Rambus (RMBS)

[Skeptic]

Good article found by mikekato at Yahoo.
Emphasis mine.

http://www.reed-electronics.com/eb-mag/article/CA447594?industryid=2117

Rambus' trials continue

IP company brings another lawsuit, and fresh evidence, against DRAM makers

Tam Harbert -- Electronic Business, 9/1/2004


Sometimes it seems that Rambus will never get out of court.

In a move that seems designed to pressure DRAM makers to settle ongoing litigation with the company, Rambus filed an antitrust lawsuit in May against Hynix Semiconductor, Micron Technology, Infineon Technologies and Siemens. The suit, which seeks at least $1 billion in damages, alleges that the DRAM companies engaged in a "concerted and unlawful effort to eliminate competition and stifle innovation in the market for computer memory technology and computer memory chips," according to Rambus.

It's no coincidence that those DRAM makers are the very companies Rambus is fighting in court for allegedly violating Rambus patents. "It is important to recognize that, by and large, the defendants named [in the antitrust suit] are the ones that are in litigation with us," says John Danforth, Rambus' general counsel. "You can almost look at it as an alternative way for us to be compensated for all this litigation as well as for our innovations."

Rambus has been fighting in the courts with Infineon, Hynix and Micron for four years. Rambus claims that the DRAM vendors owe it licensing fees, because they are selling chips that use Rambus' patents. But the DRAM vendors claim that Rambus' patents aren't valid, because Rambus allegedly broke the rules of the group that sets memory chip standards, the JEDEC Solid State Technology Association. Meanwhile, in 2002, the Federal Trade Commission charged Rambus with violating the antitrust laws by allegedly deceiving JEDEC. An administrative law judge dismissed that case in February 2004, saying that the FTC lawyers had not proved the charges. Those lawyers have filed an appeal, and a hearing is set for September 21 in Washington, D.C.

Ironically, the 300-page decision issued by the judge was chock full of memos, e-mails and conversation transcripts from DRAM company executives. The disclosure of this evidence gave Rambus the ammunition for its antitrust suit. In one e-mail, for example, a DRAM executive urged other DRAM makers to "educate others and get their agreement to say 'no to Rambus and no to Intel domination.'" Other memos and e-mails talk about the DRAM vendors' sharing information about production plans and discuss the need to "manage price competition, profitability."

"This evidence just fell into their lap," says Steve Cullen, a longtime DRAM analyst who now runs his own consulting business. "The Rambus lawyers looked at the FTC decision and said, 'Wait a minute, who is the bad guy here?'"

"We felt that this evidence was just too hard to ignore," says Danforth. "This was pretty bad behavior." The company believes that it was its fiduciary duty to its shareholders to file the lawsuit, he says.

However, it is more than a little convenient that the Department of Justice has been conducting an investigation since 2002 into possible price fixing among DRAM makers. That, combined with Rambus' antitrust suit, might just put enough pressure on the DRAM companies to settle the litigation with Rambus.



By filing the antitrust suit, Rambus has raised the level of risk for the DRAM makers, says an industry insider who has followed the cases closely. First of all, one judge will hear the antitrust case against all three companies, and the case will be heard in California, where the judge may be friendlier to Rambus than some of the judges in the individual lawsuits. Second, the evidence from the FTC case is so strong that this industry insider believes that the DRAM companies will be found guilty. "It's almost a foregone conclusion, with the only variables being compensation for damages," he says. And third, if the companies are found guilty in the antitrust case and if they are found to have knowingly infringed on Rambus patents, they can be fined treble damages plus punitive damages. This may amount to well over $3 billion.

Recent developments have bolstered the possibility of a settlement. In July Infineon increased its reserve by $260 million to cover potential liability from antitrust probes and related lawsuits. The provision pushed the company into a loss for its third quarter. There have also been indications that the DOJ investigation may be coming to a head. A former Micron sales manager has agreed to plead guilty to obstructing the DOJ investigation and is now cooperating with the DOJ, according to The Wall Street Journal, which cites its source as a January 21 plea agreement. The Journal also reported that Micron has sought amnesty from criminal prosecution and in exchange is expected to admit to a role in the alleged conspiracy and to cooperate with the DOJ investigation. (A Micron spokesman does not confirm or deny the Journal report but points out that the company has said that it is cooperating fully with the DOJ and that the company "does not expect a penalty or a fine in association with the DOJ investigation.")

In addition, Rambus is still hoping that the government will give it evidence. The company wants access to some 2.5 million documents that the DOJ has been collecting during its two-year investigation. However, those documents aren't yet available. At the request of the DOJ, a federal judge has issued a six-month stay on the disclosure of relevant documents. This means that parties in private lawsuits won't be able to use these documents in the discovery phase of their trials until January.

So the antitrust lawsuit is likely to drag on for a long time. Plus the San Francisco docket, where the antitrust case was filed, moves rather slowly, according to Alan Smith, a patent lawyer and principal at Fish & Richardson. He estimates that it could be two years before the case comes to trial. Meanwhile, further twists may come from Rambus, the DRAM makers, the FTC or the DOJ. "It's like a poker game, and the stakes keep getting raised," says Smith.







Micron - they don't expect any penalties from the DOJ and from their last 10Q, I don't believe they've reserved any funds whatsoever which suggests to me that they don't expect the DOJ case to require any allowances for Rambus.

JMS(Skeptical)O