Rambus Seeks $1 Billion in Price-Fixing Suit

Memory-chip designer Rambus has filed a billion-dollar lawsuit, claiming the four largest manufacturers of dynamic random access memory (DRAM) chips conspired to squelch demand for its products.

The suit names Micron Technology, Hynix Semiconductor, Siemens AG and Infineon Technologies as defendants, saying the four companies worked together to reduce production rates of Rambus’ DRAM offerings, which in turn led to significantly higher prices.

The case seeks to use as a springboard reports that the Federal Trade Commission (FTC) is investigating price-fixing allegations within the DRAM industry, along with recent comments from computer executives, including Michael Dell, asserting that prices for DRAM do not appear to follow market peaks and valleys.

Rise and Fall

“From substantial written evidence already in the public record, we believe that these memory manufacturers colluded illegally, thereby limiting consumer choice and depriving our products of the opportunity to compete fairly in the marketplace,” said John Danforth, senior vice president and general counsel at Rambus. “While we cannot change the past, we have a duty to our stockholders to respond appropriately to this evidence, which we are doing today.”

In a conference call, Danforth said the lawsuit was filed because of the “quantity and quality of the evidence. We couldn’t ignore our fiduciary responsibility to our shareholders.”

Rambus stock rose briefly on news of the action before falling back to US$20.30 per share.

The 36-page complaint, which seeks damages in excess of $1 billion, is based in part on documents obtained through the FTC, Danforth said. It alleges the four chipmakers violated the anti-price-fixing Cartwright Act and California state law.

Ready Response

Micron responded quickly to the lawsuit, saying it appears to be an attempt by Rambus to deflect attention from its own legal woes, including an FTC lawsuit that alleges Rambus tried to scuttle an open-standards-based model for DRAM production.

Rambus recently won a ruling in that case. The decision, which is now under appeal, could bring the company a windfall of royalties from chips already in use.

“Rambus failed in the marketplace because of excessive manufacturing costs and minimal demand,” said Dave Parker, Micron’s director of corporate communications. “Several memory manufacturers, including the world’s largest, continue to produce products sufficient to meet … limited, worldwide market demand. It is unfortunate that Rambus is trying to blame the market failure … on others, like Micron, who ultimately responded to marketplace demands.”

Infineon also responded to Rambus’ latest legal action, calling the charges “old news and without merit” and repeating the assertion that Rambus’ DRAM products failed as a “result of high costs and technical issues.”

Still a Player

IDC analyst Shane Rau said Rambus still plays a role in the chip market but has suffered significant deterioration of its overall clout since it lost the early backing of Intel, which sought to keep its options for chip design open and backed multiple design variations. Since then, other DRAM makers have gained market share.

“When they had Intel’s backing, they had their ticket punched,” Rau told the E-Commerce Times.

Computer makers often fret over the fact that prices for DRAM have remained steady and are not as easy to negotiate as prices for other PC and server components, he added.

A Suit a Day

Industry observers said while it is important to take each case on its own merits, it appears that more companies are willing to take the risks associated with filing such lawsuits, in hopes that they will result in large victories or settlements that can boost the bottom line.

“Any stigma attached with being a litigant is now gone,” attorney Steve London of Brown Rudnick Berlack Israels told the E-Commerce Times. “There was a time when SCO and Rambus wouldn’t have gone to court because of how it would reflect on them. But now, shareholders expect and demand that companies protect their intellectual property at all costs.”

That trend is likely to continue as more companies on the receiving end of lawsuits seek to reach settlements rather than endure years-long legal battles that can be costly and distracting, London added. Microsoft, Intel and AMD are among the companies that have paid out sizeable amounts to put such cases to rest in recent months.