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Rambus Accused of Submarine Patent Tactics
Dr. John
                                                          February 27th, 2001
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.

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