Will Rambus’ Big Win Hold Up?

A San Jose jury today ruled in favor of Rambus in its legal battle with Micron Technology, Hynix Semiconductor and Nanya Technology in a patent infringement case involving DRAM memory.

Rambus’s case had been thought to be a weak one. The claim by the DRAM makers is that while the dynamic random access memory (DRAM) specification was being designed, Rambus encouraged the addition of technologies that it was submitting for patent approval.

Once the DRAM spec was in place and Rambus (NASDAQ: RMBS) had the patents, it turned around and lowered the legal boom on the memory makers. The Federal Trade Commission and European Commission have both ruled against Rambus.

But after just four hours of deliberation, a jury in the U.S. District Court for the Northern District of California in San Jose found in favor of Rambus. This could mean a royalty windfall in the billions, if Rambus can reverse the FTC and EC decisions and win on the appeal that Micron has promised.

“This ruling should put to rest a series of ongoing allegations Rambus has endured for many years,” said Tom Lavelle, senior vice president and general counsel at Rambus in a statement. “Our business is to license our revolutionary technology to the industry for fair compensation. We are pleased to have this decision behind us as we continue to engage with the industry to deliver compelling products to the market.”

The company’s memory business is modest compared to the chip giants involved in this litigation. Rambus reported total revenue of $179.9 million in 2007, down from $195.3 million in 2006, and a loss of $27.7 million in 2007. Legal fees for that year alone were $19.5 million and $31 million in the year prior.

“Well, hiring all those attorneys finally paid off for them,” joked Jim McGregor, senior analyst for semiconductor research at In-Stat. “Rambus started going downhill when it began hiring more lawyers than engineers.”

Because the industry tends to patent everything it can, there are often huge cross license agreements between firms. Even as they brawl in court over antitrust issues, Intel and AMD have a large number of cross license agreements so they don’t step on each other’s feet from a technology/patent perspective.

Rambus, though, is not much more popular than SCO, and for pretty much the same reason. “They’ve been the outsider looking in and there’s a lot of resentment from the industry. Nobody is going to stand up for this. The DRAM vendors have no love lost for Rambus,” said McGregor.

The next step is the appeals process. For Micron, it’s to a higher court. For Rambus, it’s to the FTC and EC. Either way, this fight is not over by a long shot, although today was definitely a good day for Rambus. “If it holds, it would be a huge precedent. You’re talking about huge players in the DRAM market. If it holds I’ll be amazed,” said McGregor.

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