(Adds quotes, stock price, background, Rambus statement)
* U.S. Judge: Rambus can’t enforce patents against Micron
* Judge says Rambus impugned integrity of process
By David Lawsky
SAN FRANCISCO, Jan 9 (Reuters) - A U.S. District Court ruled on Friday that chip designer Rambus (RMBS.O) destroyed documents in a court case, and barred it from enforcing patents against memory chip maker Micron Technology MU.N.
The decision sent Rambus’s stock down $7.09, or 38 percent, to $11.41 in late trading.
“The very integrity of the litigation process has been impugned,” said Judge Sue Robinson, using unusually tough language in her decision issued in Wilmington, Delaware.
Rambus plans to appeal. It said Robinson’s ruling was inconsistent with court findings in California.
Micron had sued Rambus, alleging it spoiled evidence in the case. Rambus asserts that numerous memory chip makers infringe on its patents for improving dynamic random access memory (DRAM), which is used in computers and other electronics.
A federal court in California “looked at the same conduct and found there was nothing improper in our document-retention practices,” said Tom Lavelle, senior vice president and general counsel, in a statement.
Rambus listed cases still pending. A U.S. District court in California is considering Rambus suits against Hynix, Nanya, Micron and Samsung (005930.KS).
The company also said a lawsuit will go to trial in March in a state court in San Francisco against Samson, Hynix and Micron.
The judge found that the destruction of documents was part of a policy by Rambus, noting: “By July 1998, documents were being destroyed pursuant of the new policy. ...”
The judge said that Rambus knew, or should have known, that the documents would become material to the case and characterized the company’s conduct as “obstructive at best, misleading at worst.
She said that the sanction for Rambus’s conduct was to declare the patents unenforceable.
Rambus’s technology has been successful in part because it was adopted as part of an open standard by an industry group in 1991 and incorporated widely, including by Intel (INTC.O).
Government agencies and others have said that Rambus unfairly tried to collect money on patents that were supposed to be part of an open standard.
The Federal Trade Commission ruled against Rambus on the issue, but was overturned in court. A separate investigation is still pending in Brussels before the European Commission.
The ruling on Friday was separate from the standards issue, except that both questioned the company’s integrity.
Hamed Khorsand, an analyst with BWS Financial, dismissed the news by saying that Robinson was “one judge contradicting multiple judges.” He called the stock drop “an overreaction,” but conceded the decision was a setback to Rambus.
William Lefkowitz, option strategist at brokerage firm vFinance Investments in New York, said that although the stock was hit, some were speculating that it could rebound. (Reporting by David Lawsky; Additional reporting by Doris Frankel in Chicago and John Tilak in Bangalore; Editing by Brian Moss)