Patent flashback Flash customers caught in Samsung, Sandisk patent battle By Anthony Cataldo, EE, EE Times Washington -- In a blow to its efforts to beef up its flash-memory business, Samsung Electronics Co. Ltd. was barred from importing NAND-based flash chips into the United States after the International Trade Commission last week upheld a preliminary finding that the architecture violates two key patents held by SanDisk Corp. But a possible loophole in the ruling may allow OEMs to ship finished products using the devices if they are manufactured in other countries. The ruling calls for Samsung to immediately stop shipping all densities of flash chips in the United States. The exclusion order extends to carriers and circuit boards that contain the contraband chips. Samsung argues that those "carriers" include only wafers, chips and circuit boards that are not considered finished products. If that is indeed the case, electronic products containing the chips but assembled outside the United States won't be barred, said Charles Donohoe, vice president and general patent counsel for the Seoul-based manufacturer. "Any other company can import downstream telephones, cards and cameras using our flash chips," Donohoe said. "That's not excluded." However, SanDisk vowed that if it finds out about any attempt to "circumvent" the ruling, it will ask the ITC to broaden the exclusion order. "If we became aware of it, we could certainly stop it," said Eli Harari, president and chief executive officer of SanDisk (San Jose, Calif.). "There is a provision in the ITC ruling that could require any manufacturer to certify that they are not infringing the patents. We can go to the commission itself and suggest a broadening of the exclusion order." The ruling should not cause a crimp in the supply of flash parts, since NAND-based flash accounts for only a tiny portion of the market. Last year, only about 1 percent of Samsung's sales came from flash memory, Donohoe said. Still, the ruling could hamper Samsung's efforts to promote NAND as the architecture of choice for data-storage applications. Samsung and Toshiba Corp. say NAND provides small cell sizes that allow higher densities. But rivals such as Intel Corp. and SanDisk are preparing to capture an early lead in that market this year with forthcoming 64-Mbit multilevel-cell NOR devices, which will store two bits of data per cell rather than one. It's also uncertain whether Toshiba, which has seen an uptick in requests for product qualification since the preliminary judgment was handed down in February, will be SanDisk's next target. A Toshiba spokeswoman said SanDisk has not legally challenged the company, and that the two are trying to negotiate a cross-licesning agreement. SanDisk and Samsung too tried to come to an agreement after the preliminary decision was handed down, but were unable to reach one before the ITC panel made its final ruling. What could have caused the impasse was the percentage of Samsung's sales SanDisk demanded for royalty payments. The two patents in question describe methods to speed performance by programming flash cells in parallel and to erase multiple data blocks by issuing only one command. "Patent royalties paid usually range between 3 and 5 percent," said Alan Niebel, an analyst for Semico Research Corp. (Phoenix, Ariz.). "It's been rumored that SanDisk was asking double the standard royalty amount." Indeed, Samsung's Donohoe said SanDisk asked for royalty payments that were "significantly higher than normal." Harari would not discuss the details of the negotiations. A large portion of SanDisk's revenues come from its stable of intellectual property. Last quarter, 15 percent of revenues were derived from licensing and royalty fees paid by other chip makers, such as Intel and Sharp Electronics. Harari said his company is also negotiating with several other large flash vendors. Samsung claims it has designed around one of the patents, but the company unsuccessfully argued to the ITC that it had not infringed on the "338" patent covering the way flash cells are programmed. Donohoe said Samsung is now trying to design around that patent, and hopes its first products will be ready by the end of the year. In the meantime, Samsung is appealing the ITC decision to the U.S. Court of Appeals here. The two companies have also been suing each other over patent violations in U.S. Federal District Court in Oakland, Calif., since 1995. Donohoe expects the trial to begin next year. The outcome could either reinforce the ITC ruling or give the commission reason to reconsider the injunction against Samsung. (c) 1997 CMP Media, Inc [This article comes from EE Times in a joint cooperative effort with the Motley Fool. For more articles like it, please look at Fool's Gold every weekend or simply go to the Fool's Gold Mine and page through our back issues, which all have clever and cool EE Times articles in them.]

© Copyright 1995-2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. The Motley Fool is a registered trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us

..

..

..

..

..

..

..

..