Nanotech - The Circuits Blog

Rambus has asked the International Trade Commission to terminate an investigation of Nvidia relating to four patents as part of a November 2008 complaint.

Rambus provides high-speed memory interface technology, though in recent years the company has become better-known for intellectual property litigation practices. Rambus has sued many of the world's largest chip manufacturers.

Nvidia's David Shannon

(Credit: Nvidia)

The Los Altos, Calif.-based company conceded before the ITC that Nvidia products do not infringe on its four patents, and also asked for termination of several claims from a fifth patent in the ITC action, according to an Nvidia statement.

"We are pleased Rambus has recognized the weakness of these patents and claims," said David Shannon, Nvidia executive vice president and general counsel in a statement. "These withdrawals represent essentially half of the patents and one third of the claims asserted against us, and we look forward to addressing the remainder of the case."

The current ITC litigation originally included nine patents involving memory controllers related to graphics processors.

In June, Nvidia announced that the U.S. Patent and Trademark Office had rejected 41 claims, in seven patents, which Rambus had asserted in the ITC action against NVIDIA.

Rambus has a checkered track record on lawsuits. The European Commission launched antitrust investigations against Rambus in 2007, alleging intentional deceptive conduct in the context of the standard-setting process, citing its behavior as "patent ambush."

In January, a Delaware federal judge ruled that Rambus could not enforce patents against Micron Technology. Judge Sue L. Robinson, in the U.S. District Court in Delaware, ruled on January 9 that evidence "spoliation" occurred when Rambus allegedly destroyed important information related to the case that could be used against it. Robinson's decision rendered Rambus' patents unenforceable.

In a U.S. District Court patent ruling against Rambus, the judge highlighted some of the company's aggressive tactics for targeting and suing memory chip manufacturers.

On Friday, Judge Sue L. Robinson, in the U.S. District Court in Delaware, ruled that Rambus' patent suit against Micron Technology is "unenforceable," citing "spoliation," defined as the "destruction or alteration of evidence." This occurs when a party has "intentionally or negligently breached its duty to preserve potentially discoverable evidence," Judge Robinson wrote in her opinion.

As a result, 12 Rambus patents are not enforceable against Micron, the largest U.S. manufacturer of memory chips.

Shares of Los Altos, Calif.-based Rambus, which licenses technology for high-speed memory architectures, plunged almost 40 percent, to $11.42 in afternoon trading Friday.

In the opinion, Judge Robinson also cited Rambus' tactics for aggressively suing companies. One September 29, 1999 e-mail quoted in the opinion said that a consensus had been reached by Rambus on the "need to sue a dram company to set an example" and that Rambus should publicize the patents and the suits to "put all dram/controller companies that use sdram/ddr...on notice." (SDRAM stands for Synchronous Dynamic Random Access Memory; DDR stands for Double Data Rate.)

Robinson also declared in the opinion that "in light of Rambus' litigation conduct, the very integrity of the litigation process has been impugned...(and) that the appropriate sanction for the conduct of record is to declare the patents in suit unenforceable against Micron."

Micron had been a target of Rambus, along with other companies including Hitachi, Hynix, and Samsung. "We are pleased with the Delaware Court's ruling that the 12 patents Rambus asserted against Micron in the Delaware case are unenforceable," said Rod Lewis, Micron's Vice President of Legal Affairs and General Counsel, in a statement. "We believe that the decision is applicable to other pending cases, and we are reviewing the ruling to determine its potential impact," he said.

"Micron believes that the Delaware Court's ruling applies to the remaining patents in (a separate) California case and expects to file a motion with the California Court seeking a ruling of unenforceability based on the Delaware Court's decision," Micron said.

Rambus disagreed with the ruling. "We respectfully, but strongly, disagree with this opinion, and at the appropriate juncture plan to appeal," said Tom Lavelle, senior vice president and general counsel at Rambus.

"This opinion is highly inconsistent with the findings of the Court in the Northern District of California which looked at the same conduct and found there was nothing improper with our document retention practices. We are confident in the strength of our position and will continue to vigorously pursue fair compensation for the use of our patented inventions," Rambus said.

Being fabless isn't so hip these days.

Rambus and MIPS Technologies are both chip companies that don't have their own chip fabrication facilities. Intel does. Perhaps not coincidentally, Rambus and MIPS are restructuring, while Intel's business is coasting on top of surging processor shipments.

Both Rambus and MIPS, which make a living off licensing intellectual property for chips, announced layoffs this week. Intel, meanwhile, is selling lots of its tiny Atom processors and seeing processor shipments surge overall.

Rambus said Thursday that it will reduce its workforce by approximately 90 positions and will take a restructuring charge of approximately $4 million in the next two quarters. Earlier in the week, MIPS announced a restructuring charge it estimates at between $4 million and $5.5 million, and layoffs of its own: 15 percent of its 512 employees. "We believe the market continues to show signs of softness," MIPS said in a statement.

Don't tell that to Intel. IDC released a report this week showing that Intel processor shipments were up 20.8 percent in the second quarter over the same period last year. Intel market share also crept up by 0.9 percent in the second quarter, bringing it to 79.7 percent, according to IDC.

And sales of Intel's Atom processors are exceeding expectations, according to Reuters. The report quotes Chief Financial Officer Stacy Smith, who said that "Atom is off to a very, very rapid start, far exceeding our expectations when we started the year."

The Atom processor is used in high-profile products such as the Asus Eee PC and Acer Aspire.

Barring major strategic blunders, Intel appears to be on course to make gains in other markets. The company will preview its next-generation "Nehalem" Core i7 chip architecture at the Intel Developer Forum next week. Core i7 processors are due to ship in the fourth quarter.

And Intel is ramping up production of its latest generation of 45-nanometer mobile processors now. New ultra-low-power chips (rumored to appear in the next-generation MacBook Air, among other ultraslim notebooks) are due in September. Also, the chipmaker's first quad-core mobile processor debuted this week in laptops from Lenovo and Hewlett-Packard.

Nvidia is in the throes of a minor meltdown. Its share price is collapsing as it grapples with widespread product defects, a resurgent Advanced Micro Devices, and a weak market.

It all started when Nvidia released a statement on July 2 saying it would take a $150 million to $200 million charge to cover the costs for repair and replacement of defective graphics silicon in notebook PCs. Though Nvidia didn't name any names, Hewlett-Packard, Apple, and Lenovo, among others, use Nvidia graphics chips in their notebooks.

Then on Thursday, July 3, shares plunged $5.54, or just over 30 percent, and closed at $12.49. And share prices have continued to fall--though how much of the post-30-percent drop can be attributed to the weak stock market is not clear.

"There are two piece of news. One is the technical problem, the other part is that (Nvidia) isn't happy with where their business is going," said Dean McCarron, principal at Cave Creek, Ariz.-based Mercury Research.

Keener-than-usual competition is adding to product-defect woes. "Pricing has been more aggressive," McCarron said, referring to more competitive products from AMD's ATI graphics unit. "They did make some price adjustments on their GPU (graphics processing unit) products based on AMD being more competitive," McCarron said.

PC makers such as HP and Toshiba are also using more AMD-ATI graphics chips in notebook PCs, though the impact of this trend may be felt later rather than sooner. "I wouldn't necessarily look at it as being a tremendous share shift. We won't know until the end of the quarter. My suspicion is that (this quarter) a market share shift could be a small component," he said.

Beyond Nvidia's internal problems and the inter-company rivalry with AMD, McCarron sees a bigger issue looming that may affect not only Nvidia in a big way but AMD and Intel, too. "I am seeing some early signs that the market is weaker than forecast. China in particular seems to be much softer," McCarron said. This is a concern because China is now driving a lot of the growth, he said.

Stateside, an ill-timed Rambus lawsuit against Nvidia falls into the kick-them-when-they're-down category. Rambus, which makes a living--though not that successfully in recent years--suing other companies for patent infringement, has now set its sights on Nvidia. The Los Altos, Calif.-based company filed a lawsuit Thursday claiming Nvidia products with memory controllers for synchronous dynamic random access memory (SDR) and double data rate memory (DDR, DDR2, DDR3, GDDR, and GDDR3) infringe 17 Rambus patents.

But product defects will be the big issue that dogs Nvidia over the summer and weighs on its stock price. Here is an excerpt from Nvidia's 8-K filing with the Securities and Exchange Commission on July 2. "While we have not been able to determine a root cause for these failures, testing suggests a weak material set of die/package combination, system thermal management designs."

McCarron said in some cases "you're getting enough mechanical stress that you're actually breaking the bond between the chip and the motherboard" which can cause a system with an Nvidia chip to fail.