Rambus Could Reap Millions In Patent Settlements

By Jesse Emspak: Subscribe to Jesse's RSS feed

July 27, 2010 5:32 PM EDT

Rambus, a designer of semiconductor chips, won a long-running patent battle with NVIDIA, but that dispute is not the only one the company is involved in - and the upcoming decisions could mean millions in additional revenue.

This week the barring the U.S. International Trade Commission ruled that NVIDIA was violating Rambus' patents for certain kinds of memory controllers. NVIDIA must now come to some agreement with Rambus to pay license fees. If it does not, then the company's products cannot be imported into the United States.

Besides the NVIDIA decision, Rambus is involved in a suit with Hynix Semiconductor that will be heard in October. In that case, Hynix had originally sued Rambus in 2000, but Rambus countersued. Hynix lost, and appealed. The parties will appear before the U.S. Court of Appeals for the Federal Circuit in October. A judgment in Rambus' favor would be worth at least $397 million, according to Rambus' general counsel, Tom Lavelle.

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Almost all of Rambus' revenue comes from licensing. The company reported $38.9 million, down 76.0 percent from the first quarter of 2010 and up 44.0 percent compared to the second quarter of 2009.

Much of that spike in revenue during the first quarter was due to the agreements signed with Samsung, which also lost a patent battle with Rambus last year. That judgment was worth $700 million in addition to a $200 million stock purchase.

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A settlement with Hynix, in addition to whatever agreement is reached with NVIDIA, could also boost the company's results sometime in 2011, Lavelle said.

Payments from NVIDIA are not a sure thing. NVIDIA said it will appeal the ITC's decision. Besides that, there are three possible outcomes.

NVIDIA could agree to pay license fees. In that case a possible framework exists: a 2009 settlement before the European Commission, in which Rambus was required to offer a license deal of 2% on a maximum of $20 per chip sold. Neither Rambus nor NVIDIA would say if such an agreement is in the works now.

The President's office could review and alter the ITC ruling, but that is a rare occurrence.

The third outcome is NVIDIA declining to sign a license agreement at all, but that would leave the 16 other companies named in the ITC action in the position of either paying Rambus royalties themselves or foregoing any shipments to the U.S. One of the companies named is Hewlett-Packard, so that is unlikely.

For its part, NVIDIA spokesman Hector Marinez said even if NVIDIA is forced to sign a license agreement, the effect on NVIDIA's bottom line would be small.

This article is copyrighted by International Business Times, the business news leader