updated 3/21/2005 6:42:46 PM ET 2005-03-21T23:42:46

Ending a long-running patent dispute over computer memory, Rambus Inc. and Infineon Technologies AG settled all legal claims Monday and granted each other licenses to their respective technologies.

Under the deal, German memory chip maker Infineon will pay Rambus a quarterly license fee of $5.85 million, starting Nov. 15 and ending Nov. 15, 2007. After that, Infineon could continue to pay up to an accumulated total of $100 million if certain conditions are met.

Rambus, meanwhile, was granted a perpetual license for Infineon’s memory interfaces and agreed to treat the company as a “most-favored customer.”

“We are satisfied with these terms. We believe they are in the best interest of our shareholders,” said Harold Hughes, Rambus’ chief executive officer.

The settlement comes three weeks after a federal judge in Virginia dismissed Rambus’ patent claims because the Los Altos, Calif.-based company destroyed documents in anticipation of litigation. At the time, Rambus said it had “strong case” to appeal.

The ruling likely helped Infineon’s bargaining position. Under the settlement, the chip maker will make quarterly payments that will not change even if the number of memory chips incorporating Rambus technology increases, said Christoph Liedtke, an Infineon spokesman.

“Each quarter, it’s a flat payment. It’s not related to volume, which is important when you’re talking about large commodity markets,” he said.

Rambus doesn’t manufacture chips but licenses designs that improve communication between a computer’s microprocessor and its memory. The interfaces were critical to avoid data bottlenecks between ever-faster processors and memory chips.

Many memory makers, however, balked at paying Rambus’ licensing fees, setting the stage for a flurry of litigation.

In 2000, Rambus sued Infineon over royalty payments. Infineon refused to pay and alleged Rambus participated in an industry standard setting group from 1991 to 1995 but failed to disclose that it had patents on some technical specifications.

A Virginia jury decided in 2001 that Rambus should pay Infineon about $10 million in damages and litigation costs. A federal appeals court reversed the trial court ruling in early 2003, and Infineon demanded a retrial.

After the settlement was announced Monday, Rambus shares soared $3.91, or nearly 30 percent, to close at $17.03 on the Nasdaq Stock Market. Infineon shares lost 7 cents to close at $9.58 on the New York Stock Exchange.

Also, Rambus slightly lowered its revenue forecast to between $37 million and $38 million, and raised its total spending estimate to between $33 and $36 million for the first quarter. The higher spending, the company said, is the result of increased litigation costs.

Rambus is continuing to assert larger patent claims against Hynix Semiconductor, Inotera Memories and Nanya Technology Corp. It also has a case pending against Micron Technology Inc.

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