Friday, July 13, 2001
The “Rambus vs Infineon” case was dismissed in the Virginia Court. Rambus immediately vowed for appeal. Well, how did Judge Payne come to the judgement?
How did the jury found Rambus in violations?
Only the court paper can give us the detail insights. Combing through the 3,000 pages of review gives us a lot of information, that is otherwise, not commonly known to the public.
Back in the summer of 1992 when the JEDEC committee for memory standards were holding their meeting on future memory standards, two representatives from a tiny technology-design company called Rambus were present among the many giant companies like IBM, Toshiba, Hitachi and Siemens . They listened as their industry colleagues discussed an element known as "programmable CAS latency." A week after the meeting, Rambus’s Richard Crisp, met with a company attorney to talk about amending Rambus'' pending patent applications.
Among new technologies that Crisp wanted to add was “programmable latency”. A few months before, Crisp had recommended adding patent claims for "mode registers"--right after he had learned that at the same standards committee. A few months before that, it was "low-voltage swing." Many of what Crisp learned had quietly journey from the standards committee agenda into Rambus patent applications.
In the early 1990’s, it was apparent that the higher microprocessor performance will soon be bottle-necked by the speed of the memory system. Newer method of operating memory system is seek. It became obvious that the effort to define a new memory system will take industry wide co-operations.
Memory companies, including then IBM, Siemens, Micron, Samsung, Hitachi and Toshiba had to put down their difference and joint together in a series of meetings to form one single possible memory standard. The Joint Electron Device Engineering Council (JEDEC) was serving as the central magnet to bring forth the new memory standard called SDRAM (synchronous dynamic random access memory).
This method would include a clock that gates the execution of each bit of memory information. In order to make the system work, bitter rivals have to put down their swords and collaborate. The process requires the realization that self-interest sometimes demands cooperation.
Jedec the Referee
JEDEC has always tried to avoid adopting standards that are already patented--or about to be--so that no one company will have the power either to charge outstanding royalties or to block a competitor from manufacturing the product. But there are so many patents out that avoiding all of them is nearly impossible. So companies that have patents on a standard are asked to commit to license all comers at a reasonable rate. On the rare occasions where a company refuses, JEDEC changes its standard so that it doesn''t use the patented design.
Inception of Rambus
For the time being, in 1990, a tiny little company called Rambus was formed in Los Altos, Califormia. Founders Mike Farmwald and Mark Horowitz, both Stanford Ph.D.s, invented a way to connect the two types of chips that would dramatically improve the speed at which data could be moved from memory to microprocessors. Farmwald and Horowitz had no desire to raise $1 billion to build a chip-fabrication. Instead, they set up shop as an intellectual-property company. They would sell their technology to chip manufacturers and make money on royalties and consulting fees. They called their technology RDRAM.
Although RDRAM was a revolutionary step, but selling it proved no easy task. It was so different from past incarnations of memory technology that chipmakers at first doubted it could work. It was expensive to implement. And the very chipmakers to which Rambus was trying to sell its products were developing a competing product called SDRAM.
SDRAM was resolutely evolutionary. (The most significant difference between the two, according to the judge''s ruling in the Infineon trial: RDRAM transmits three different types of information on a single "bus"--essentially a collection of wires; SDRAM has separate buses, each dedicated to a single type of information.)
Rambus patent approved
Nearly a decade later, long after the SDRAM standards had been adopted, Rambus decided it was time to cash in. Meanwhile, Rambus'' patents were starting to roll in: The Patent Office issued Rambus its first patent on RDRAM, in 1993. (Rambus promptly disclosed the patent at JEDEC.)
In 1996 Rambus'' first SDRAM patent was issued. That year, at its lawyer''s recommendation, Rambus bailed out of JEDEC; CEO Tate conceded at trial that the patent issue was at least one of the reasons for the company''s departure. And the withdrawal letter that Rambus sent JEDEC included a list of all of Rambus'' patents except its SDRAM patent. Rambus lawyers later said the omission was unintentional.
Intel Support Rambus Technology
Later in 1996 came the news that would vault Rambus to prominence. Intel announced that its next generation of PC microprocessors would use Rambus technology. Intel went so far as to invest $850 million in memory-chip makers to encourage them to implement the Rambus design.
With this critical backing, virtually every memory company, including Infineon, anted up for a license on RDRAM. The news helped fuel Rambus'' smash IPO in May 1997. Hailed as "the year''s hottest IPO" by the Wall Street Journal after it went public in 1997, Rambus'' stock was long a favorite of chat-room denizens and CNBC devotees.
The market reality was that Rambus technology was expensive. The political reality was that the company had alienated many chipmakers. "From the beginning, Rambus has been arrogant," says Desi Rhoden, chairman of JEDEC and CEO of Advanced Memory International. "[Rambus] used to say, ''We''re going to bury the memory industry.'' " The company was also known for its heavy-handed tactics.
For example, according to Rhoden and three other sources, Rambus'' contracts forbade customers from saying anything negative about Rambus in public. According to those sources, Rambus threatened unspecified retribution on several occasions when people made statements that Rambus took exception to. "Lots of people got slapped around," says Rhoden.
Intel supporting DDR memory
Intel began backing away from its erstwhile protege. Just as the company was getting set to introduce its Rambus-only Pentium 4 last year, it announced that it would soon make versions of the chip that would be SDRAM-compatible. "We made a big bet on Rambus, and it did not work out," Intel CEO Craig Barrett told the Financial Times last fall.
"It was a mistake to be dependent on a third party for a technology that gates your performance." To be sure, RDRAM production is expected to rise on sales of the Pentium 4, but it has a long way to go to catch SDRAM: In the first quarter of this year, RDRAM production accounted for only 5.6% of the market, according to Gartner Dataquest, compared with 83.6% for SDRAM
Rambus the Toll Collector
Feeling the market pressure from competing SDRAM technology, Rambus decided to collect license fee not only on Rambus technologies, but also on other synchronous memory technologies like SDRAM and DDR. That is right after the US Patents and Trademark Office had issued the patent on synchronous memory technology to Rambus. The company started approaching its RDRAM customers to let them know that it expected to be paid for SDRAM too.
"People were incensed," says analyst Bert McComas of InQuest Market Research. It was as if a microbrew that had built its entire brand identity on the notion that it was better than Budweiser had then turned around and demanded a royalty on every case of Bud. But Rambus'' sweeping licensing program went even further. Late last year a Rambus executive told industry weekly Electronic News that it wanted to license not only the entire SDRAM market, but also every product that connected to SDRAM. If successful, says McComas, Rambus "would end up taxing everybody" in the industry.
In June 2000, soon after the Hitachi settlement, Rambus'' shares topped out at $127, giving the company a stunning $13 billion market value. Buoyed by the euphoric stock price and the momentum of its licensing deals, Rambus began pounding on the doors of the remaining industry holdouts. Only six weeks after first contacting Infineon in late June, Rambus sued for patent infringement. The memory industry knew that they had to have a countering tactic or they will be sued one after another. It was reported that a high level meeting of memory companies executives was held in Tokyo right after Infineon was sued. Shortly after the meeting, 7 companies bucked and decided to pay license fee to Rambus on SDRAM they produce.
Rambus demand royalties
With now 7 companies under it’s SDRAM license, Rambus lawyers was walking tall into a meeting room in Boise Idaho on August ,2000. They were expecting an easy contract settlement from Micron Technologies, the largest SDRAM manufacturer in the US. Five minutes into the meeting, the Rambus lawyers had only heard the refusal statement from Micron Technology lawyers. They were then escorted out of the room and told to go home. Before their plane lands at Silicon Valley, Micron had filed a law suit against Rambus charging Rambus Inc. with trying to "coerce exorbitant royalties" from the DRAM industry, Micron Technology Inc.''s antitrust lawsuit were to determine the validity of key patents that serve as the foundation for much of the computing world''s memory requirements.
Micron antitrust lawsuit
The suit, filed in U.S. District Court in Delaware, seeks to invalidate patents Rambus holds pertaining to a synchronous interface used in billions of memory devices, processors, and core-logic chipsets and seeks unspecified damages from Rambus as well as treble punitive damages allowed under antitrust law.
Court battle begins
Hyundai’s counter suit came right after in US district court naming that Rambus had violated US anti-trust law by filing patents on technologies generated in industry open standards meetings.
Infineon lawyers told Federal Judge Robert Payne that the e-mails from "Secret Squirrel" and "Deep Throat" provided details of the DLL technology that JEDEC was considering and ultimately included in the SDRAM standard. They charged that Rambus then subsequently included the DLL technology as part of its amended SDRAM patent application on SDRAMs filed in 1997.
Rambus attorneys told the court that Richard Crisp, Rambus engineer and recipient of the Secret Squirrel and Deep Throat e-mails, had no knowledge of where the messages came from, according to the transcript.
"Mr. Crisp testified it was one of the most bizarre experiences of his life was receiving these e-mails,"
Rambus defense itself
According to Rambus attorney David Pendarvis. John Desmarais, Infineon lawyer, told Judge Payne, "It goes directly to the scheme here, because what happens [is] Rambus continues to modify its pending patent applications after withdrawing from JEDEC until they get it finally right in the patents, and one of them is in this suit."
Rambus would later argue that until 1993 JEDEC''s policy applied only to issued patents, not pending patents, and that even afterward, the organization didn''t make clear that patent applications had to be disclosed. JEDEC President John Kelly says that Rambus was the only company that didn''t get the message: "Our regulars will tell you it was clear."
Court paper also shows that in a June 1992 business plan, Rambus CEO Geoffrey Tate described the SDRAM as generally "inferior" and dismissed it as an "incremental improvement" on 20-year-old technology. Still, he noted, "all customers are familiar with it and understand it, so there will be a tendency to try the Sync DRAM [SDRAM] approach."
Tate laid out a four-part strategy for dealing with the SDRAM threat. The first three parts assessed ways in which Rambus could "counter" the technology in the market. Part four laid out a parallel strategy, to claim ownership of it: "We believe that Sync DRAMs infringe on some claims in our filed patents; and that there are additional claims we can file for our patents that cover features of Sync DRAMs. Then we will be in a position to request patent licensing [fees and royalties] from any manufacturer of Sync DRAMs." Rambus would follow that plan to a tee--competing with SDRAM in public while quietly working to lock up the patent rights to key parts of it.
While Rambus was monitoring the proceedings, routinely updating its patent applications with concepts such as programmable latency, one of its lawyers was growing concerned. The attorney told Crisp, the company''s JEDEC representative, that even an intentionally misleading silence about patents at a standards body could lead a court to void the patents.
But on at least one occasion, silence was exactly what Crisp gave. In May 1992, when the JEDEC committee chair asked him whether Rambus had any patents relating to "two-bank designs," another component of SDRAM, Crisp simply shook his head no. (At trial, Crisp defended his muteness by noting that Rambus'' patents hadn''t yet issued. When Infineon''s lawyer asked, "You had applications on two-bank designs, didn''t you, sir?" Crisp responded, "That''s right. But that''s not what he asked me.")
"What you did," Infineon lawyer John Desmarais asked Crisp on the stand, "was work on new claims for the Rambus pending patent applications, and your intent was to make them broad enough that they would cover an SDRAM using the features that you had seen at prior meetings. Isn''t that a fact?" Crisp answered, "In some cases that was true."
Rambus charged with fraud
In light of admissions like that, it''s not surprising that the jury found that Rambus had committed fraud and slapped the company with $3.5 million in damages (which were automatically reduced to $350,000 under a punitive-damages cap).
The judge hearing the Infineon case, Robert Payne, concluded that Rambus'' patents hadn''t even been infringed. If other courts adopt his interpretation, Rambus will have virtually no way to prove that other companies infringed either. That could cost Rambus a significant chunk of its revenues, seriously imperiling its growth prospects.
In the light of all Rambus did, was it a result of greed or was it just “survival of the fittest”?
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