SAN FRANCISCO (Reuters) - While most corporate chiefs in Silicon Valley devote their days to dreaming up new technology, Rambus Inc CEO Harold Hughes spends his time dealing with lawyers.
Years of patent litigation against Samsung Electronics Co Ltd, Hynix Semiconductor Inc, Micron Technology Inc and Nvidia Corp have been tough on the Los Altos, California-based chip company, which designs and licenses high-speed memory for computers.
Rambus has spent about $330 million on legal bills since it was founded in 1990, equivalent to a million dollars per employee, as it sued the biggest names in the business for allegedly infringing some of its more than 1,000 patents. They in turn countersued, and last year nearly half of Rambus’ $115 million in revenue went to lawyers and other legal expenses.
Hughes describes Rambus’ strategy of aggressively suing its opponents as championing innovation, even as critics accuse him of being a belligerent Silicon Valley pugilist.
“I know the people’s names on these patents we’re litigating. I meet them most days. They’re proud of what they did. Their names are often run through the mud,” Hughes told the Reuters Global Technology Summit in San Francisco.
Hughes says he often has to reassure those engineers after legal setbacks.
“We don’t make products. As a result the only thing we can do when someone we believe is using our technology and refusing to pay is to litigate. It’s unfortunate but it is the only alternative,” Hughes said.
The growing ranks of global technology companies that have faced Rambus’ lawyers would beg to differ. Over the years, Rambus has alienated chip makers and earned Hughes a formidable reputation in the Valley. Critics accuse Rambus of abusing patent laws.
The long string of legal disputes also has taken a toll on Rambus on Wall Street, as its share price swings wildly with every twist and turn in an increasingly complicated legal web.
Quarterly earnings conference calls are dominated not by new memory architectures but by the minutiae of court proceedings. Rambus is now followed by only a handful of analysts, like Capstone Investments’ Jeff Schreiner and BWS Financial’s Hamed Khorsand.
“We have three or four people who have been loyal and follow us closely, some of whom are probably in the process of taking the bar exam,” Hughes joked.
He added more seriously, “God knows it can be very frustrating. The legal process is not necessarily logical, certainly not clear and not predictable.”
NEXT WEEK COULD BE BIG
Hughes, a former army officer who got his start in Silicon Valley working at Intel Corp in the 1970s, said that while lawyers dominate much of his day, he also spends a significant amount of time reassuring worried employees.
“Since I’ve been CEO, which has been five years, we have had five significant legal setbacks,” he said. “We are hardly alone as a small technology company in a world where people will, if they get a chance, rip off your technology or try to pay you nothing.”
Next week could be a pivotal one for Rambus, with a possible decision in the coordinated appeals of its legal fights with Hynix and Micron. As well, the U.S. International Trade Commission could make a final decision on Rambus’ dispute with graphic chip designer Nvidia.
In January, Samsung agreed to a licensing settlement worth as much as $900 million after Rambus accused the No. 1 memory chip maker, along with Micron and Hynix, of colluding to fix memory prices.
Hughes, who boasts that his employees include 40 PhDs and nine former CEOs, can’t tell you exactly how many lawyers he has at work on Rambus’ myriad legal battles.
One silver lining, he said, is that he is increasingly approached by smaller firms with intellectual property, looking to be taken under Rambus’ wing.
“Who wants to litigate with Rambus? We’re pretty formidable for a small company. We have damn good attorneys,” he said. “We’re looking at replicating through acquisitions of mini-Rambuses.”
Reporting by Noel Randewich, editing by Tiffany Wu and Carol Bishopric
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