Rambus Waterloo: How Intel Sunk the Antitrust Micron/Hynix Lawsuit
11/17/2011 by: Gil Russell
Yesterday, Rambus Inc. lost a long fought legal battle filed against Micron and Hynix by the company in 2004. The San Francisco jury decided 9-3 against Rambus after deliberating a near record of more than eight weeks on their decision.
Rambus' stock, halted in anticipation of the court action, fell more than 60% of its market value on the decision (today, it saw a 15% recovery). It's been a very bad day for Rambus aficionados.
Rambus accused Micron and Hynix of violating antitrust laws in that they purposely sold Rambus DRAM at elevated prices while conspiring to sell DDR2 SDRAM at depressed prices to deprive Rambus of their rightful place in the cash flow hierarchy - claiming direct damages to the tune of just under $4 Billion. Under California law, this can easily triple, and, along with the asked for punitive damages, bringing the grand total to somewhere around $20 Billion.
For the Record
Rambus has a long history of litigating against the very companies vital to its survival. The company is an intellectual property provider and in fact, desperately needs large DRAM manufacturers to turn licensing fees into cash flow. Spurned by Intel as a consequence of Caminogate, the company turned to "hardball" litigation in their effort to restore corporate coffers and respectability.
What Rambus did not expect was the resulting "hardball" warfare tactics waged by the very companies that they thought would be "pushovers" when faced with their legal onslaught. While American public companies are vunerable to lawsuits and tend to settle, Asian tigers have a different way of conducting business.
Certain Asian providers were easy targets and folded easily though some turned the situation to their own advantage realizing a fair amount of profit during the brief "up" period that Rambus technology enjoyed. In the end, they too paid up.
Intel's testimony during the trial tapped the nail into Rambus' coffin. Intel testimony related to the court that Rambus' DRAM technology was not ready for market and its failure was mostly due to the Rambus' inability to understand basic market requirements in which reliability is of the utmost importance. Dell Computer suffered some 300% higher field returns over DDR SDRAM with their foray into the Rambus DRAM technology. Intel lost over a billion dollars in the i820 recall and when all was said and done, the company finally decided that they could not rely on Rambus for the future of their memory requirement and turned to DDR2 instead.
Price Fixing and Implications
The guilty pleas of Infineon, Hynix, and Samsung to charges of price fixing [2004-2005] evidently led Rambus to conclude that if the major DRAM manufacturers were guilty of price fixing then they were certainly not be above colluding to preclude Rambus technology from becoming successful in the market place. Of course, no one knows what motivated Rambus' thought processes behind lawsuit but this seems to be the most probable.
Will They Appeal?
Rambus said they are considering an appeal of the jury's decision though nothing is firm yet. The jury's 9 to 3 decision does give the company some comfort that an appeal might have a chance though overturning jury decisions in Civil litigations is well known to be difficult.
The New Rambus?
The question is where to next for Rambus... to continue litigating against the companies they would like to sell their IP to or turn to innovation?
Rambus has been moving away from being a memory IP company only. The company has invested in other areas outside of the memory IP marketplace and seems to be downplaying their role in the memory space.
It will be interesting to see what Rambus' board of directors decides…,
Rambus, RMBS, Rambus Inc., RDRAM, XDR, XDR DRAM, Micron, Hynix, Hynix Semiconductor, San Francisco, lawsuit, jury, San Francisco jury, DDR2, DDR, DDR SDRAM, DRAM, SDRAM, DDR2 SDRAM, Intel, Intc,
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