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Infineon fights on with Rambus countersuit

Although a judge dismissed Rambus' case against Infineon, the German memory manufacturer continues to pursue a countersuit that could have far-reaching implications.

Chip designer Rambus stands to lose its grip on the PC memory industry as German chipmaker Infineon pursues a countersuit that could have far-reaching implications.

A federal judge in Virginia on Friday dismissed the three remaining charges in Rambus' patent infringement suit against Infineon. Rambus said it will appeal.

In its countersuit, Infineon alleges that Rambus should be barred from collecting royalties on the production of SDRAM, the most common form of memory in computers today, and double data-rate (DDR) DRAM, a high-speed version of SDRAM, because of its conduct while a member of a standards-setting body.

If Infineon is successful, the numerous chipmakers that have agreed to pay Rambus royalties on DDR and SDRAM production would likely alter or scrap altogether their payments, chopping Rambus' revenue.

In 1992, Rambus joined the memory committee of the Joint Electronic Devices Engineering Council (JEDEC), an organization that eventually set the SDRAM and DDR DRAM standards. Infineon claims that Rambus wrongfully failed to disclose its intellectual property to JEDEC, a move that effectively makes the patents unenforceable.

A ruling in favor of Infineon would likely be a major blow to Rambus. The Los Altos, Calif.-based memory designer is suing Micron and Hynix (formerly Hyundai Semiconductor) over the same issues and is still squaring off against Infineon in lawsuits in Europe. While a ruling in Infineon's case wouldn't be binding on these other courts, it would establish a precedent for them to follow.

"A precedent would not be a good omen," said Nathan Brookwood, an analyst at Insight 64. "I'd be pretty confident that should the judge find the patents are not enforceable, these companies would fight very hard for an escape clause."

Ripple effect
Just as important is that the eight memory companies that settled with Rambus would no doubt use an Infineon verdict as ammunition to renegotiate or even cancel SDRAM/DDR DRAM licensing agreements signed before the trial.

In certain circumstances, Rambus executives have said that an adverse ruling could make these deals irrelevant. Many of the agreements also are subject to renewal after a year or two, according to Sherry Garber, an analyst at Semico.

Potential suits against companies such as Transmeta could also be nipped in the bud, sources have said.

The outcome of the suits will affect PC prices. Rambus, it was revealed during the trial, charges a 3.5 percent royalty on DDR DRAM and a 0.75 percent royalty on SDRAM, fairly high by industry standards. In the end, that means Rambus gets about $2 per PC with DDR DRAM and 17 to 20 cents of SDRAM-equipped PCs.

Revenge of the JEDEC
Rambus first filed the specifications for its memory patents in April 1990. In February 1992, it joined JEDEC. The group subsequently adopted standards relating to SDRAM. In 1996, Rambus left JEDEC.

What did it do while a member of JEDEC? Nothing. Rambus didn't try to persuade JEDEC memory committees to vote on proposals that would affect its patents and didn't vote on any, Rambus has maintained. Some companies had also already licensed Rambus' technology.

"We attended meetings, but we never proposed a standard," Avo Kanadjian, senior vice president at Rambus, said in an interview in February. Testimony in the case has been similar. "We've been very consistent that lot of inventions we have brought to the market predate any issues brought up at JEDEC."

Doing nothing, however, is a violation of the law, the memory makers claim. Rambus didn't receive its patents, or make them fully public, until after it left JEDEC. By then, SDRAM was already established as the next standard for memory.

"If Rambus had disclosed these patents at JEDEC, we contend that these standards would never have been adopted," Patrick Lynch, a lawyer for Hyundai, said in a hearing earlier this year. "The intent was to have an open standard."

Other companies, including Wang and Dell, have been accused of violating antitrust law for not disclosing patent applications in this manner, according to numerous sources. In settlements, these companies have agreed not to enforce patents against other members of the standards body.

In many of these instances, however, the companies actively promoted their technology to some degree. By contrast, Rambus was relatively passive.

Rambus has also produced evidence that Infineon, among other memory companies, also knew of its patents years before the JEDEC meetings through nondisclosure agreements.

The company told memory makers, "We're part of this body, but we are also working on technology," said Peter Glaskowsky, an analyst at MicroDesign Resources.

JEDEC's rules, unfortunately, are also not clear on what, if any, penalty should be imposed. Under its own guidelines, participating companies are required to disclose any patents that relate to proposed standards. JEDEC rules also state that the organization cannot adopt standards relating to undisclosed patents.

On the face of it, Rambus' conduct appears to violate the group's policy. Still, a violation of the rules may not lead to a nullification of the right to collect royalties. JEDEC's rules permit companies to submit patents for adoption by the group and to collect royalties from members. As a result, the courts may rule that preventing the company from collecting royalties is an excessive penalty.

In addition, Rambus left the organization in 1996 and never participated in the formulation of DDR DRAM standards.

News.com's Ian Fried contributed to this report.