Court Rules Against Nvidia In Rambus Case

Graphics chip maker Nvidia infringed on three patents held by Rambus, according to the U.S. International Trade Commission, which 26 July ruled that certain products containing the Nvidia chips may not be imported.

The ITC ruling pertains to Nvidia’s GeForce, Quadro, nForce, Tesla and Tegra chips, which are used by customers such as Hewlett-Packard, Asustek Computer and Biostar Microtech. After the ruling, Nvidia officials said the company would pay a bond that will enable it to continue supplying HP and other OEMs with chips while the company appeals the ruling. The bond is 2.65 percent of the value of what it is being imported, and enables Nvidia and its partners to continue to bring in the products for a period of 60 days.

Patent Inventions

Rambus filed the complaint in November 2008. In a 27 July statement, Rambus General Counsel Thomas Lavelle expressed his pleasure with the ITC’s findings.
“We are extremely pleased with the ITC’s decision to issue a Limited Exclusion Order, signaling the strength of our innovation efforts beyond the Farmwald-Horowitz patents of our founders,” Lavelle said. “The value of our patented inventions has been recognised by our current licensees, and we will continue our efforts to license others.”

Deutsche Bank analysts said they believe an injunction is unlikely, as Nvidia, through an agreement negotiated by the European Commission, has the option to license the Rambus IP (intellectual property).

“Under that agreement the royalty would be 2 percent, but capped at a $20 (£12.83) ASP [average selling price],” the analysts said in a 27 July research note. “We note the majority of Nvidia’s products have ASP well north of $20 and therefore we suspect the effective royalty is well below 2 percent and probably closer to 1 percent.”

The note added that Nvidia, with its $4 billion in annual sales, could “easily support” a 1 percent royalty.

According to Bloomberg, Nvidia plans to appeal the ruling, and has assured its customers that their orders will still be filled as expected.

In July 2008, Rambus filed a civil suit against Nvidia in a U.S. District Court, alleging the infringement of 17 Rambus patents and looking to collect on past damages. While the ITC ruling “resolves the future, it doesn’t resolve the past,” Lavelle recently told Bloomberg.

Licensing With Nvidia

“For more than six years, we have diligently attempted to negotiate a licensing agreement with Nvidia, but our good-faith efforts have been to no avail,” Lavelle said in a statement at the time of the filing. “Graphics and multimedia products require leading-edge memory performance, and as Nvidia advances its product portfolio, it infringes more and more of our patents. We are left with no other recourse than litigation to protect and seek fair compensation for the use of our patented inventions.”

Deutsche Bank analysts said they expect the ITC ruling to negatively affect the civil suit. “The ITC verdict likely strengthens Rambus’ position,” the analysts wrote, “but any outcome on damages looks unlikely in the short term.”

Bloomberg reported that 96 percent of Rambus’ $113 million revenue for 2009 came from patent licensing royalties.

Michelle Maisto

Michelle Maisto covers mobile devices, Android and Apple for eWEEK and is also a food writer.

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