Patent Law

Philip Zera, an analyst with Algorithm Capital, sent me his most recent research report on Rambus last night.  In his report, Mr. Zera details recent legal decisions affecting Rambus and his expectations on the impact of these decisions.  The following is excerpted from his April 28, 2008 report:

Like other technology licensing companies, Rambus invests tens of millions in research and development every year. Rambus recently reached the 699 patent milestone and they have another 451 patents pending.

Rambus not only develops intellectual property, it protects it. Litigation is an essential part of the Rambus story. Since 2000, Rambus has been involved in numerous legal battles with patent infringers. The recent legal victories with the FTC and in federal court in San Jose were hard fought and expensive.

PROGRESS WITH LITIGATION

Rambus has enjoyed two recent wins in its long running battle to collect royalties due from past patent infringements. On April 22nd, the U.S. Court of Appeals for the Washington D.C. Circuit overturned a Federal Trade Commission determination that Rambus tried to monopolize the memory-chip market. In 2006, the FTC had found that Rambus acted deceptively to obtain patents for its DRAM chips. But the appeals court said "the commission failed to demonstrate that Rambus inflicted any harm on competition," and chided the FTC for having "taken an aggressive interpretation of rather weak evidence."

On March 26th, a U.S. District Court jury in San Jose sided with Rambus in its eight year legal battle with Hynix. After a seven-week trial, the jurors rejected claims by chip-makers Hynix Semiconductor, Micron Technology and Nanya Technology that Rambus had harmed competition in patenting its chip technology. The case was originally filed by Hynix against Rambus in August 2000. Judge Ronald Whyte had split the case into three separate phases. Rambus has now prevailed in all three phases.

Rambus still has other legal battles including the DRAM price fixing case that the U.S. Supreme Court declined to hear and sent back to California as well the separate Samsung and Micron cases.

Rambus? immediate challenge is to translate the recent legal victories into renewed licensing momentum.  Litigation expenses were $13.2 million, a decrease of $2.9 million from 4Q07 and an increase of $8.3 million from 1Q07.