Third, Most Important Rambus Patent Invalidated; Company Share Price Craters

The United States Patent and Trademark Office (USPTO) has released a ruling that invalidates the third of three patents Rambus used to intimidate Nvidia into settling with it early last year. The decision is a further blow to Rambus' ambitions; the company has sued a wide range of companies, including HP, Broadcom, MediaTek, and STMicroelectronics alleging that they infringed on the three patents.  

The 6,591,353 patent, "Protocol for Communication with Dynamic Memory," was overturned on the basis of prior art. It makes numerous references to a 'memory device'; a fact Nvidia was able to exploit. The patent examiner reported that "As NVIDIA persuasively explains, Hayes describes time-multiplexed clock data transfers between a master and slave during different clock cycles, and Bennett teaches benefits to providing a synchronized interface in a memory device using an external clock."

In other words, Bennett (the patent Nvidia declared constituted prior art) contained information that made the Hayes patent obvious. The question of "obviousness" is a key component of patent law; the USPTO evaluates the issue using what's known as the Teaching-Suggestion-Motivation (TSM) test. In this case, the patent office found that information contained within the original Bennett patent made the Hayes patent obvious.

This decision is the latest blow to Rambus' ambitions; the company's $4 billion lawsuit against Hynix and Micron was tossed out of court in November. That decision wiped out nearly 2/3 of the company's value; this further announcement has sent shares plunging once again.

Rambus, of course, has a well-deserved reputation not as a patent troll, but as the patent troll; the company has prioritized litigation as a means of earning income for more than a decade. A quick check of the company's stock price shows how well that's worked for them long-term.

Rambus' share price across both the last ten years (above) and the last month (below). Charts generated by YCharts

Not only has the company's share price fluctuated and dipped precisely in time with the outcome of its patent lawsuits, its 10-year share price is essentially flat ($7.46 in 2002, $7.97 at close of market on Friday). Granted, Rambus is scarcely the only company whose shares are worth less now than they were 10 years ago -- it shares that distinction with Microsoft, to name one example. The difference, however, is that Microsoft has spent the last ten years designing new products and attempting to move into new markets. Rambus, in contrast, has generally relied on licensing agreements -- negotiated either politely, or from the barrel of a gun.

The company has made some effort to create new product strategies, such as partnering with GE around LED lighting, but this latest decision undermines a great deal of the company's lawsuits and may invalidate the agreements it has signed with companies like Nvidia and Broadcom. After spending a decade suing virtually everyone, Rambus may have real problems finding partners for itself in its traditional markets.