Bloomberg News

Rambus Chip Failure Due to Flaws, Not Plot, Hynix Tells Jury

June 21, 2011

(Updates with Micron lawyer in seventh paragraph.)

June 21 (Bloomberg) -- Rambus Inc. memory chips failed in the marketplace because computer makers found them technically inferior and too expensive, not because of a conspiracy among rival companies, Hynix Semiconductor Inc. and Micron Technology Inc. said at a trial of Rambus’s antitrust lawsuit.

Rambus-designed chips hit the memory market with “a whimper and not a bang” and survived only as a “niche product,” Hynix lawyer Kenneth L. Nissly told jurors today in California state court in San Francisco.

Rambus, based in Sunnyvale, California, is seeking as much as $12.9 billion from Hynix and Micron based on arguments they conspired to thwart its dynamic random access memory, or DRAM, chips. The $4.3 billion in damages sought by Rambus against the two companies would be automatically tripled under California law, according to Rambus.

Nissly made an argument that chipmakers have used with some success defending themselves against patent claims brought by Rambus. He said that before any of the chips at issue were produced, Rambus “had at its core” a plan to sue Hynix and Micron and destroy documents to hide that strategy.

“We’re talking about setting out to destroy documents so they don’t get used in litigation,” Nissly said.

Rambus claims Hynix, based in Ichon, South Korea, and Micron, based in Boise, Idaho, inflated the price of Rambus- designed DRAM, or RDRAM, chips and collusively underpriced their own Synchronous Dynamic Random Access Memory, or SDRAM, and Double Data Rate, or DDR, chips to undercut competition.

Hynix Guilty Plea

Micron’s lawyer, William Price, sought to downplay the importance of Hynix’s guilty plea and payment of a $185 million fine in 2005 to resolve price-fixing claims by the U.S. Justice Department. In 2004, a Micron salesman pleaded guilty to obstructing the government probe.

The Justice Department investigation is a “distraction” and an “unrelated investigation about manipulating the price” of memory chips, Price said. The probe concerned artificially raising prices, which is “exactly the opposite of what Rambus is saying,” Price said.

Price attacked an e-mail exchange Rambus cited in its opening arguments as evidence of a plot against the company. The 2001 e-mails were between Linda Turner, then a vice president of international sales at Micron, and members of her staff citing the declining prices of standardized DDR chips manufactured by Samsung Electronics Ltd. and Hynix.

‘No Problem!’

In response to a staff member’s statement that the declining prices are “scary,” Turner wrote: “No problem! We want DDR to explode into the marketplace so have actually been requesting Infineon, Samsung and Hynix to lower their DDR pricing to help it become a standard (and drive Rambus away completely).”

Turner’s e-mail is a “sarcastic” reply, Price said. He said jurors must decide for themselves whether it represents evidence of the alleged conspiracy or is instead “gallows humor” about the competitive pricing Micron faced.

After opening arguments concluded, Superior Court Judge James McBride instructed the jury that the Justice Department investigation concerned DRAM and not specifically RDRAM.

The first witness to testify for Rambus was Dae Soo Kim, a former Hynix senior vice president in charge of worldwide sales and marketing. In a videotape shown to the jury today, Dae Soo Kim said he pleaded guilty in the U.S. price-fixing investigation and served eight months in prison.

The case is Rambus Inc. v. Micron Technology Inc., 04- 431105, California Superior Court (San Francisco).

--Editors: Peter Blumberg, Fred Strasser

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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