June 12 (Bloomberg) -- Rambus Inc., a California memory- chip designer, said it reached a tentative settlement of a two- year-old European Union antitrust probe that includes cutting its patent royalty rates for some products.

Under the proposed agreement, Rambus won’t pay a fine and the European Commission won’t find it liable for wrongdoing, the company said in a statement dated today. The commission accused Rambus of “patent ambush” by failing to disclose the scope of its patents, which it later claimed were covered by industry standards, and then demanding “unreasonable royalties.”

“Assuming that this goes through, it would be a very good thing for the company because it offers our licenses at attractive rates and allows us to spend money on innovation rather than litigation,” Tom Lavelle, the company’s general counsel, said in a phone interview.

Under the settlement, Rambus will stop charging royalties on licenses for technology from the 1990s and to charge rates of 1.5 percent on more recent products. The U.S. Federal Trade Commission last month dropped the remainder of its case against Rambus, ending that agency’s bid to impose penalties intended to limit the company’s royalties.

Rambus rose $2.30, or 15 percent, to $17.39 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has gained 9.2 percent this year.

The commission, the 27-nation EU’s Brussels-based regulator, accused Rambus in August 2007 of illegal and “deceptive conduct” by obtaining patents on an industry standard for memory chips -- known as dynamic random access memory -- used in mobile phones and personal computers.

Rambus Customers

The allegations, first made by chipmakers, center on Rambus’s behavior while attending meetings between 1992 and 1995 of a committee called the Joint Electron Device Engineering Council to set the industry standard for high-speed memory chips. Chipmakers claimed Rambus plotted to get patents on the standard so it could improperly collect royalties.

The commission said in a statement today that JDEC- compliant memory chips represent around 95 percent of the market and are used in “virtually all” PCs. Worldwide sales of DRAM chips in 2008 were worth more $34 billion.

Rambus committed to put a five-year cap on its royalty rates for JEDEC-standard products, the commission said.

“The cap includes a ‘most-favored-customer’ clause which would ensure any future rate reductions would benefit the whole market,” the commission said.

‘Does Not Agree’

Rambus’s customers, including Korea’s Hynix Semiconductor Inc. and Micron Technology Inc., will have one month to comment on the offer, according to a statement in today’s EU Official Journal. The commission will make the settlement legally binding if the offer resolves competition problems. Under EU rules, Rambus could be fined as much as 10 percent of annual sales if it doesn’t follow through on the agreement.

Rambus “does not agree with the commission’s preliminary assessment as regards both the factual and legal elements, but has notwithstanding this disagreement nevertheless offered commitments” under EU rules “to meet the commission’s competition concerns,” according to the EU’s Official Journal.

Los Altos, California-based Rambus earns money from designing memory chips and gets almost 90 percent of its revenue from royalties charged to manufacturers. The royalties are based on a percentage of the price of a chip.

DDR Chips

For the older double data rate, or DDR chips, and single data rate, or SDR, Rambus will no longer charge a royalty. This will be as long as the licensee ships less than 10 percent of its products with the technology, Lavelle said. SDR technology is being phased out and represents about 8 percent of the market, he said.

For the newer generations, called DDR2 and DDR3, as well as the graphic GDDR3 and GDDR4 versions, the rate will be 1.5 percent worldwide, he said.

The other part of the proposed settlement deals with memory controller technology, which determines what information is delivered to a processor. For SDR memory controllers, the rate is 1.5 percent until April 2010 and falls to 1 percent after that. For the new technology, DDR2, DDR3 and GDDR3 and GDDR4, the rate is 2.65 percent and falls to 2 percent after April 2010.

The proposed settlement follows the rejection by the U.S. Supreme Court in February of the Federal Trade Commission’s bid to impose antitrust penalties on the company in a similar dispute.

To contact the reporters on this story: Matthew Newman in Brussels at Mnewman6@bloomberg.net; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.

Last Updated: June 12, 2009 16:19 EDT