Rambus Back in Legal Limbo

According to the commission, Rambus violated the Sherman Antitrust Act as well as Section 5 of the FTC Act, regarding deceptive practices.

While Rambus plans to appeal the liability finding, Danforth said the company's primary focus would be to vigorously argue the forthcoming remedy portion of the case.

"Whether or not this is a major setback for us is going to ultimately depend on the remedy phase which is yet to come," said Danforth. "We think we have developed a record and can further develop a record that shows that the rates we have been charging are reasonable, but that still is yet to come."

Briefings on the remedy portion of the case are due by Sept. 15, and hearings are expected thereafter.

It's still unclear what form the FTC's remedy might take.

Pacific American Securities analyst Michael Cohen pointed to a footnote in the FTC opinion which notes that Rambus' 3.5% royalty rate is above the 1%-2% rate that is standard for RDRAM. Thus, says Cohen, it's possible that the remedy phase will involve capping Rambus' royalty rate at the midpoint of 1.5%.

Given that the worldwide DRAM market is $26 billion, Cohen estimates that a 1.5% royalty rate could potentially provide Rambus with $390 million in annual revenue, and by his calculations, a price target of $50 a share (Cohen personally owns shares in Rambus).

Of course, another possible scenario is that the FTC determines Rambus is entitled to zero royalties, given its belief that the standards-setting organization might have selected other technologies had Rambus not deceived it. And it's possible the commission could even decide that Rambus needs to repay its past royalties, with interest.

How the opinion will affect Rambus' ongoing litigation with memory makers Micron(MU Quote - Cramer on MU - Stock Picks) and Hynix Semiconductor is another open question. The courts are not bound by FTC opinions, though they could provide Micron and Hynix with some ammunition and grounds to appeal any unfavorable judgments in the cases thus far.

Micron, which is involved in various suits against Rambus, issued a statement Wednesday applauding the FTC's decision.

« Previous Page

1 2 3

Next Page »