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THE CHIP TRIALS

LOS ALTOS COMPANY WANTS TO MOVE BEYOND LEGAL FIGHT

By Therese Poletti

Mercury News

On the day last month that the Federal Trade Commission was due to release a decision in an antitrust case against Los Altos memory-chip designer Rambus, half a dozen investors and paralegals camped out in the document room of the agency's Washington, D.C., headquarters, hoping to get a jump on the news.

As the clock ticked toward closing time, irritated FTC staffers shooed the group out of the room. Some stragglers waited in the building's lobby before leaving. ```Well guys, I'm sorry I couldn't get an exclusive for you, but I did my best,'' wrote a day trader called ``Nukejohn'' on a Yahoo message board after returning to his hotel.

Such a frenzy for news about an FTC decision is just another sign of how Rambus' legal entanglements have overshadowed its pioneering memory-chip technology. As it turned out, an FTC judge later that day dismissed charges that Rambus violated antitrust laws by helping establish standards for the memory-chip industry based in part on its own patented technology.

Rambus Chief Executive Geoff Tate said he would like nothing better than to call an end to four years of litigation and get back to business.

``We'd be ecstatic about putting the past behind us and getting all of our focus on the present and the future, but it's not just up to us to get there,'' he said.

As investors have come to realize in the weeks since the FTC ruling, the Rambus legal saga is far from over.

Founded by two Stanford University computer scientists in 1990, Rambus was the ``it'' company of the semiconductor industry. Memory chips store data and Rambus' chip designs resulted in a faster transfer of data between the chips and the microprocessors that power personal computers, making PCs operate more efficiently.

In late 1996, Rambus scored a major coup when Intel announced it would use the company's technology in its PC chipsets. The chip giant also invested in Rambus. Rambus then went on to sign licensing pacts with most of the big memory makers -- Mitsubishi, Hyundai, Micron and Siemens, for its proprietary technology.

But the memory companies eventually claimed that Rambus' technology cost too much. In a devastating blow to Rambus, the industry adopted a competing memory-chip technology, known as double data rate, that came to dominate the $16 billion memory-chip market.

The memory industry is mostly made up of South Korean and Japanese conglomerates. The two major non-Asian chip companies are Micron Technology in Boise, Idaho, and Infineon Technologies in Germany. In 2000, two of these companies, Toshiba and Samsung, agreed to pay Rambus royalties for using some of its chip technology.

But three chip companies balked: Hyundai of South Korea, now called Hynix; Infineon; and Micron.

Industry meetings

The companies had invited Rambus to participate in meetings that set industry standards for memory chips. They subsequently accused Rambus of stealing ideas from these meetings in the 1990s, filing patents based on them and then engaging in anti-competitive behavior by trying to get royalties on almost every memory chip produced.

In 2000, Rambus sued Infineon for patent infringement as part of its legal strategy of seeking hundreds of millions of dollars in royalties from chip makers. Infineon countersued with fraud claims. A Virginia federal judge threw out Rambus' patent suit in 2001 and a jury found Rambus had committed fraud.

But an appellate court reversed Rambus' fraud conviction in 2003 and ordered that the company's patent-infringement suit against Infineon be retried.

The Infineon case and similar fraud suits against Rambus by Micron and Hynix prompted the FTC to investigate the company. In 2002, the FTC sued Rambus, contending the company engaged in ``anti-competitive and exclusionary acts'' by failing to reveal it had sought patents on technology that was adopted as industry standards for memory chips.

Complaint dismissed

Last month, FTC Administrative Law Judge Stephen McGuire dismissed the complaint against Rambus. In a 334-page ruling, McGuire found Rambus did not violate any rules imposed by the standards committee. He noted that there were no viable alternatives to Rambus' technology at the time the committee selected standards.

Some evidence and testimony in the two-month FTC trial last year suggested that the world's leading memory-chip makers were so fearful of Rambus' partnership with Intel that they appeared to have conspired to undermine Intel's support of Rambus' technology.

In his ruling, McGuire included excerpts of several e-mails from memory-chip industry executives who appeared to be fearful of the Intel-Rambus alliance. That partnership meant memory-chip companies were forced to license Rambus' technology if they wanted their chips to be used in Intel-based personal computers.

For instance, former Hynix executive Farhad Tabrizi wrote in a 1996 e-mail to a Hitachi executive, ``The real motive of Intel is to control'' chip manufacturers. ``I urge you to please educate others and get their agreement to say `NO TO RAMBUS AND NO TO INTEL DOMINATION.' ''

A Hynix spokesman in San Jose declined to comment.

Micron spokesman Dave Parker declined to comment on any specifics in the ruling. ``We . . . believe that the findings and the conclusions by McGuire are contrary to the interests of the FTC.''

With McGuire's wide-ranging ruling in hand, Rambus would seem to be in the catbird seat, ready to pounce on the memory-chip giants that it now believes colluded to keep the company out of the worldwide memory market.

``We believe the logical extension is for the FTC to turn around and pursue an antitrust case against'' the memory-chip companies, said Mike Crawford, an analyst with B. Riley & Co. who owns Rambus shares.

But the FTC said it will appeal McGuire's decision, a process that could take up to a year or more.

So what is Rambus going to do now? Rambus CEO Tate said the company just wants to get royalties for its technologies.

`Takes two to settle'

``If we can get this litigation settled behind us in some mutually amicable way, we are willing to live and let live, and forgive and forget, but it takes two to settle,'' said Tate. ``The ball is in their court.''

It doesn't appear that the memory-chip companies are ready to call it a day anytime soon. Christoph Liedtke, a spokesman for Infineon in San Jose, said the company is preparing for the retrial of Rambus' patent suit, which is scheduled to begin June 10.

Analysts said it is unlikely the memory-chip makers would settle with Rambus now, given that they are embroiled in a San Francisco federal grand jury investigation into alleged price fixing in the memory-chip industry.

As Rambus faces a retrial of its patent-infringement lawsuit against Infineon, the FTC appeal process could get under way.

Rambus, meanwhile, continues to work on its next-generation memory technologies. The company hopes Intel will consider using those memory-chip designs with its microprocessors. Rambus has developed two other chip interfaces. One is used to improve overall computer system performance. The other, called Redwood, improves communications between chips used in consumer and communications devices. Toshiba and Sony are licensing Redwood for future consumer products.

From: http://www.mercurynews.com/mld/mercurynews/business/8240997.htm