At issue: Rambus patent claims to technologies crucial to today's popular SDRAM memory and its expected replacement, DDR SDRAM memory. Rambus wants royalties from manufacturers that make SDRAM and DDR. Some have agreed to pay, but others claim deception by Rambus invalidates those patents and refuse to pay.
Rambus has filed suits in several countries, including the US, against three major memory makers: Infineon Technologies, Hyundai Electronics, and Micron Technologies. These companies are also suing Rambus. The first court action is likely to be in March in Virginia.
Royalties could raise prices
If Rambus wins, and all memory makers have to pay royalties on SDRAM and DDR products, it will certainly increase manufacturing costs, says Kevin Krewell, senior analyst with MicroDesign Resources.
Just how such an increase might impact consumers is hard to guess, he says. Since some vendors have already signed agreements, they're likely to pay less than the companies fighting Rambus in court. Regardless, the entire industry paying dues "would cause price pressures," he says.
Another industry expert is more blunt. Memory manufacturers "will pass the price increase along to consumers if they can," says Sherry Garber, vice president of memory research firm Semico.
Rambus disagrees. "We don't anticipate consumers will be affected by this," says Avo Kanadjian, vice president of worldwide marketing at Rambus. In the volatile memory market, the small additional cost of royalty fees will matter little; it's supply and demand that determine prices, he says.
Billions at stake
It's difficult to estimate how much money Rambus stands to gain if it wins the court cases, but it's likely to be in the billions of dollars. Semico's Garber estimates Rambus could collect anywhere from half a per cent to a 2 per cent royalty for each SDRAM unit sold. In 2000, SDRAM accounted for 3.4 billion of the 3.9 billion memory units the industry shipped, she says. DDR accounted for 52 million units, RDRAM made up 31 million units, and the aging EDO/FPM variety sold 456 million. Industry revenues totalled $US29 billion last year.
It's unclear whether royalties would be retroactive, Garber says. If they are, it could mean billions more for Rambus, as SDRAM has accounted for more than 50 per cent of the memory market every year since 1998.
Rambus also holds patents to technologies used in DDR memory, Krewell says. Since DDR is the main competition to the Rambus-designed RDRAM, it's conceivable the company would charge a higher royalty on DDR to push up prices and make RDRAM look better, he says.
What bothers many in the industry is that it may not stop there, Garber says.
"Does Rambus go after everybody that has an interface with SDRAM? And if everyone has to pay, what does that cost?" Garber asks. This scenario could easily drive up the cost of a PC, she says.
Some avoid the legal morass
Seven major memory manufacturers have chosen not to fight Rambus on its patent claims and signed royalty agreements: Hitachi, Toshiba, Oki Electric Industry, NEC, Samsung, Elpida, and Mitsubishi.
Rambus attempted to reach agreements with Infineon and Hyundai without success; talks with Micron hadn't yet begun when the company filed suit. (Infineon and Micron representatives declined to comment for this report, and Hyundai representatives did not return calls.)
Rambus claims the three companies owe patent fees on technology they use to manufacture SDRAM, the most popular form of computer memory on the market. Micron and the others say Rambus failed to disclose its patent ownership during meetings of the standards body of the Joint Electron Device Engineering Council, which established the SDRAM industry guidelines. Rambus argues that it left JEDEC before acquiring the patents and therefore did nothing wrong. (JEDEC representatives did not return calls for comment.)
Rambus may not have held the patents during its JEDEC membership, but it appears those patents were pending, says MicroDesign Resource's Krewell. The controversy is whether the company intended to mislead JEDEC, he says. The JEDEC group probably would have attempted to work around the Rambus patents if it knew they existed, he says.
Most troubling, he says, is the fact that JEDEC exists to help create standards that benefit the whole industry as well as consumers who get the benefit of interchangeable parts.
"How can the industry come up with standards if companies don't reveal their patents in committee?" Krewell says.
Rambus never mislead JEDEC, and never pushed for adoption of particular SDRAM standards during its membership in the group, Kanadjian says. "Rambus never drove a standard," he says.
"We didn't invent SDRAM or DDR, but they do incorporate Rambus inventions," Kanadjian says. "The courts will hear all of this evidence and will rule accordingly," he adds.
Tough to llove
Despite all the hoopla, Kanadjian says he expects that when the legal wrangling ends, other companies will have more admiration for Rambus and its innovations. "Others should respect our intellectual property," he says.
Garber says it's hard to imagine companies in the memory industry ever warming up to Rambus. While legal battles aren't uncommon, the industry's dealings with Rambus have always been more contentious than usual.
"From the beginning this has had a different intensity to it," Garber says. "It's been a very nasty situation."
The way Rambus used its patents in this case was akin to springing a trap, Krewell says. A company may use patents in two ways, he says: "One is as a money scheme and the other is to produce useful technology."
Rambus' RDRAM designs are a concrete technological contribution, Krewell says, but with SDRAM and DDR, the company acts merely as a toll collector. "The industry has not been enthusiastic about Rambus's business model," he says. "It increases cost of manufacturing without adding value."
Garber says most memory companies sign cross-licensing agreements with the competition so the technology can move forward without adding undue cost to the process. Rambus doesn't sign cross-licensing agreements because its profits come from licensing agreements alone; the company doesn't actually make products itself.
Kanadjian admits that many in the industry don't like the Rambus policy against cross-licensing. But many understand how the Rambus business model can offer enormous value. "We are a research and development hub for these companies," he says. "We have a strong contribution to make."
Contribution or not, Rambus shouldn't expect much affection from memory makers, Krewell says. "They've burned a lot of bridges along the way," the analyst says.