Billions at stake in chip trial

Rambus' lawsuit against Infineon will affect what kind of memory you buy for your PC, and how much it costs

The trial between Rambus and Infineon Technologies that gets underway this week could, if it goes in favour of Rambus, reap £1bn in licence fees for the company, but more importantly to buyers, drive up prices of standard PC memory -- already one of the PC's most expensive components.

The trial has even more far-reaching implications than that, however: experts say it could make Rambus a major players in the lucrative memory business. One analyst speculated that a win against Infineon could double or triple the company's share price.

At issue are patents which Rambus, a California-based chip designer, says apply to dynamic RAM, or DRAM, which powers PCs as well as cash machines, computer servers and phone systems. Rambus is suing Infineon, one of the largest DRAM manufacturers, for unspecified damages and an injunction to block the German company from using technology in its memory designs that allegedly infringes Rambus patents.

If it is successful, Rambus could levy license fees ranging up to as much as ten percent on billions of pounds of memory chips, according to industry analysts. The DRAM market is worth about £21bn a year.

The court battle, in the US District Court in Richmond, Virginia, is part of Rambus plans to embed itself firmly in the memory market. Those plans seemed secure a year or two ago, as Rambus had the firm backing of chip giant Intel to use Rambus' own standard -- Rambus DRAM, or RDRAM -- in its next-generation Pentium 4 processor.

More recently, however, the high price of RDRAM, combined with some observers' doubts about its real speed advantages, have led Intel to hedge its bets, and it is no longer a sure thing that the proprietary RDRAM memory technology will become a mainstream standard.

Rambus has said it will charge a higher license fee for SDRAM-based memories, thus making RDRAM a more attractive buy. "It does look like somewhat of a pincer movement by Rambus," said Andrew Norwood, senior analyst at Gartner Dataquest. "They tried tempting [users] to come on board, and now someone's gone behind [users] and is beating them with a big stick."

He predicted that if Rambus is successful in pressing its DRAM claims, the extra costs are likely to be passed along to consumers. "If [manufacturers] are having to pay a five to ten percent royalty, then of course, that cost has to come from somewhere," Norwood said.

All Pentium 4 chips today use RDRAM memory, but in Q4 Intel plans to release the Brookdale chipset, which will allow the use of SDRAM and double data rate SDRAM (DDR SDRAM) chips, which compete with RDRAM.

Both SDRAM and DDR are currently much cheaper to manufacture than RDRAM, but that situation could change. "It [RDRAM] is all too expensive to manufacture," said Norwood. "But by bringing it into the mainstream, they will get those economies of scale, bringing down the price."

Rambus' claims have been strengthened by several large DRAM manufacturers that have already done deals with the company: these include Hitachi, NEC, Samsung Electronics, Mitsubishi Electric, Oki Electric Industry, Elpida Memory, Matsushita Electric Industrial and Toshiba. Together they account for nearly half of all memory-chip sales.

Hynix Semiconductors (formerly Hyundai Electronics Industries) and Micron have launched lawsuits against Rambus, claiming the company violated US antitrust laws by allegedly spying on meetings of the Joint Electronic Device Engineering Council, a memory-chip standards committee, and secretly incorporating its standards into Rambus patents. These claims also make up part of Infineon's defence.

In opening arguments this week, Infineon's legal team argued that "the highest levels of Rambus management and its board of directors" collaborated in altering Rambus patents to include SDRAM technology after it had become standard.

Rambus attorneys claimed that Infineon had taken features unveiled in Rambus nondisclosure meetings and included them in the JEDEC standards for SDRAM.

"Intellectual property rights exist not to just protect Rambus and other companies, but to protect innovation," said Rambus in a statement. "It is Rambus' right and indeed obligation to our shareholders to do all in our power to protect our patented innovations."

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