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Rambus Case Clouds Standards

Infineon Technologies AG (NYSE/Frankfurt: IFX) won't get its day before the United States Supreme Court, and that leaves most standards bodies in murky territory, according to one legal expert.

The controversy centers on Rambus Inc. (Nasdaq: RMBS), whose product is the interface that links memory chips to the rest of a system. Rambus owns patents that cover the latest standards for PC memory chips -- synchronous dynamic random-access memory (SDRAM) and double data rate (DDR) DRAM -- and has hit up every major memory vendor for royalties.

Problem is, Rambus didn't mention the patents while the standards were being crafted. In 1999, after SDRAM chips had hit the market, the company popped a little surprise on the industry, demanding royalties from all the DRAM giants, many of whom acquiesced.

A few stood their ground and sued Rambus for fraud; of those cases, Infineon's has gotten the furthest. Separately, the Federal Trade Commission in 2002 filed antitrust claims against Rambus. Closing arguments in that case are due to be heard this week.

Infineon scored an initial win in its suit, but the latest rounds have gone to Rambus. Infineon's last resort was to have the case heard by the Supremes, but the request was denied Monday. The trial now moves back to Richmond, Va., where a federal court will proceed with a retrial.

For most of the technology industry, what's important isn't so much the case as the implications for standards. Dell pulled a similar strategy in 1996, and it leads one to wonder -- what happens to the standards process if one member is allowed to go after the others for royalties based on with secret patents?

Because of the Rambus case, some standards groups are tightening up their rules. The Optical Internetworking Forum (OIF) has updated its policies regarding intellectual property rights, trying to coerce members to reveal any patents related to potential standards.

That might not be enough, though, because the court's decisions in the Infineon case have left plenty of gray areas, says Andrew Updegrove, a partner in the law firm Lucash Gesmer & Updegrove.

"You could read [the court decision] and say that even if you write a really tight policy, they still aren't going to uphold it unless you have all these really tight patent disclosures," Updegrove says.

Many standards groups are using the OIF's strategy, altering policies to compel members to disclose patents and other intellectual property. Admittedly, that's meant good business for Updegrove, who's helping consortia retool their policies.

But plenty of questions remain open, Updegrove says. For example, do patent applications count? They're supposed to be protected as trade secrets, so should standards bodies force members to give up that confidentiality? Also, do members have to disclose patents that might cross the path of a standard being formed?

In the worst case, enough loopholes might exist to discourage standards participation. "The concern is whether people would [think] that they have more to lose than to gain by participating in a standards setting," Updegrove says.

— Craig Matsumoto, Senior Editor, Light Reading

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