Rambus to settle chip inquiry in Europe

NEW YORK, USA: The memory chip company Rambus and antitrust regulators in Europe said on Friday that they have reached a tentative settlement of the antitrust charges brought by the European Commission

This agreement would effectively end proceedings against Rambus by the European Commission regarding potential violation of competition law, the company said in a conference call on Friday. Rambus would not have to pay a fine.

European regulators accused Rambus in 2007 of participating in the Joint Electron Device Engineering Committee, an industry standards setting organization, without disclosing that it owned patents the organization decided to implement.

The antitrust watchdog charged that once standards were set, Rambus could surprise others later with royalty claims.

As a result of the proposed compromise, Rambus would agree to offer new pricing structures to its prospective DRAM and memory controller customers.

Under the pact, some of Rambus's older products will be free and other licenses will have maximum royalty rates of 1.5 per cent to 2.65 per cent per unit, depending on the type. Those rates are set to drop in April, 2010.

The pacts include provisions for a "royalty holiday" under certain circumstances for prospective DRAM licensees, and lets Rambus designate some customers as "most favored", giving them an opportunity to buy at lower rates.

"We view the deal as positive for Rambus," said Jeffrey Schreiner, a research analyst at Capstone investments.

Schreiner said the new rates are "not far from rates we've been using to derive our target price of 40 dollars" for the company's shares.

Schreiner and another analyst, Mike Cohen of MCD Financial research, said the deal would give customers certainty in pricing. That is because in addition to price caps, the deal also requires that Rambus give every customer the low rates it offers to any of them.

"I believe that is likely to facilitate the ability to get licenses for Rambus," said Cohen, who is a shareholder in Rambus. He said companies would be more willing to sign up for royalties knowing their price was the same as others. He said that has not been true in the past.

The company, which is involved in multiple court cases around the world, said it hopes that it can move forward with licensing agreements, rather than "engaging in costly litigation."

"We have entered into a tentative settlement with the EC in order to resolve outstanding litigation and we have agreed to offer a five-year worldwide license for DRAM and memory controller (at new rates)," Connie Chen, the company's deputy general council, said on a conference call.

The Commission said it will decide whether to adopt the agreement having consulted with competitors and customers. The rates are valid for five years once the Commission formally adopts the decision.