After five years and millions of dollars in legal expenses, Rambus and Infineon Technologies have called a truce in their battle over the intellectual property rights to the memory technology used in most of the world's computers.
The two companies have agreed to settle their legal differences, ending separate cases related to Infineon's alleged use of patented Rambus technology and Infineon's alleged role in a conspiracy five years ago to thwart the adoption of a memory standard designed by Rambus and backed by Intel.
Starting on November 15, Infineon will pay Rambus $US5.85 million each quarter for a license to existing and future Rambus patents, the companies said. The payments will continue until November 15, 2007 unless Rambus is able to sign licensing deals with the other synchronous dynamic RAM (SDRAM) vendors. If that occurs, Infineon will continue to pay $US5.85 million a quarter up to a maximum of $US100 million in payments after November 2007, capping the total amount of payments to Rambus at $US150 million.
The companies did not specify the terms of any payments after November 2007 should Rambus fail to sign additional licensees, but Infineon was "the poster child" for the wide-ranging disputes between Rambus and the SDRAM industry, and agreements with the other vendors should fall into place now that financial terms had been laid out on the table, said Andrew Updegrove, an attorney with Gesmer Updegrove who works with standards-setting organisations and has followed the Rambus/Infineon case.
This deal was negotiated exclusively with Infineon and should not be interpreted as a framework for future deals with SDRAM vendors such as Hynix Semiconductor or Micron Technology, chief executive officer at Rambus, Harold Hughes, said.
Hynix and Micron representatives did not respond to requests for comment on the Infineon settlement.
However, Infineon has been granted "most-favoured customer" status as a result of this settlement, director of litigation at Rambus, Bob Kramer, said. That term couldbe interpreted a number of different ways, but it generally meants those customers were receiving special consideration for their relationship, he said.
Given that Infineon is the first SDRAM vendor in the recent disputes to put an end to litigation with Rambus, it was safe to assume the company's rate was better than what other SDRAM vendors would be charged during any future settlements, Kramer said. "People who settle first or take a license first get better rates," he said.
Rambus designs and licenses memory and bus technologies to chipmakers. The company and Infineon have been locked in legal wrangling since 2000, when Rambus first sued Infineon and other makers of SDRAM alleging that the SDRAM vendors were manufacturing chips using technology developed and patented by Rambus.
Some companies, such as Samsung and Hitachi, decided to sign licenses with Rambus for SDRAM technology. However, the rest of the industry cried foul, given that Rambus had at one time participated in the standards-setting organiszation that developed the SDRAM technology and had contributed technology to the final standard. Attempting to extract royalties based on that standard constituted fraud and should invalidate Rambus' patent claims, the SDRAM vendors argued.
Infineon and most of its SDRAM counterparts countersued Rambus in 2000, claiming the company improperly used its influence with the standards body, the Joint Electron Devices Engineering Council, to purposefully design Rambus technology into the SDRAM standard. A Virginia jury sided with Infineon in 2001, convicting Rambus of fraud in 2001 and fining the company $US3.5 million.
But on appeal, Rambus simply argued that a poorly worded patent disclosure policy did not require a participant in the discussions to reveal patents they currently held or were seeking. Two out of three appeals court judges agreed with Rambus, lifting the fraud judgement and breathing new life into Rambus' patent claims in 2003.
That appeals court sent the case back to the lower court in Virginia and Judge Robert Payne. In early March of this year, Infineon's new tack of focusing on claims of "litigation misconduct" on the part of Rambus' lawyers during the litigation found favor with Judge Payne, who dismissed Rambus' patent claims after allegations that Rambus lawyers destroyed documents and produced false testimony.
This ruling changed Rambus' strategy with Infineon, leading Rambus to approach Infineon with settlement terms rather than arguing yet another appeal, said Christoph Liedtke, an Infineon spokesman. Rambus' Kramer said he was unaware of which company approached the other first, but did not deny Liedtke's statement. Senior Vice President and General Counsel John Danforth, Rambus' chief litigator, is out of the U.S. on vacation, a Rambus spokeswoman said.
With Judge Payne's latest ruling, Infineon was finally in a favorable position to accept licensing terms, Liedtke said.
"We put an end to litigation that would have been prolonged far into the future," he said. "This is a very moderate payment, a flat fee, not volume based. It gives us financial stability, and gives us access to [Rambus' technology] under favorable conditions," Liedtke said.
The settlement also absolves Infineon from another legal headache looming over the company. In May 2004, Rambus filed an antitrust lawsuit against Infineon, Micron, Hynix and Siemens AG alleging that the companies conspired to artificially inflate the price of Rambus DRAM (RDRAM), a memory technology backed by Intel that was set to compete with SDRAM in 1999 and 2000. Four Infineon executives and one Micron executive have already pleaded guilty to price-fixing charges as a result of a separate investigation by the US Department of Justice.
But with the settlement, Infineon and Siemens were absolved of all legal charges concerning the antitrust case, Hughes said Siemens spun off its chip business in 1999 to create Infineon.
Rambus declined to comment on how the settlement with Infineon would affect the other cases it has pending with Hynix and Micron. It holds a strong position in the case against Hynix, having received a ruling of summary judgement validating most of its patent claims against Hynix's products. A trial is scheduled for June to decide the merits of the remaining claims. The Micron case is not scheduled to come to trial until February 2006.