After a recent U.S. Navy civilian submarine
joyride ended in tragedy, the news media treated us to many video clips of
submarines surfacing. Keep that image in mind, as it will help you relate
to the twists and turns of the ongoing Rambus court case. Indeed, the
latest accusations leveled against Rambus by SDRAM makers Micron, Hyundai
and Infineon in court are that Rambus Inc. used so-called "submarine
tactics" to inappropriately acquire patents to SDRAM technology that
it had not invented.
'Submarine tactics' refers to the practice of keeping patents secret
until competitors come out with a similar product. At that point the
submarine patent holder can "surface" quickly and demand
royalties and fees for the product in question. Patents derived by
submarine tactics may or may not be enforceable depending upon the
situation. In the case of Rambus Inc.'s SDRAM patents, a strong argument
can be made that the patents will be rendered invalid by the current court
case. Here are some of the highlights.
Rambus filed patent applications for Rambus DRAM and Rambus controllers
in 1990. They argue that these patents also covered certain aspects of
SDRAM technology. Then in 1992, a standards body known as JEDEC was formed
by a consortium of memory makers to hammer out the new technical standards
for SDRAM. Rambus Inc. joined JEDEC at that time and participated in the
meetings until 1996. During their participation they failed to disclose
any of their existing patent applications as required by JEDEC rules.
JEDEC adopted several SDRAM standards between 1992 and 1996. It was in
1996 that it became clear to Rambus that JEDEC was preparing to vote on
the final standard for SDRAM technology. Rambus pulled out of JEDEC at
that point, and then in 1997 filed amended patent applications to cover
SDRAM technology. These were finally awarded in 1999 and 2000, long after
SDRAM had been on the market.
Internal Rambus documents released recently by the court clearly
indicate that Rambus had a business plan that involved submarine patents.
But unlike regular submarine patents, Rambus went one step further. Rambus
never planed on participating in JEDEC to help work out SDRAM standards.
Their participation was more like a mole in spy circles. The basic idea
was to acquire enough information from the JEDEC meetings to amend their
existing patent applications to cover as much of the technology in SDRAM
as possible. As soon as it became apparent to Rambus that they would have
to either disclose their existing patents, or make them invalid due to the
upcoming vote by JEDEC members, Rambus quit the standards committee.
It was not until the year 2000 that Rambus began to flex its patent
muscle in the marketplace. SDRAM had become the standard PC memory type at
a time when Rambus was trying to get the computer industry to adopt Rambus
DRAM as the new standard. Rambus worked out a deal with Intel that forced
the chip giant to use Rambus DRAM exclusively for their upcoming Pentium 4
processor. But due the very high price of Rambus DRAM, Rambus Inc. decided
that it's submarine patents could help if they could be used to force
SDRAM makers to pay royalties to Rambus Inc.. This would reduce the price
difference between the two memory products, and help Rambus with market
penetration. But as you might imagine, some of the SDRAM makers decided to
fight back. And that has led us to this court case.
It is probably safe to say that Rambus Inc.'s stock may suffer as the
court case continues on. Few of the internal documents released so far put
Rambus Inc. in a positive light. Indeed many of them seem to bolster the
argument put forward by SDRAM makers that Rambus Inc. is, and has been,
engaging in anticompetitive practices. As such, Rambus has become the
subject of an FTC probe to determine whether nondisclosure of its SDRAM
patent applications to JEDEC constituted a "restraint of trade".
Between the court case and the FTC probe, it looks like Rambus is in hot
water. If more damaging information comes out, I would hope that the court
in San Jose CA would slap an injunction on Rambus Inc. preventing them
from collecting any further royalties from SDRAM makers until the court
case has been settled.