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Judge scraps Rambus suit against Infineon

A federal judge throws out the three remaining patent infringement claims brought by memory chip designer Rambus in its case against European chipmaker Infineon.

A federal judge in Virginia on Friday threw out the three remaining patent infringement claims brought by memory chip designer Rambus against European chipmaker Infineon.

Rambus had sought a court ruling that Inifineon's production of standard SDRAM and DDR-DRAM memory chips infringes on Rambus patents. Other chipmakers already have agreed to pay royalties to Rambus for those chips. However, analysts say that should Rambus ultimately lose in court, those that settled would likely not have to pay Rambus.

The stakes were high for Rambus. According to royalty rates revealed during the trial, Rambus is collecting close to $2 for each 128MB DDR DRAM chip sold by chipmakers--including market leader Samsung--that have signed agreements with the company. One analyst estimated Rambus could reap as much as $1 billion in royalty payments, retroactive over the past decade, if it was successful in its case againt Inifineon.

Los Altos, Calif.-based Rambus said in a statement that it will appeal Friday's ruling.

"We are disappointed with the Court's decision and plan to appeal the ruling," Rambus CEO Geoff Tate said. "If today's decision is allowed to stand, all companies that innovate risk having their intellectual property rights unjustly expropriated."

Friday's ruling the was the second blow to the company this week. On Tuesday, the same judge tossed out 54 other claims of patent infringement covering four Rambus patents.

Shares of Rambus were halted pending the company's news release. At the time of the trading halt, the shares were trading at $15.50, down $2.65, or more than 14 percent, before the halt. Rambus fell further once trading resumed to close regular trading at $14.60.

Rambus noted in its statement that the Virginia case against Infineon involves only four of Rambus' U.S. patents, while there are a dozen U.S. and European patents involved in other infringement cases pending against Infineon, Hyundai and Micron.

The company said it "intends to pursue all these cases vigorously," including at a trial against Infineon in Germany currently scheduled for May 18. Rambus said it also has newly issued U.S. and European patents covering Rambus inventions that it says are used in SDRAMs and DDR SDRAMs.

Until last year, Rambus' primary business strategy was licensing its own next-generation PC memory standard, known as RDRAM. However, Rambus sued Hitachi in January, claiming its patents also entitle Rambus to royalties on memory using the rival DDR (double-data rate) standard as well as SDRAM, today's standard memory.

Hitachi and several other memory makers had settled with Rambus, but other large chipmakers, including Infineon and Micron Technology had balked at such a proposal.

Following Friday's ruling, Morgan Stanley analyst Mark Edelstone, a longtime backer of Rambus, cut his rating on the company's shares to "neutral" from "strong buy." Edelstone previously had estimated that Rambus could generate up to $1 billion a year in revenue by 2003 from licensing its technology to memory makers for use in standard memory.

"In our view, if Rambus loses the Infineon case, the stock loses its catalyst," Edelstone wrote in a research note earlier this week.

Insight 64 analyst Nathan Brookwood said memory makers who settled with Rambus likely would not have done so unless there was a provision that they would be freed from having to pay should a court invalidate Rambus' claims.

"Rambus was pretty eager to get people signed up," Brookwood said. "If everybody had signed up, we wouldn't even be here."

Brookwood said that Rambus does still stand to get some revenue from licensing its own high-speed memory technology. He noted that production of Rambus-based memory is increasing as more computers use Intel's Pentium 4 chip. For now Intel's chipset supports only Rambus-based memory. A chipset supporting DDR with the Pentium 4 is due next year.

Still, Brookwood said the market for Rambus-based memory will always be a fraction of the total memory chip industry.

"It seems unlikely Rambus (memory) will ever be a high-volume, mainstream memory technology," he said.