Rambus Patent Case Could Change Business
Now that a federal appeals court has lifted a fraud verdict against memory chip designer Rambus, the company is poised to once again defend its intellectual property in courts around the world. Analysts say that the decision's fallout will likely change the way standards organizations operate, and that it will affect other memory vendors--and memory prices.
If competing memory manufacturers are found to owe royalties to Rambus, they're likely to
The U.S. Court of Appeals for the Federal Circuit, in Washington, D.C., in a
When Rambus sued Infineon Technologies in 2000, alleging Infineon violated Rambus patents with its products, Infineon made its own accusation. It said Rambus committed fraud for participating in Joint Electron Device Engineering Council meetings without disclosing that it had obtained or was seeking patents on several key technologies included in the SDRAM standard.
A jury found Rambus guilty of fraud on two separate charges of interfering with the SDRAM standard and the DDR SDRAM standard. The judge in that case overturned the DDR SDRAM verdict, noting Rambus withdrew from JEDEC before the DDR SDRAM standard was completed.
A three-member panel of appeals court judges overturned that verdict in a split decision, saying that JEDEC's disclosure policy was not clear enough to charge Rambus with fraud.
The case delves into the sometimes murky world of U.S. patent law, which has become controversial among technology companies. For example, Amazon.com won a patent in 1999 for a one-click Web purchasing system and later sought an injunction against use of a similar system by Barnesandnoble.com. British Telecommunications went even further in
U.S patent laws require an application to describe a specific invention in terms of exactly how the technology works and what it can be used for, says Randy Gard, a partner in the law firm Carl & Ferrell in Palo Alto, California. The specific applications of the invention are known as claims and are crucial to determining patent infringement.
"The first time you write that patent, you have dueling requirements. There's a requirement to be fairly specific as to how the invention works, but at the same time you have to describe all of the variations and exclusions you can think of," he says.
Rambus filed for a patent on DRAM with the U.S. Patent and Trademark Office in 1990. It was written as broadly as possible to cover a number of different technologies, says John Danforth, Rambus's general counsel. The main technology that emerged from those patents was RDRAM (Rambus DRAM).
Rambus officially joined JEDEC in 1992. The organization convened to set standards for memory manufacturers so PC vendors could select one type of memory from various manufacturers without having to worry about interoperability. The SDRAM standard was set in early 1993 by the council members.
What happened--or didn't happen--at those meetings to decide the SDRAM standard set the stage for the legal battles that would continue for more than ten years.
A slightly modified version of Rambus's original patent was awarded in 1993, and Rambus disclosed that patent to JEDEC during a committee meeting, according to the court's opinion.
While the patent is pending, if the applicant realizes the industry is moving toward a slightly different use of the invention, they can add or modify claims to reflect that new application, as long as it was referenced in the detailed description of how the device works, Gard says.
"That's not cheating. That's the recognition that as you continue to work with an application, you may think of a better way to frame your application. Or, while that first application was pending, you then realized that technology is being used or deployed in the marketplace, and the way you claimed your invention doesn't cover what's being done in the marketplace, yet the detailed description describes what the market is doing," he says.
However, Rambus was involved in an organization actively discussing ways to advance memory technology. The participation gave the company a unique perspective on how the market would evolve, and even the chance to influence adoption of a standard on which it could claim royalties.
"It's not at all easy to know if a patent application [applies to] a standard," says Steve Becker, a partner in the law firm of McDermott, Will & Emery in Washington, D.C. "Rambus had a basic patent disclosure that disclosed almost all the technology that would be adopted by the committee, but only a few of those [technologies were] patent claims that would require a license" in order to manufacture, he says.
Because JEDEC did not have a specific policy in place regarding disclosure of pending patents, Rambus could not be found guilty of fraud, the court said. The company still tried to obtain patent claims that covered technology included in the SDRAM standard, however, which didn't impress the court.
"The record shows at most that Rambus wanted to obtain claims covering the SDRAM standard. Some of that evidence does not put Rambus in the best light," the court wrote in its majority opinion. "While such actions impeach Rambus' business ethics, the record does not contain substantial evidence that Rambus breached its duty" under the disclosure policy.
Clear impact of the Rambus case will be felt at standards organizations, says Ray Jacobsen, also a partner with McDermott, Will & Emery. "Standards-setting organizations must come up with rules that they want to enforce, such as, 'We don't want people to attend meetings unless they certify they won't file applications regarding the standard'," he says.
Individuals also must be aware of the full range of their patent portfolios, he says. "This is going to place a lot more burdens on companies who participate in standards-setting organizations," he says.
From 1989 to 1991, Rambus taught several memory manufacturers around the world how to manufacture its proprietary memory technology under nondisclosure, Danforth says. Some of the technologies used in Rambus's memory chips were incorporated in the SDRAM standard set by JEDEC in the early 1990s.
In order to convince manufacturers to license the Rambus technology, it had to disclose its proprietary technology so the companies could evaluate the product, says Nathan Brookwood, principal analyst with market research company Insight 64. Rambus is unique among the companies involved in the litigation, as it only designs memory chips. Infineon and the others manufacture their own chips.
The litigation between DRAM vendors and Rambus seems far from over as a result of this decision, analysts say. Infineon is also expected to seek a rehearing of the appeals court's decision.
"The DRAM vendors hate to pay license fees," Brookwood says. "Samsung is in a pretty good position, having already struck a deal with Rambus. At the opposite end are Micron and Infineon, who have been the most resistant to the notion of paying license fees for anything," he says.
Danforth also indicates that Rambus's patent infringement claims have seen new life with Wednesday's decision.
"We believe that when we've made a contribution this significant to the industry, we should be compensated for that," Danforth says.