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Rambus Loses Ruling, Delaying Hynix Patent Infringement Case

By Joel Rosenblatt

Aug. 23 (Bloomberg) -- Rambus Inc. lost a ruling in its patent dispute with Hynix Semiconductor Inc., delaying the final phase of the case until the U.S. Federal Trade Commission issues its penalty in an antitrust lawsuit against Rambus.

U.S. District Judge Ronald Whyte in San Jose, California, said yesterday that the third trial in the Hynix case, originally set to begin next month, will take place no sooner than February. The FTC ruled Aug. 2 that Rambus engaged in ``deceptive conduct'' in order to control patents for high-speed computer memory chips.

Rambus, a computer-chip designer based in Los Altos, California, has sued memory makers including Hynix, Samsung Electronics Co. and Nanya Technology Corp. for infringing its patents. In the final phase of the patent case, Hynix says it will use the same arguments presented by the FTC: that Rambus attended meetings of a memory-chip standards panel without disclosing the patents it would later enforce.

Whyte's ruling ``goes a long way towards supporting our claim that Rambus is not entitled to enforce these patents based on the antitrust laws,'' Ken Nissly, a lawyer representing Hynix, said in an interview late yesterday. The rulings issued by Whyte and the FTC ``present significant obstacles'' to Rambus enforcing its patents against the entire chip industry, Nissly said.

A federal jury in April awarded Rambus $307 million in its dispute with Ichon, South Korea-based Hynix, the world's second- largest memory chipmaker. Jurors agreed with Rambus's claim that Hynix infringed patents covering fundamental aspects of dynamic random access memory, or DRAM, the main type of memory used in computers. Whyte later reduced the award to $133.4 million.

`Encourage Settlement'

Robert Kramer, Rambus's acting general counsel, said in an e-mailed statement that Whyte delayed the final trial to encourage a settlement. It will be ``Hynix's burden to establish'' which of the FTC's findings it can use to defend against Rambus's infringement claims, he said.

In the FTC case, the commission found that Rambus monopolized four aspects of an industry standard for memory chips. The ruling threatens to reduce Rambus's ability to collect royalties that provide 80 percent of its revenue. Rambus has said it will appeal the decision. The FTC hasn't said when it will announce the penalty.

Rambus and the FTC staff must submit arguments by Sept. 15 on whether the company should be barred from getting royalties on memory chips that comply with the standard.

Rambus has also filed antitrust lawsuits in state court against Hynix, South Korea's Samsung and Micron Technology Inc. claiming the companies conspired to fix prices and keep Rambus out of the memory chip market.

Price-Fixing

Hynix, Samsung, Germany's Infineon and Japan's Elpida Memory Inc. have pleaded guilty to U.S. criminal charges for price- fixing. Boise, Idaho-based Micron, the biggest DRAM maker in the U.S., wasn't charged after it cooperated with prosecutors.

``If parts of the FTC's decision are taken as fact, it will hurt Rambus's odds on prevailing'' in its patent case against Hynix, said Michael Cohen, a director of research at San Diego- based Pacific American Securities. Cohen said he owns 500 Rambus shares and has a ``buy'' rating on the stock.

Rambus investors are afraid Whyte's decision might cause the company to ``cut a cheap deal'' with Hynix or any of the memory manufacturers it has sued, ``as opposed to pushing forward with its antitrust case in California,'' Cohen said.

The FTC penalty ``should not affect Hynix's past-due damages for its infringement of Rambus's patents,'' Rambus's Kramer said in an e-mailed statement. Whyte acknowledged in his order that the FTC penalty will not resolve the companies' dispute over double data rate 2, or DDR2, chips, Kramer said.

Given the DDR2 exemption and the antitrust case pending in state court in San Francisco, ``Rambus has strong reasons to believe it will be fairly compensated for its inventions,'' Kramer said.

The case is Hynix Semiconductor Inc. v. Rambus Inc., 00-cv- 20905, U.S. District Court, Northern District of California (San Jose). The FTC case is In the Matter of Rambus Inc., Docket No. 9302, U.S. Federal Trade Commission.

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net .

Last Updated: August 23, 2006 00:02 EDT