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After losing a copyright infringement battle, memory chip designer Rambus has been found guilty of fraud and fined $3.5 million in punitive damages.

Rambus plans to appeal the ruling, which follows the same judge throwing out the final three of the company's 57 infringement charges. Rambus had accused Infineon Technologies of copyright infringement of the patented Rambus SDRAM chip technology.

U.S. District Judge Robert E. Payne ruled that Rambus had acted improperly when it obtained patents on chip designs that were being developed at the time by JEDEC (Joint Electron Device Engineering Council), the semiconductor standardization group, Rambus says in a statement.

"This is fraud because JEDEC has specific rules saying you have to disclose patents and applications," says John Desmarais, Infineon's trial attorney. "Rambus intentionally violated those rules" by not informing JEDEC that it had obtained patents for the standards being developed, he says.

The jury awarded the $3.5 million to Infineon because they were defrauded as a member of JEDEC, Desmarais says. He expects the ruling may set a precedent allowing other members of JEDEC, which include Sun, Motorola, and Mitsubishi, to also sue Rambus. "I think it's a very important ruling for the industry," he adds.

Additional Rounds Ahead

This could prompt an eventual drop in memory prices, if manufacturers no longer owe fees to Rambus. But if the chip designer's court appeals prevail, it could mean higher prices for consumers--because manufacturers would owe royalties.

Rambus continues to contend that Infineon's charges are "completely baseless," says Geoff Tate, chief executive officer. He also notes that rules pertaining to JEDEC "have been shown to be confusing, conflicting, poorly communicated, and generally not complied with by other JEDEC members."

Rambus took Infineon to court, claiming Infineon had infringed upon its design patents in manufacturing SDRAM and DDR SDRAM. Rambus had made deals with other chip makers. However, Infineon, Micron Technology, and Hynix Semiconductor have held out on paying royalties to the company. This case is the first of several Rambus suits against those licensees.

A Shift in the Industry?

One analyst says the ruling is good for the industry.

"I think it's good that SDRAM and DDR SDRAM can go ahead without any constraints by Rambus," says Kevin Krewell, a senior analyst with MicroDesign Resources. "It hurts Rambus from a financial point of view, but it hasn't invalidated their patents on their own technology," he adds. Rambus's proprietary RDRAM technology was not involved in the suit.

The verdict is also a good sign for JEDEC, because it helps eradicate fears that the organization has become irrelevant in the industry, he adds. "It's a good thing for JEDEC that they've been able to maintain their integrity."

But with Rambus appealing, the case is likely far from over, Krewell says. "This could easily go on for another year or two," he adds. Such cases typically end up going back and forth with suits, countersuits, and appeals before one company is declared victorious, he notes.

The court indicated that the jury's award exceeds Virginia's punitive damages cap of $350,000, according to a report published in Wednesday's Richmond Times-Dispatch, implying that the amount could be reduced.

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