Jan. 30 (Bloomberg) -- Rambus Inc., the designer of chips for Sony Corp.'s PlayStation video-game console, might collect royalties of as much as $10 billion, six times its market value, by winning a seven-year fight with Hynix Semiconductor Inc.

After claiming the world's second-largest memory-chip maker infringed on patents it owned, Rambus won a $133.4 million award in 2006. To collect, it must now win a trial next month over the South Korean manufacturer's claim that the Los Altos, California- based company illegally used information obtained at industry meetings in the 1990s to get the patents.

A Rambus victory probably would include a court order barring Hynix and other manufacturers from selling the chips, said analyst Michael Cohen of Pacific American Securities. That would allow the memory designer to seek royalties of $700 million to $10 billion, or $97 a share, Cohen said. A loss might make the patents unenforceable, pushing Rambus shares down more than a third, he said.

``There's really a lot at stake here because this is the conduct trial for not just the past but current and future memory types as well as multiple manufacturers,'' Cohen said. He has a ``buy'' recommendation on Rambus and owns 500 shares.

A victory for the company in the San Jose, California, trial would apply to the U.S. and give it leverage to demand global royalties, Cohen said. He said his $10 billion top estimate is based on a 4.25 percent rate on all manufacturers' sales of the most recent memory types and Rambus's triple-damages claim for willful infringement.

Rambus Shares

Rambus rose $2.92, or 17.7 percent to $19.44 in Nasdaq Stock Market trading after rising earlier in the day as high as $20.80, or 26 percent -- the biggest percentage gain since Nov. 16, 2006. The company, which relies on licensing of memory-chip patents for 85 percent of sales, has soared as much as 57 percent in the wake of legal victories and settlements.

Analyst Jeff Schreiner of American Technology Research in San Francisco said Rambus shares might double following a favorable decision. A loss might cut them by more than half, he said. Schreiner rates Rambus's chances of victory at 60 percent, based on pretrial rulings. He advises buying the stock and owns none.

Spokeswoman Linda Ashmore declined to comment on how much Rambus expects in royalties if it wins.

The case comes as a memory-chip glut has driven prices to record lows. Hynix, based in Ichon, South Korea, is forecast to report its first quarterly loss in four years on Feb. 1, according to a survey of 11 analysts by Bloomberg.

Settlement Urged

U.S. District Judge Ronald M. Whyte has repeatedly urged the companies to settle out of court. Lawyers replied that efforts to reach an accord were fruitless.

Hynix is in the case with Samsung Electronics Co., the largest memory-chip manufacturer; Micron Technology Inc.; and Nanya Technology Corp. Samsung, based in Seoul, isn't part of the trial on Rambus's conduct.

Hynix, Micron and Nanya argue the patents weren't legally extended to cover the design specifications of the Joint Electron Device Engineering Council, based in Arlington, Virginia.

Jedec, as it is known, sets the most widely used standard for dynamic random access memory, or DRAM, the chips forming computers' main memory. Companies use the Jedec standard to ensure product compatibility.

Rambus violated antitrust and fraud laws by failing to disclose its technology at meetings from 1992 to 1996, then amended patent applications to cover Jedec specifications, the chipmakers claim.

Antitrust Claim

``We're seeking to establish that Rambus has violated the antitrust laws and committed fraud, and we're seeking an order barring them from enforcing their patents against Jedec-standard products,'' said Kenneth Nissly, a San Jose partner at Thelen Reid Brown Raysman & Steiner representing Hynix.

The Federal Trade Commission decided against Rambus in 2006, finding in an antitrust case that the company wrongfully obtained patents, then used them to impose undeserved license fees. The agency imposed royalty limits that are being challenged by Rambus in an appeals court in Washington, D.C.

The FTC result ``will not legally control the outcome'' in San Jose, said M. Sean Royall, of the Los Angeles law firm Gibson, Dunn & Crutcher, the agency's lead lawyer against Rambus.

The judge might ``consider or choose to follow the FTC's rulings'' by overruling a jury verdict in Rambus's favor, Royall said. Whyte denied manufacturers' requests to allow the commission's findings as evidence.

Chips' Market Share

While a Rambus win in San Jose wouldn't erase the FTC- imposed royalty limits, it would leave the company free to set fees for the chips that a research firm says dominate the market.

The agency's penalty applied to older memory, SDRAM and DDR chips, and none on the next generation, including DDR2 and DDR3. The latter two comprised 77 percent of the estimated $31.3 billion DRAM market in 2007 and may comprise 81 percent of this year's estimated $32.7 billion market, according to El Segundo, California-based iSuppli Corp.

Rambus argues that in private talks with manufacturers before the Jedec meetings, the company disclosed its memory technology and plans to seek patents and license them in exchange for royalties.

The case is Hynix Semiconductor Inc. v. Rambus Inc., 00-cv- 20905, U.S. District Court, Northern District of California (San Jose).

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

Last Updated: January 30, 2008 16:28 EST