web site reports on the trial.
Infineon contends Rambus officials also attended some meetings and wrongly obtained patents for memory-chip designs that have become industry standards, according to court documents.
Judge Payne ordered the jury to return today to deal with the remaining issues, his office said.
"I'm not sure why the judge kept the JEDEC issue," said Brookwood. "It's not terribly relevant if all the claims are now thrown out."
Despite the legal setback, some investors remained optimistic about Rambus' future.
"We still think the premise upon which we invested in the company is valid, and we are standing behind the company," said Mike Green, managing partner at Benham & Green Capital Management LLC in La Jolla, California, which holds 212,000 Rambus shares.
Green said he bought the shares based on Rambus patents for so-called RDRAM (Rambus Dynamic Random Access Memory chips), speedy semiconductors that are backed by Intel Corp for use in computers with its new Pentium 4 microprocessors. The patents for RDRAM were not part of the lawsuit and are not in contention.
"This isn't the end of the road, but it's never good news for a company when they lose a lawsuit," said private shareholder John McLaughlin of Virginia Beach, Virginia, who's been attending most days of the trial. "The company needs to get their patent house in order, and I think they will."
Analysts had said a Rambus victory might have helped the Los Altos, California-based company collect up to US$1 billion in royalties and licensing fees from companies in the US$30 billion-a- year memory-chip industry.
Eight companies that control almost half the world's memory chip sales have already bought licenses from Rambus and now may stop paying in light of the ruling.
"We are disappointed with the court's decision and plan to appeal," said Rambus Chief Executive Geoff Tate. "If today's decision is allowed to stand, all companies that innovate risk having their intellectual property rights unjustly expropriated."
"Clearly, this ruling has established a precedent that will be tested in the courts," said Insight 64's Brookwood. "The appeal will be on whether the judge followed proper procedures."
Rambus shares fell US$3.55 on Friday, or 20 percent, to US$14.60 after touching a 52-week low of US$12.90. The volume of 19 million shares was more than three times the three-months daily average. American depositary receipts of Infineon, with about US$6.4 billion in fiscal 2000 sales, rose US$2.15, or 5.3 percent, to US$42.40.
Rambus' designs enable memory chips, microprocessors and other semiconductors to speed data in computers and other devices such as Sony Corp's PlayStation game consoles. The RDRAM chips used in PlayStation consoles aren't at issue in the patent battles.
The chip designer gets most of its revenue, US$72.3 million in fiscal 2000 sales, by charging royalties and license fees to chipmakers on more than 100 patents. Its percentage of revenue from each chip is pegged to the chip's price.
Rambus sued Munich-based Infineon -- 71 percent owned by German electronics giant Siemens AG -- last August, contending Europe's top semiconductor maker infringed four US patents for the microchips.
In addition to Infineon, Rambus is suing Micron Technology Inc and Hyundai Electronics Industries Co, now called Hynix Semiconductor Inc, for alleged patent infringement. The companies have denied the allegations.
Costs associated with Rambus' legal battle against the three companies jumped to US$7.3 million in the second quarter from US$4.3 million in the previous quarter and US$660,000 a year earlier.
Eight other chip companies signed licensing agreements instead of taking on Rambus in court: Samsung Electronics Co, the world's No. 1 memory-chipmaker; Mitsubishi Electric Corp; NEC Corp; Hitachi Ltd; Oki Electric Industry Co; Toshiba Corp; Elpida Memory Inc; and Matsushita Electric Industrial Co.
These companies account for more than 45 percent of the worldwide memory-chip market, Rambus has said.
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