Nvidia to Pay Rambus Fees While Appealing ITC Ruling

Nvidia Corp., the world’s second- largest maker of computer-graphics chips, plans to appeal a patent ruling lost to Rambus Inc. and said customers including Hewlett-Packard Co. won’t see any disruption to their supplies.

The U.S. International Trade Commission in Washington yesterday said Nvidia chips infringed three Rambus patents, and issued an order that would ban imports of certain products containing the chips. Nvidia said it can continue sales by taking advantage of a licensing arrangement Rambus reached with European regulators as part of an unrelated antitrust case.

“I would expect that they would fight it to the extent the law provides, but having said that, they have to take care of their customers,” Chris Caso, an analyst with Susquehanna International Group in New York, said in an interview.

Rambus, which got about 96 percent of its $113 million in revenue last year from patent licensing royalties, filed the complaint against Santa Clara, California-based Nvidia after the two were unable to reach a licensing agreement. Rambus, based in Los Altos, California, has spent more than a decade suing computer-memory chipmakers that refused licensing deals.

“It puts Rambus in the dominant bargaining position,” Jeff Schreiner, an analyst for Capstone Investments Inc. in San Diego, said in an interview. “A whole bunch of other companies that were watching this will now likely sign licensing deals.”

Rambus Shares Rise

Rambus rose $1.41, or 7.2 percent, to $21 at 9:45 a.m. New York time in Nasdaq Stock Market trading. The shares jumped as much as 11 percent for their biggest intraday gain since Jan. 20. Nvidia fell 12 cents, or 1.1 percent, to $10.43.

Schreiner has a “strong buy” rating on Rambus, which he doesn’t own. Caso has a “negative” rating on Nvidia because of slow personal computer sales and said he doesn’t own the shares.

As part of an agreement reached with the European Commission last year, Rambus agreed to license its patents related to memory controllers at a rate that wouldn’t exceed 40 cents per unit.

“That’s revenue to us: It resolves the future; it doesn’t resolve the past,” Rambus General Counsel Tom Lavelle said in an interview. Rambus still expects Nvidia to pay “past damages for the eight years they were infringing our patents and not paying us,” he said.

Rambus has a civil lawsuit pending to seek that money. The ITC doesn’t have the authority to impose monetary damages, only to block imports of the offending products.

Nvidia’s Next Steps

By paying the European-set rate, Nvidia avoids an ITC order that would ban imports of some products containing the chips and prohibit sales of imported goods already in the country.

The bans are subject to review by U.S. President Barack Obama. The underlying patent case will be appealed to a court in Washington that specializes in patent law. Nvidia also is challenging the patents in a review before the U.S. Patent and Trademark Office.

The European Commission license “will allow us and our partners to continue our business under the terms of that license and prevent the enforcement of any exclusion order,” Nvidia said in an e-mailed statement.

Nvidia is the largest maker of graphics chips behind Intel Corp., and most of its chips are made by Taiwan Semiconductor Manufacturing Co.

The ITC case names products that use Nvidia chips, including some Hewlett-Packard computers, motherboards made by Asustek Computer Inc.’s Asus Computer International unit and products from Biostar Microtech International Corp. Most of the chips were made in Taiwan and sold to computer-parts makers. Nvidia was handling the defense on behalf of its customers.

Samsung Agreement

A judge with the ITC said in January that Nvidia was infringing three Rambus patents, while two other patents were ruled invalid. In its announcement yesterday, the commission sided with the judge on the three patents.

It ordered the parties to post a bond of 2.65 percent of the value of the imports to continue bringing the products into the U.S. during the presidential review period.

The patents relate to controllers that connect the memory and the graphics chips. The complaint targets Nvidia’s GeForce, Quadro, nForce, Tesla and Tegra lines.

Samsung Electronics Co. in January agreed to pay $900 million to end its legal dispute with Rambus and sign a new licensing deal. The commission said in a May 27 order that it wanted to determine if Nvidia was protected by the Samsung settlement or if Rambus exhausted its rights on the technology.

The commission didn’t release a copy of its findings, only a notice of its decision. Typically, it lets both sides redact confidential information before making its opinions public.

Memory Chips

Rambus also has disputes pending with Korea’s Hynix Semiconductor Inc. and Micron Technology Inc., based in Boise, Idaho, over patented technology related to dynamic-random access memory, or DRAM, which acts as the main type of memory in personal computers.

The patents in the Nvidia case are newer than those in the DRAM cases. Rambus does license the patents to other companies, and the win may help lure more companies that make memory controllers to its licensing program.

“We feel there will be a number of other memory controller companies that would be interested in taking a license to these patents,” Lavelle said.

The ITC case is In The Matter of Semiconductor Chips Having Synchronous Dynamic Random Access Memory Controllers and Products Containing Same, 337-661, U.S. International Trade Commission (Washington).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net.

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