CAULEY, GELLER, BOWMAN
& COATES, LLP
PAUL J. GELLER
One Boca Place, Suite 421A
2255 Glades Road
Boca Raton, FL 33431
Telephone: 561/750-3000
561/750-3364 (fax)

SPECTOR, ROSEMAN & KODROFF, P.C.
JAMES A. CAPUTO (120485)
600 West Broadway, Suite 1600
San Diego, CA 92101
Telephone: 619/338-4514
619/231-7423 (fax)

Attorneys for Plaintiffs

1. This is a securities fraud class action brought on behalf of all purchasers of the common stock of Rambus, Inc. ("Rambus" or the " Company") between January 18, 2000 and May 9, 2001, inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "1934 Act"). This action involves the dissemination of materially false and misleading statements concerning, among other things, the undisclosed fact that: (i) the Company had engaged in fraudulent activity in order to obtain purportedly valuable patents on SDRAM computer memory and memory-related technologies which enable semiconductor memory devices to keep pace with faster generations of processors and controllers; (ii) the true enforceability and viability of these patents and the true risks involved with investing in Rambus stock during the Class Period; (iii) the effects these adverse undisclosed actions were having and would continue to have on the Company's growth and earnings prospects; and (iv) that Company insiders, certain of which are named as defendants herein, sold or otherwise disposed of over $125 million⁽¹⁾ of their privately held Rambus stock while in possession of undisclosed, material adverse information regarding the true validity of the Company's SDRAM patents, including the undisclosed fact that such patents were obtained by defendants' fraud.

2. For the past several years, Rambus has been a leader in developing computer memory and memory controllers and interfaces for personal computers, video games and other electronic systems. In fact, by the late 1990's and into 2000, Rambus was an exclusive provider of memory technology to giant micro-chip manufacturer Intel Corp. ("Intel") and others. Recently, however, as the cost of memory products which compete with Rambus' memory products has fallen, and as Rambus' new memory products have become more complex and more difficult to produce, Intel has decided to create microprocessors which are compatible with non-Rambus memory and non-Rambus controllers and interfaces. In fact, Intel has even encouraged other manufacturers, excluding Rambus, to work together to develop memory that was not based on Rambus' purportedly proprietary intellectual property and technology.

3. In fact, both prior to an during the Class Period, Intel repeatedly indicated to Rambus that it was seeking to open its microprocessor designs to competing memory and memory device products, as follows:

* In late 1999 and early 2000, Intel had difficulty launching its new microprocessors because Intel found it difficult to integrate Rambus memory into the Intel products and because Rambus memory was relatively expensive and in short supply. In fact, during this time, as Rambus was aware, Intel was forced to pay a premium to semi-conductor manufacturers to even manufacture new Rambus memory and memory devices to meet the needs of Intel. Due to the complexity of Rambus memory and its high prices, semiconductor manufacturers resisted manufacturing such chips, and only did so after Intel had agreed to pay them a premium. See Client Server News, 1/24/00.

* In early 2000, at the behest of Intel, a group called the Advanced DRAM Technology ("ADT") alliance was formed to develop new PC main-memory architecture. The purpose of this group, composed of Hyundai Electronics ("Hyundai"), Infineon Technologies ("Infineon"), Micron Technologies ("Micron"), NEC Corp. ("NEC") Samsung Technologies ("Samsung"), and Intel, is to create a low-cost royalty-free, "open-architecture" PC main memory that would replace current designs by 2003. Notably, Rambus was not invited to participate in the ADT alliance. See Electronic Buyers' News, 2/14/00.

* In addition to such high costs and capacity constraints, other problems existed, at least from the inception of the Class Period, with Rambus memory and memory-related products - notably that these new products, despite their higher cost and added complexity, did not outperform standard forms of high-speed memory which competed with the Rambus technology. In fact, according to Intel's own benchmark tests, published on the Intel website, a 933MHz Pentium III Computer equipped with 128MB of PC 133 (standard high-speed) memory, surpassed the same processor equipped with 128MB of Rambus memory on 11 out of 14 benchmarks. In addition to needlessly raising Intel's costs, these results also caused Intel significant embarrassment because Intel had previously encouraged its partners to adopt Rambus technologies, despite their higher costs and added manufacturing complexity. SeeeWeek, 7/24/00.

5. Thus, faced with non-competitive new products, which are difficult to manufacture, costly and not necessarily faster than competing products which cost a fraction of Rambus memory, and facing the loss of Intel's support for the reasons stated above, plus the impending loss of the ability to exercise the $400 million warrants that would allow Intel to purchase Rambus stock for $2.50 per share, the Company quickly embarked on a scheme to sustain and enhance its revenues and inflate its share price by suddenly seeking to enforce patents which Rambus received in 1997, which were purportedly based on a patent application filed in 1990 and which also purportedly gave Rambus proprietary rights to synchronous memory and SDRAM interfaces and controllers.

6. Rambus' sudden decision to enforce its SDRAM patents, especially against those companies who manufacture controllers and interfaces (as opposed to actual memory products), reflected defendants' realization that Rambus was encountering great difficulty generating revenues from its new memory products, such as Rambus DRAM ("RDRAM"). From at least the inception of the Class Period, Rambus attempted to transition itself from a computer memory design house into an IP company, which entailed shifting the Company's focus from innovative and cost effective design and creation to becoming a "lawsuit business." Thus, it was during this time when Rambus' new memory products were not being widely adopted by semiconductor manufacturers, and when Intel was distancing itself from Rambus, that defendants suddenly began to claim that Rambus "'invented fundamental aspects of high-speed memory interfaces which are currently being implemented in SDRAM and DDR SDRAM and anticipates that semiconductor companies will want to license its technology for use in non-RDRAM-compatible products.'" See Client Server News, 1/24/00.

7. Thus, to counter the Company's deteriorating relationship with Intel and the fact that its new, complicated and expensive memory products were not being widely adopted, defendants embarked on a multi-faceted litigation strategy. Since Rambus was having a difficult time competing in the market based on the high price of its products, first the Company attempted to raise the price of rival memory interfaces by initiating litigation against companies which were attempting to bypass the Company by utilizing a rival interface not designed by Rambus, but which could interact with Rambus memory. The goal of this litigation was to raise the price of competitors' interfaces by imposing a royalty (i.e., tax) upon its competitors, thereby enhancing the competitiveness of its own products. In fact, according to Electronic News, on June 26, 2000:

I believe that Intel and Rambus were convinced that DRAM vendors weren't going to ramp up production on parts, and so Rambus decided to cash in on the majority of parts those vendors will be making, which is SDRAM, at least for the foreseeable future. Call me crazy, but if you're already going down this road, then why not jack the royalty price up on all non-RDRAM memory so it encourages those same vendors to invest in and manufacture RDRAM? Makes sense to me.

9. Rambus' litigation/licensing strategy initially appeared to be successful, and resulted in licensing agreements with Toshiba, Hitachi and Oki Technologies, among Asian manufacturers. The Company was quickly able to obtain licenses with chip manufacturers who were unwilling to engage in protracted litigation with Rambus in foreign jurisdictions where these manufacturers maintained manufacturing plants and operations. The result of Rambus' legal gambit was the signing of several SDRAM licensing agreements with large Japanese, Korean and Taiwanese memory manufacturers.

10. It was only once Rambus attempted to extend its hegemony over SDRAM technology to European memory manufacturers that the scheme began to unravel. In fact, it was through the discovery and findings conducted in an action initiated by Rambus against German chip manufacturer Infineon, that the true genesis of Rambus SDRAM patents became known to investors. It was only on May 9, 2001 that U.S. District Court Judge Payne of the Eastern District of Virginia announced that certain counterclaims brought by Infineon against Rambus had resulted in a $3.5 million punitive judgment against Rambus for fraud related to Rambus' 1990 patent applications, subsequently granted in 1997. According to Judge Payne and the jury in the Infineon action, Rambus was guilty of misappropriating technology created by the industry consortium JEDEC (the "Joint Electron Device Engineering Counsel") during 1990-1996, and for failing to disclose the existence of the 1990 Rambus patent application during the period when Rambus was a member in JEDEC and a participant in setting a purportedly open standard for computer memory, and for illegally appending the 1990 patent application to include the misappropriated JEDEC SDRAM technology.

11. Judge Payne's May 9, 2001 ruling, as well as a prior ruling on March 15, 2001 that dismissed Rambus' patent infringement claims, had a devastating effect on the price of Rambus stock. Having traded to a Class Period high of over $127 per share on June 23, 2000, following the Company's announcement that Toshiba Corporation, Japan's second largest chip manufacturer, had agreed to pay Rambus a licensing fee to manufacture SDRAM memory chips, after Judge Payne's May 9, 2001 ruling, shares of Rambus traded to a Class Period low of $12.80 per share and continued to trade lower following this shocking revelation. This dramatic decline in the price of Rambus shares has resulted in the loss of over $11 billion in Rambus market capitalization, and has caused plaintiffs and the other members of the Class to suffer losses, in the aggregate, of over several hundred millions, if not billions of dollars.

12. In addition, the revelation on May 9, 2001 that Rambus had engaged in fraudulent and deceptive behavior relating to obtaining a proprietary interest in the SDRAM technology directly contradicted many of the statements made by defendants during the Class Period, proving these statements to be false and materially misleading, as follows:

* That defendants, the majority of whom were long-time managers of the Company and who were associated with Rambus from the early 1990's, knew or deliberately disregarded that the synchronous memory patents, upon which its Hitachi infringement suit was brought, were not based on claims which stemmed from the Company's original 1990 disclosures regarding fundamental technology related to SDRAM memory devices and methods of controlling such devices, but were rather based on claims that the defendants added to their original, over-broad application after defendants had participated with industry consortium members of JEDEC, and after the Company illegally misappropriated the technology contributed by such JEDEC members.

* That defendants also knew that they had failed to disclose the 1990 patent application to JEDEC or its members, as was required by participation in that organization, and also knew that as a result of such non-disclosure and illegal misappropriation of the JEDEC technological standards for SDRAM, which defendants appended to their undisclosed patent application, the Company did not possess a valid patent and as such had no reasonable basis to claim either that companies were infringing on its proprietary technology, nor that Rambus "invented" fundamental aspects of such high-speed memory interfaces.

* That defendants knew that, had they disclosed the existence of their 1990 patent applications to the JEDEC members in 1990, even if Rambus had invented certain aspects of synchronous memory and the methods to control the same, this SDRAM technology would not have been adopted by JEDEC as an "open" industry standard absent a waiver of Rambus' patent claims, and that it was only by failing to disclose the existence of its prior patent applications that Rambus was able to convince JEDEC to adopt synchronous memory as a standard memory form.

* That, based on the foregoing, defendants had no reasonable basis to claim that they expected or anticipated that other semiconductor companies would or did want to license such Rambus SDRAM technology for either compatible or non-compatible Rambus memory.

* That Rambus' purportedly "'very valuable patents that cover fundamental aspects of synchronous DRAM'" were obtained by fraud, deception and misappropriation.

* That the Company's "'clear and straightforward'" patents were the product of misappropriated technology and that if this misappropriation of the JEDEC technology was disclosed, these patents would be found to be unenforceable and worthless.

* That defendants' statements regarding quarterly licensing revenue gains created the false impression that, based on the Company's successful enforcement of its patents and licensing of its technologies, Rambus was and would continue to generate significant royalties on its patented technologies. In fact, however, due to the fraud engaged in by defendants in securing the synchronous memory patents, or which actions have been later ratified by defendants, the Company would not be able to continue to generate such licensing and royalty fees in the foreseeable future.

* That it was materially false and misleading to announce that the Company was looking forward to renewing its long-term relationships with Hitachi and Toshiba, after settling their SDRAM patent infringements suits and entering into licensing agreements with these companies, without also disclosing that its new synchronous memory licenses with Hitachi and Toshiba were wholly dependent upon the SDRAM patents and that such licenses would be void if Rambus' patents were found to be invalid. The undisclosed contingent nature of this and other licensing agreements for synchronous memory created an enormous undisclosed risk to Rambus' investors, in that if the Company's SDRAM patents were found to be invalid (i.e., if the fraudulent activities surrounding the filing of these patents was eventually discovered), the Company would instantly lose the revenue expected to be generated by its licenses. Just as the Company had failed to disclose its pending patent application to JEDEC years before, defendants again failed to disclose important and material terms of its licensing agreements to investors. Instead, the Company merely heralded its triumph in obtaining such agreements, and said nothing about the interdependence of the patents and its licenses.

14. The claims asserted herein arise under and pursuant to §§10(b) and 20(a) of the 1934 Act [15 U.S.C. §§78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC") [17 C.F.R. §240.10b-5].

15. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§1331 and 1337 and §27 of the 1934 Act [15 U.S.C. §78aa].

16. Venue is proper in this District pursuant to§27 of the 1934 Act, and 28 U.S.C. §1391(b). Many of the acts alleged herein, including the preparation and dissemination of materially false and misleading information, occurred in substantial part in this District. Additionally, defendants maintain their chief executive offices and principal place of business within this District.

17. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets.

18. (a) Plaintiff Matthew Greenblatt purchased the common stock of Rambus at artificially inflated prices during the Class Period, as detailed in the attached certification, and was damaged thereby.

(b) Plaintiff Charles A. Harad purchased the common stock of Rambus at artificially inflated prices during the Class Period, as detailed in the attached certification, and was damaged thereby.

19. Defendant Rambus is a Delaware corporation with its principal executive offices located at 4440 El Camino Real, Los Altos, CA 94022. According to the Company's press releases, Rambus purports to be an intellectual property ("IP") company that designs, develops and licenses high-bandwidth chip-connection technology which enables semiconductor memory devices to keep pace with faster generations of processors and controllers. During the Class Period, Rambus claims to have had licensed its technologies to over 30 semiconductor companies for the development, manufacture and sale of Rambus-compatible integrated circuits ("ICs")

20. The individual defendants identified below (the "Individual Defendants"), served at all times material to the claims set forth herein, as senior officers and/or directors of Rambus in the positions set forth below:

(a) Defendant Geoffrey R. Tate ("Tate") is, and at all times relevant to the allegations raised herein was, Chief Executive Officer and a director of the Company. Defendant Tate has held these positions since May 1990 and also served as President of the Company from 1990 to December 1999. During the Class Period and as part of the fraudulent scheme, defendant Tate sold or otherwise disposed of 540,000 shares of his privately held Rambus common stock for prices as high as $89.48 per share to realize illicit gross proceeds of at least $31.57 million.

(b) Defendant David Mooring ("Mooring") is, and at all times relevant to the allegations raised herein was, President and a director of the Company. Defendant Mooring joined the Company in February 1992 as Vice-President of Marketing and Sales and in March of 1997 became Senior Vice President and General Manager of the Computer and Memory Group. During the Class Period and as part of the fraudulent scheme, defendant Mooring sold or otherwise disposed of 420,000 shares of his privately held Rambus common stock for prices as high as $86.48 per share to realize illicit gross proceeds of at least $23.96 million.

(c) Defendant Gary G. Harmon ("Harmon") is, and at all times relevant to the allegations raised herein was, Chief Financial Officer and Senior Vice President of the Company. During the Class Period and as part of the fraudulent scheme, defendant Harmon sold 28,664 shares of his privately held Rambus common stock for prices as high as $ 53.46 per share to realize illicit gross proceeds of at least $1.15 million.

(d) Defendant Mark Horowitz ("Horowitz") is, and at all times relevant to the allegations raised herein was, a director of the Company. Defendant Horowitz has been a director of the Company since its founding in March 1990, and currently serves as a part-time member of the Company's technical staff. During the Class Period and as part of the fraudulent scheme, defendant Horowitz sold 380,000 shares of his privately held Rambus common stock for prices as high as $91 per share to realize illicit gross proceeds of at least $18.13 million.

(e) Defendant Paul Michael Farmwald ("Farmwald") is, and at all times relevant to the allegations raised herein was, a director of the Company. Defendant Farmwald has been a director of the Company since March 1990, and also served as Chief Scientist from March 1990 to November 1993. During the Class Period and as part of the fraudulent scheme, defendant Farmwald sold 270,000 shares of his privately held Rambus common stock for prices as high as $83.45 per share to realize illicit gross proceeds of at least $24.9 million.

(f) Defendant Bruce S. Dunlevie ("Dunlevie") is, and at all times relevant to the allegations raised herein was, a director of the Company. Defendant Dunlevie has been a director of the Company since its founding in March 1990. Defendant Dunlevie is also a member of the venture capital firms of Benchmark Capital and Merrill, Pickard, Anderson & Eyre where he has served as a general partner since 1989. During the Class Period and as part of the fraudulent scheme, defendant Dunlevie sold 30,000 shares of his privately held Rambus common stock for prices as high as $88.98 per share for proceeds of at least $2.66 million.

(g) Defendant Edward H. Larsen ("Larsen") is, and at all times relevant to the allegations raised herein was, Vice-President - Administration for the Company. During the Class Period and as part of the fraudulent scheme, defendant Larsen sold or otherwise disposed of 149,526 shares of his privately held Rambus common stock for prices as high as $90 per share to realize illicit gross proceeds of at least $7.3 million.

(h) Defendant William Davidow ("Davidow") is, and at all times relevant to the allegations raised herein was, Chairman of the Board of Directors, and has held that position since the Company was founded in March 1990. In addition, defendant Davidow is also a general partner of Mohr, Davidow Ventures, a venture capital firm.

21. Because of the Individual Defendants' positions with the Company, they had access to the adverse undisclosed information about the methods used by the Company to obtain its patents, the true validity and enforceability of these patents, and Rambus' present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and/or Board of Directors meetings and committees thereof and via reports and other information provided to them in connection therewith. In addition, the majority of the defendants, including defendants Tate, Mooring, Horowitz, Farmwald, Dunlevie and Davidson, are also board members and long-standing officers and/or directors of the Company who controlled Rambus during the time when the Company improperly misappropriated the JEDEC technology and attempted to and did incorporate such technology into the Company's then pending 1990 patent application, which was subsequently issued in 1997 under false pretenses.

22. It is appropriate to treat the Individual Defendants as a group for pleading purposes and to presume that the false, misleading and incomplete information conveyed in the Company's public filings, press releases and other publications as alleged herein are the collective actions of the narrowly defined group of defendants identified above. Each of the above officers and/or directors of Rambus, by virtue of their high-level positions with the Company, directly participated in the management of the Company, was directly involved in the day-to-day operations of the Company at the highest levels and was privy to confidential proprietary information concerning the Company, its intellectual property, business, growth, and financial prospects, as alleged herein. Said defendants were directly involved in drafting, modifying, supplementing, producing, reviewing and/or filing the Company's improper and illegal patent applications, as well as the other false and misleading public statements and information related to the Company's intellectual property as alleged herein, and were aware or deliberately disregarded that the false and misleading statements were being issued regarding the Company, and approved or ratified these statements, in violation of the federal securities laws.

23. As officers and/or directors and controlling persons of a publicly held company whose common stock was, and is, registered with the SEC pursuant to the 1934 Act, traded on Nasdaq National Market System (the "Nasdaq"), and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate promptly, accurate and truthful information with respect to the Company's intellectual property, business, products, markets, growth, and present and future business prospects, and to correct any previously issued statements that had become materially misleading or untrue, so that the market price of the Company's common stock would be based upon truthful and accurate information. The Individual Defendants' misrepresentations and omissions during the Class Period violated these specific requirements and obligations.

24. The Individual Defendants participated in the drafting, preparation, and/or approval of the various public, shareholder and investor reports and other communications complained of herein and were aware of, or deliberately disregarded, the misstatements contained therein and omissions therefrom, and were aware of their materially false and misleading nature. Because of their Board membership and/or executive and managerial positions with Rambus, each of the Individual Defendants had access to the adverse undisclosed information about Rambus' intellectual property, its patent applications and the circumstances surrounding the making of such applications, business prospects, financial condition and performance as particularized herein and knew (or deliberately disregarded) that these adverse facts rendered the positive representations made by or about Rambus and its business issued or adopted by the Company materially false and misleading.

25. The Individual Defendants, because of their positions of control and authority as officers and/or directors of the Company, were able to and did control the content of the various SEC filings, press releases and other public statements pertaining to the Company during the Class Period. Each Individual Defendant was provided with copies of the documents alleged herein to be misleading prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein and is therefore primarily liable for the representations contained therein.

26. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Rambus common stock by disseminating materially false and misleading statements about the Company's exclusive right to license certain important and valuable SDRAM computer memory technology, and/or concealed the material adverse fact that the Company had misappropriated this SDRAM technology from the industry consortium, JEDEC, which together with Rambus worked in the early 1990's to set a common standard for computer memory and memory transmission. The scheme: (i) deceived the investing public regarding Rambus' right to exclusively license certain valuable SDRAM technology, the foreseeable ability of the Company to obtain royalties for such licensed SDRAM technology, its foreseeable product demand and growth, and the intrinsic value of Rambus common stock; (ii) caused plaintiffs and other members of the Class to purchase Rambus common stock at artificially inflated prices; and (iii) allowed defendants and other insiders of the Company, who were also officers and directors, to sell or otherwise dispose of over 2 million shares of their privately held Rambus common stock to realize illicit gross proceeds of over $125 million, while in possession of material, adverse non-public information regarding the Company's true claims to ownership over the SDRAM computer memory technology.

27. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons who purchased Rambus common stock during the Class Period and who were damaged thereby (the "Class"). Excluded from the Class are defendants, the officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.

28. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Rambus common shareswere actively traded on the Nasdaq. As of October 31, 2000, there were approximately 97.64 million shares of Rambus common stock issued and outstanding. While the exact number of Class members is unknown to plaintiffs at this time and can only be ascertained through appropriate discovery, plaintiffs believe that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Rambus or its transfer agent and may be notified of the pendency of this action by mail, using a form of notice similar to that customarily used in securities class actions.

29. Plaintiffs' claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants' wrongful conduct in violation of federal law that is complained of herein.

30. Plaintiffs will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class and securities litigation.

31. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by defendants' acts as alleged herein;

(b) whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the intellectual property, business, operations, future growth and prospects for the Company; and

(c) to what extent the members of the Class have sustained damages and the proper measure of damages.

32. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.

The Company

33. According to the Company's FY:00 Form 10-K, Rambus claims that it:

[D]esigns, develops, licenses and markets high-speed chip connection technology to enhance the performance and cost-effectiveness of computers, consumer electronics and communications systems. The Company licenses semiconductor companies to manufacture and sell memory and logic ICs incorporating Rambus chip connection technology and markets its solution to systems companies to encourage them to design this technology into their products. The Company's chip connection technology ... increases the data transfer rate, or "memory bandwidth," allowing semiconductor memory devices to keep pace with faster generations of processors and controllers and thus supports the accelerating data transfer requirements of multimedia and other high-bandwidth applications.

34. The performance of a computer or other electronic system is typically constrained by the speed of its slowest element. In the past, that element was the logic circuit that controlled the system's specific functions and performed calculations - the microprocessor. In recent years, however, new generations of microprocessors and controllers have become substantially faster and more powerful and, increasingly, the bottleneck in system performance is becoming the component that stores the instructions and data needed by the microprocessors and controllers - the DRAM. To reduce such "bottlenecks" in newer, more powerful computer systems, according to the Company's FY:00 Form 10-K, Rambus purportedly provides the following important and "revolutionary" technology:

Rambus has created a revolutionary chip connection architecture, which addresses the Performance Gap by transferring data through a simplified bus at significantly higher frequencies than permitted by conventional technologies. To date, the largest immediate application for this interface technology is to connect logic circuits to memory in home video game consoles, PCs, workstations and other electronic systems.

Among such "revolutionary" technology, the Company provides several types of DRAM, including: synchronous DRAM ("SDRAM"), Rambus Standard DRAM ("RDRAM") and double data-rate SDRAM ("DDR SDRAM"), among other products.

35. In order to establish Rambus interface technology as an industry standard, the Company purportedly has adopted a business model whereby Rambus neither manufactures nor sells semiconductors, but rather patents and then licenses such technology.⁽⁴⁾ The Company's FY:00 Form 10-K states that:

The Company generates revenues from two types of licenses. The first, for technology which is fully compatible with the Rambus standard ("RDRAM-compatible licenses"), allows semiconductor manufacturers to manufacture and sell RDRAMs ... to systems companies which have adopted Rambus technology. The second type of license ("SDRAM-compatible licenses"), covers the use of Rambus patents and other intellectual property in non-Rambus ICs, specifically in synchronous DRAM ("SDRAM") and double data-rate ("DDR") SDRAM memory devices and logic ICs which control such memory.

* * *

SDRAM-compatible licenses also generally provide for the payment of license fees as well as quarterly royalties.... The license fees, which generally are millions of dollars, include compensation for use of Rambus patents from the time the Company notifies the licensee of potential infringement.

36. On January 18, 2000, the first day of the Class Period, the Company issued a release in which it announced that it had filed suit in Federal District Court in Delaware against Hitachi Ltd. ("Hitachi"), for willful patent infringement.⁽⁵⁾ According to this release:

Rambus is seeking injunctions against the manufacture, use and sale of certain Hitachi memory and microprocessor products that infringe Rambus patents. Rambus is also seeking punitive damages from Hitachi.

Rambus seeks to halt the importation, sale, manufacture and use of certain Hitachi semiconductor products including PC100 SDRAM, PC133 SDRAM, DDR SDRAM, SGRAM, and DIMM modules as well as [other] microprocessor products which directly or contributorily infringe four Rambus patents. The patents in the suit,... stem from Rambus' original 1990 disclosure and cover fundamental technology relating to synchronous memory devices and methods of controlling such devices.

* * *

Rambus invented fundamental aspects of high-speed memory interfaces which are currently being implemented in SDRAM and DDR SDRAM and anticipates that semiconductor companies will want to license its technology for use in non-RDRAM-compatible products.

In addition to asking the court to stop Hitachi from manufacturing and shipping what Rambus claimed were infringing memory products, Rambus was also attempting to stop Hitachi from selling processors that included built-in interfaces, known as controllers, that let non-Rambus processors communicate with Rambus computer memory chips. If Rambus was successful in advancing these claims, which were purportedly based on Rambus' 1990 patent application, this would make almost all computer and memory manufacturers subject to royalty claims by Rambus.

* "Rambus executives make no secret of the fact that they believe that all of the memory cited in the lawsuit, no matter which company makes it, violates their patents. 'We believe we have very valuable patents that cover fundamental aspects of synchronous DRAM,' said Avo Kanadjian, vice president of worldwide marketing for Rambus. 'It's always been our position that we've invented fundamental aspects of high speed memory interfaces and that other companies will want to license our technology for use in (developing) non-Rambus memory,' he added. 'We would prefer to negotiate and settle amicably.'" San Jose Mercury News, 1/21/00.

* "'We had a meeting with Hitachi in 1999 during which we reviewed the details of the infringement with them, but they failed to respond,' said Avo Kanadjian, Rambus' newly appointed vice president of worldwide marketing. 'We feel that a company that wants the use of our intellectual property for the development of non-Rambus-compatible products will have to get a separate license.' According to Rambus executives, the SDRAM patents in question were granted in 1997 were originally filed as part of a 1990 application." Electronic Buyers' News, 1/24/00.

* Defendant Tate told shareholders at the Company's annual shareholder meeting that Rambus' suit against Hitachi is distinguishable from the "traditional" practice of semiconductor companies - suing sector mates but eventually striking cross-licensing agreements. "If the matter ends up in court, Tate says, 'our intention is not to let Hitachi license our technology.' He dryly encouraged shareholders to check out the 'riveting reading' in Rambus' 141 patent claims. 'Our patent claims are as clear and straightforward as you're going to see.'" TheStreet.com, 2/11/00.

(a) Defendants, the majority of whom were long-time managers of the Company and who were associated with Rambus from the early 1990's, knew or deliberately disregarded that the synchronous memory patents, upon which the Hitachi infringement suit was brought, were not based on claims which stemmed from the Company's original 1990 disclosures regarding fundamental technology related to SDRAM memory devices and methods of controlling such devices, but rather were based on claims that the defendants added to their original, over-broad application after defendants had participated with industry consortium members of JEDEC, and after the Company illegally misappropriated the technology contributed by such JEDEC members;

(b) Defendants also knew that they had failed to disclose the 1990 patent application to JEDEC or its members, as was required by Rambus' participation in that organization, and also knew that as a result of such non-disclosure and unfair misappropriation of the JEDEC technological standards for SDRAM which defendants appended to their undisclosed patent application, the Company did not possess a valid patent and as such had no reasonable basis to claim either that Hitachi had infringed on its proprietary technology, nor that Rambus "invented" fundamental aspects of such high-speed memory interfaces;

(c) Defendants knew that had they disclosed the existence of their 1990 patent applications to the JEDEC members during the period 1990-1996, even if Rambus had invented certain aspects of synchronous memory and the methods to control the same, this SDRAM technology would not have been adopted by JEDEC as an "open" industry standard absent a waiver of Rambus' patent claims, and that it was only by failing to disclose the existence of its prior patent applications that Rambus was able to convince JEDEC to adopt synchronous memory as a standard memory form;

(d) Based on the foregoing, defendants had no reasonable basis to claim that they expected or anticipated that other semi-conductor companies would or did want to license such Rambus SDRAM technology for either compatible or non-compatible Rambus memory;

(e) It was false and materially misleading to claim that Rambus had " very valuable patents to cover fundamental aspects of synchronous DRAM," when such patents were obtained by fraud, deception and misappropriation; and

(f) It was false and materially misleading for defendants to claim that the Company's patents were "clear and straightforward," when defendants knew that they had misappropriated the technology covered by such patents and that if this misappropriation of the JEDEC technology was disclosed, that these patents would be found to be unenforceable and worthless.

39. The false and materially misleading statements made by the Company had the effect of artificially inflating the value of Rambus shares, and between January 18, 2000 and February 15, 2000 shares of Rambus stock soared, trading from a low of $18.13 on January 28, 2000, to a high of $43 on February 15, 2000.⁽⁶⁾ On February 15, 2000, over 57 million shares of Rambus stock traded on the Nasdaq, over 10 times its average trading volume. On March 14, 2000, shares of Rambus traded over $117 per share (almost $470 per share on a non-split adjusted basis). Taking full advantage of the artificial inflation in the price of Rambus stock which their false statements had created, during the period between January 21, 2000 and February 29, 2000, certain insiders, several of whom are named as defendants herein, sold over 600,000 shares of their privately held Rambus stock to realize illicit gross proceeds of over $32.69 million.

40. The false and materially misleading statements made by defendants also had the effect of misleading analysts. As evidence of this, on January 19, 2000, following the Company's report of strong quarterly financial results and after announcing its suit against Hitachi, Warburg Dillon Read analyst Gregory Mischou issued a report on Rambus giving its shares a "Strong Buy" recommendation and stating the following:

We are increasing [our] FY'00 EPS estimate for Rambus to $0.64 from $0.60. Additionally we are instituting a FY'01 EPS estimate of $2.18 based on our market estimate of 15% DRAM penetration rate for Rambus in CY-00 and 40-45% penetration rate in CY-01. We believe the near-term outlook for Rambus is improving as the market begins to ramp with the introduction of additional desktop PCs and the Sony Playstation 2 in Mar-00. We reiterate our Strong Buy rating on Rambus ....

42. On April 12, 2000, Rambus issued a release which announced results for 2Q:F00, the period ended March 31, 2000. According to this release:

Fiscal Q2 earnings excluding acquisition-related costs and one-time employee compensation expenses ... $0.15 per share, up 50% sequentially.

... Revenues for the quarter were $15.7 million, up 59% over the same period last year and up 31% from the previous quarter.... Also included in the second quarter is a record $3.5 million in royalties received from licensees based on their shipments of Rambus ICs in the October - December period. This is an increase of 83% over the same period last year and 33% over the previous quarter.

* * *

Also in the second quarter, Rambus recorded a one-time charge of $171 million associated with the vesting of certain employee options and Common Stock Equivalents (CSEs). This is a non-cash charge, except for a $1.2 million payment for payroll taxes.⁽⁷⁾

44. By the time the Company announced its results for 2Q:F00, on April 12, 2000, the price of Rambus stock had fallen to about $53 per share from a high of $117.75 on March 14, 2000. The announcement of the huge options grants given to the Company's employees in addition to the uncertainty created by Rambus' patent litigations were substantial causes leading to the decline in Rambus' stock price.

45. By this time, however, the Company's positive guidance caused analysts to increase their price targets on Rambus stock to as high as $350 per share (non-adjusted, or $87.50 adjusted). As evidence of this positive guidance, on April 13, 2000, Warburg Dillon Read analyst Seth Dickson issued a report on Rambus which reiterated a "Strong Buy" recommendation, stating the following:

We reiterate our Strong Buy rating on RMBS. We believe near-term catalysts for the stock include new RDRAM PC introductions in the Spring, a continued successful ramp of Sony Playstation 2, and additional RDRAM vendors ramping volume production during the current quarter. We believe the recent weakness in the stock provides a very attractive buying opportunity.

* * *

Hitachi/SDRAM lawsuits: Early this quarter Rambus announced a lawsuit against Hitachi for willful infringement on four key Rambus patents and is seeking an injunction against shipments of Hitachi SDRAM and DDR memory products and certain SH processors. Rambus holds claims on certain patents dealing with fundamental aspects of high-speed memory interfaces that Rambus believes Hitachi used in certain memory logic ICs. A favorable ruling for Rambus would set a precedent whereby the company could attempt to license other DRAM and semiconductor companies manufacturing chips that incorporate elements of Rambus technology, but are not Rambus "branded" (Rambus-compatible) I Cs - greatly opening the company's total available market (TAM) and enhancing the Rambus royalty stream over the long-term.

47. Thus, by early June 2000, defendants again attempted to assure investors that Rambus was ramping up the licensing of the Company's proprietary SDRAM, and that Rambus was then aggressively pursuing its claims by initiating at least seven litigations against purported infringers, located on two continents. In addition, at that time defendants also guided analysts, such as Morgan Stanley financial analyst Mark Edelstone, to report that even companies such as Germany's Infineon would be forced to settle with Rambus. As reported by Electronic Buyers' News on June 16, 2000, Rambus claimed that it was likely to succeed on its patent infringement claims against Hitachi and others, since the claims at issue were granted in 1997, as a result of claims made by the Company in 1990. In addition, as reported, defendants denied claims that they had acted improperly in obtaining such patents or that Rambus had violated any disclosure rules related to its involvement in the JEDEC consortium, as follows:

Rambus also claims its SDRAM IP goes back to a broad patent application filed in 1990 that was only amended by its 1997-98 claims. But the record shows that the Patents and Trademarks Office (PTO) refused to consider the original Rambus 1990 application as filed because it was considered too broad and included a number of different inventions. Rambus subsequently broke out a series of separate invention claims that were withdrawn or continued until the final 1997-98 amendments were filed and accepted by the PTO.

Rambus' contention that its SDRAM patent goes back to the frequently withdrawn and continued claims appended to the 1990 application seems to be a prima facie admission the company failed to disclose such proprietary IP to JEDEC. In fact, Rambus doesn't dispute that it failed to make such a disclosure, arguing instead that it wasn't required to.

49. The same day, June 16, 2000, the Company announced that Toshiba Corporation ("Toshiba"), Japan's second biggest chip maker, said that it would pay Rambus royalties for a broader range of computer memory designs.⁽⁸⁾ As a result of the Toshiba announcement and the further reports about the purported validity of Rambus' SDRAM patents, shares of Rambus again rose on substantial volume. On June 15, 2000, shares of Rambus closed at approximately $56.50 per share and on June 16, 2000 shares of Rambus closed at $83.38 per share, on huge volume of over 64 million shares. The following trading day, June 19, 2000, shares of Rambus traded as high as $100.25 per share and by June 23, 2000 shares of Rambus reached a Class Period high of $127 per share. Taking advantage of the artificial inflation in the price of Rambus shares created by defendants' misrepresentations, between mid-April and early June 2000, Company insiders, including certain of the defendants herein, sold or otherwise disposed of over 400,000 of their personally held Rambus shares to reap additional illicit gross proceeds of over $18.57 million.

50. On June 19, 2000, the Street.com reported on the huge spike in the price of Rambus shares, and attributed this price increase to several factors including: (i) the "growing expectations that it could soon be signing additional licensing deals for the use of its high-speed chip connection technology"; (ii) receiving an upgrade by Morgan Stanley analyst Mark Edelstone to "strong buy" from "outperform"; and (iii) following reports of the Toshiba licensing deal.

51. Again, the false and materially misleading statements made by defendants also had the effect of misleading analysts. On June 19, 2000, following the Company's announcement of its new licensing deal with Toshiba, UBS Warburg analyst Seth Dickson issued a report on Rambus which reiterated its "Strong Buy" recommendation. In addition, the UBS Warburg report stated the following:

Rambus and Toshiba announced that the companies engaged in a licensing agreement in which Toshiba will pay Rambus royalties on shipments of SDRAM, DDR and FC-DRAM products and controllers which interface with these memories.

We believe other DRAM vendors will follow suit. Likely candidates to sign in the near-term include Samsung, the world's largest DRAM vendor, NEC and Hyundai. Ultimately, these deals could double Rambus DRAM royalty opportunity over the next 12-18 months.

As part of the agreement, Hitachi will pay Rambus an up-front settlement fee, as well as quarterly royalty payments.

The license agreement involves patents for fundamental aspects of high-speed memory interfaces invented by Rambus which are currently being implemented in Hitachi's SDRAM, Double Data Rate (DDR) SDRAM memory, and Hitachi's controllers which directly interface with these types of memory. Under the licensing agreement, the royalty rates for DDR SDRAM and the controllers, which directly interface with DDR SDRAM, are greater than the RDRAM compatible rates. The agreement also includes royalties for SDRAM and for controllers that directly interface with SDRAM.

"Rambus develops and licenses IP - our objective is to produce innovations that will benefit the semiconductor and systems industries, and by licensing these innovations to generate a return on investment to our shareholders," said Geoff Tate, chief executive officer of Rambus, Inc. "We believe our Rambus memory interface is the best solution for the majority of the market. Developing and marketing the Rambus memory interface has been and remains our top priority, but we are willing to license our IP for other memory interface solutions as well. We are pleased that Hitachi chose to license our patents for SDRAM, DDR SDRAM memory and controllers. We look forward to renewing a long-term relationship with Hitachi."

54. The statements made by defendants and contained in the June 16, 2000 and June 22, 2000 releases were false and materially misleading and were known by defendants to be false at that time, or were deliberately disregarded as such, for the reasons stated herein in ¶¶38, 43, and 48, above. In addition, it was also materially false and misleading to announce that the Company was looking forward to renewing its long-term relationships with Hitachi and Toshiba after settling their SDRAM patent infringements suits and entering into licensing agreements with these companies, without also disclosing that its new synchronous memory licenses with Hitachi and Toshiba were wholly dependent upon the SDRAM patents, and that such licenses would be void if Rambus' patents were found to be invalid. The undisclosed contingent nature of this and other licensing agreements for synchronous memory created an enormous undisclosed risk to Rambus investors, in that if the Company's SDRAM patents were found to be invalid (i.e., if the fraudulent activities surrounding the filing of these patents was eventually discovered), the Company would instantly lose the revenue expected to be generated by its licenses. Just as the Company had failed to disclose its pending patent application to JEDEC years before, defendants again failed to disclose important and material terms of its licensing agreements to investors. Instead, the Company merely heralded its triumph in obtaining such agreements, and said nothing about the interdependence of the patents and its licenses.

55. Following the announcement of the Hitachi settlement, on June 23, 2000, Morgan Stanley analyst Mark Edelstone issued a report on the Company styled, "Hitachi Settlement Fortifies Rambus's IP Position," which stated that:

Hitachi's settlement offers another validation of Rambus's intellectual property

* * *

Given Toshiba's willingness to license Rambus's patents, and Hitachi's decision to settle out of court suggests that these leading companies believe that Rambus' patents are legitimate and have considerable value. As a result, we believe that the Rambus DRAM transition issue is no longer the key issue facing RMBS. Based on the scope of its patents, we continue to believe that every DRAM supplier and the concomitant logic interface suppliers will need to license Rambus's patents, including Acer Laboratories, ATI Technologies, Fujitsu, Hyundai, IBM, Infineon, Intel, LSI Logic, Micron, Motorola, National Semiconductor, NEC, NVIDIA, Samsung, Silicon Integrated Systems, Transmeta, Via Technologies, and many others. We believe it is likely that several more companies will complete license agreements before the end of the year, and RMBS should continue to advance as more companies license its patents. Consequently, we reiterate our Strong Buy rating and 12-18 month stock-price target of $200.

57. Adding credence to the widely circulated Financial Times report, on June 26, 2000, the Electronic Engineering Times reported statements made by defendant Tate regarding the Company's proprietary interest in Rambus SDRAM memory technology, as follows:

"We think our patents are pretty fundamental," said Geoff Tate, Rambus' chief executive officer, adding the company believes that most of the SDRAM chips now available in the market are based on Rambus technology and therefore liable for royalty payments to the company.

"We don't have a huge legal department," Tate said, "and we can't pursue claims against everybody. We will go company by company and present them with our detailed analysis of why we think are violating our patents. We [believe] it is likely that most, if not all, will determine that they are infringing upon our patents."

58. On July 1, 2000, Microprocessor Report reported that, based on Company guidance and the closing of the Toshiba and Hitachi licensing agreements, "We expect most other makers of memory chips and controllers to come to terms with Rambus over the next few months. With Toshiba and Hitachi now firmly in the Rambus camp, it is unlikely that other chip makers will dispute the validity of the Rambus patents. It now appears that Rambus will have a significant share in the memory market - no matter where the market goes from here."

59. On July 18, 2000, Rambus issued a release which announced "Record Quarterly Royalties, Revenue [and] Earnings," for 3Q:F00, the period ended June 30, 2000. According to this release:

Revenues for the quarter were a record $17.8 million, up 67% over the same period last year and up 13% from the previous quarter. Included in third quarter results is a record $6.6 million in royalties received from licensees based on their shipments of Rambus ICs in the January-March period. This is an increase of 265% over the same period last year and 88% over the previous quarter.

* * *

During the quarter, the Company settled all outstanding litigation with Hitachi, Ltd. As a result, Hitachi has been licensed to use Rambus intellectual property for the production of SDRAMs, DDR SDRAMs and logic products which directly control these memories. Also during the quarter, Toshiba Corporation signed a similar license agreement for the use of Rambus intellectual property in non-Rambus ICs. Both agreements call for up-front payments and quarterly royalties which will be reflected in the Company's financial statements beginning next quarter upon the commencement of receipt of such payments.

61. Following the release of 3Q:F00 results, shares of Rambus traded as high as $108.50, before closing the day at $101.88 per share. Company insiders, several of whom are named as defendants herein, raced to the market to sell more of their personally held Rambus stock while in possession of material adverse information about the Company, and during the time Rambus shares were artificially inflated by defendants false statements. During the period July 21, 2000 and July 27, 2000 Company insiders sold over 119,000 more shares of their personally held Rambus stock to realize additional illicit gross proceeds of approximately $11 million.

62. Based on Company guidance that "Royalty Momentum Builds," USB Warburg analyst Gregory Micshou issued a report on July 19, 2000, which reiterated a "Strong Buy" rating on Rambus and maintained a near-term price target of $165. Analyst Mischou stated, that:

Licensing Agreements - Rambus recently settled a lawsuit with Hitachi in which Hitachi agreed to pay royalties to Rambus for shipments of SDRAM, DDR memories (non-RDRAM) and logic controllers directly connecting to these products, thus expanding Rambus' near-term market opportunity. Prior to the Hitachi settlement, Toshiba[] signed [an] agreement with similar terms. Although this quarter's results did not include any non-Rambus royalties or license fee[s], we do begin to factor them into our model going forward and have raised our estimate accordingly. Additionally, with Rambus aggressively seeking to secure such non-RDRAM licensing agreements from other DRAM manufacturers, we anticipate additional near-term upward revisions in our estimates.

Intel Says It's Not Married To Rambus Type Memory Intel Corp. finally came out and said it. Its new Pentium 4 microprocessor will work with memory chips other than just Rambus Inc.'s. This is a switch for Intel and a big blow to Rambus, but not unexpected. For a few years, Intel said its future microprocessors would work exclusively with Rambus memory. But Intel has been hinting since early this year that it's not married to having its microprocessors - the brains of a PC - work only with Rambus memory chips. On Wednesday, Intel made it official. The world's largest chipmaker said it's developing a chipset for its P4 that will support other memory designs.... The news hammered Rambus stock, which fell 9 ½, or 11% to 75 ½, though volume was below average. Intel at one time was pushing computer makers to adopt Rambus memory because it's faster than other memory chips. PCs use dynamic random access memory. But there is a wide variety of DRAM memory chip flavors. The problem with the flavor called Rambus, says Sherry Garber, analyst for Semico Research in Phoenix, is that it's just too expensive for most personal computers. "Rambus is a niche product," Garber said. "Only (makers of) high-end products can afford the additional cost." ... But Avo Kanadjian, Rambus vice president of worldwide marketing, says Rambus is the only way the market can go in the future. Why? Because increasingly sophisticated users of PCs and other devices will demand the high performance of the Rambus-designed memory chips. "Rambus has to become a mainstream memory because performance requirements from end users continue to grow," he said. In addition, the price difference between Rambus and other memory chips has shrunk and will continue to shrink, he says.... Another issue in Intel's move away from only Rambus, says analyst Garber, is that Rambus might have trouble meeting demand when P4 is launched. Rambus memory chips are harder to make than other memories. In fact, most every type of memory chip is in short supply. Complicating the matter for Rambus, though, is that few memory chipmakers have opted to make the Rambus memory because those chips are harder to make. Mountain View, Calif.-based Rambus doesn't manufacture any chips itself. It licenses the design to other memory chipmakers. More than 30 companies have licensed the Rambus design. They include IBM Corp., Micron Technology Inc., Samsung Group, Toshiba Corp. and Infineon Technologies AG. But only five companies are actually making Rambus-type memories today, and only a couple of those are shipping large volumes of chips.... Intel first talked publicly about the possibility of using other types of memory at its Intel Developers Forum in Palm Springs, Calif., in February. The company also discussed plans to use other memories during its July 18 earnings conference call with analysts and the media.

65. The statements made by defendants and contained in the July 28, 2000 release were false and materially misleading and were known by defendants to be false at that time, or were deliberately disregarded as such, for the reasons stated herein in ¶60, above.

66. On August 28, 2000, Micron Technologies ("Micron") filed suit against Rambus in the U.S. District Court in Delaware. The Micron suit alleges that: (i) Rambus violated the Federal antitrust laws; (ii) Rambus' SDRAM patents were not valid; (iii) Micron did not infringe on such patents; and (iv) such patents were not enforceable. Micron and its subsidiaries manufacture and market DRAMs, very fast SRAMs, Flash and other semiconductor components, memory modules and personal computer systems.

67. Inspired by the Micron lawsuit, the following day, August 29, 2000, Hyundai Electronics Industries Co. ("Hyundai"), announced that it was seeking a court order to declare that their products do not infringe on Rambus' chip design patents. According to Dow Jones Business News, Hyundai said that the lawsuit was in response to a recent assertion by Rambus that Hyundai's products infringed on Rambus' patents, and the Company's demand that Hyundai pay royalties on the use of the patents. The Hyundai suit was filed in U.S. District Court in San Jose, California, seeking this order on grounds that the Rambus SDRAM patents are invalid and unenforceable.

68. The same day the Hyundai suit was filed, Rambus issued a release announcing that it had received a copy of the Micron complaint filed the prior day, and that Rambus expected to prevail on the Micron claims. According to this release:

Rambus initiated negotiations with Micron to license Rambus' intellectual property (IP) for use in SDRAM and DDR SDRAMs. Rather than negotiate, Micron chose to litigate.

Rambus is preparing a response to Micron's allegations. Rambus expects to prevail in this litigation and to be fairly compensated for the use of its IP.

In a statement, Rambus said it "expects to prevail in this litigation." The company said the lawsuit was prompted by Micron's unwillingness to negotiate licenses for the use of patented Rambus technology. Rambus added that it expects it will be "fairly compensated" by Micron for the use of the technology.

* * *

Mark Edelstone, a semiconductor analyst at Morgan Stanley Dean Witter & Co., said he believes Rambus will prevail in the case. "I think having Toshiba [Corp.], Hitachi and Oki [Electric Industry Co.] license those patents gives them credibility," Mr. Edelstone said, referring to three Japanese companies that have agreed to license Rambus's technology.

Rambus had initiated negotiations with Hyundai to license the use of Rambus' intellectual property (IP) by Hyundai in SDRAMs and DDR SDRAMs. In contrast to Rambus' preference to negotiate and settle amicably, Hyundai abruptly cut off further discussion with the commencement of litigation. Rambus is preparing a response to Hyundai's allegations. Rambus expects to prevail in this litigation and to be fairly compensated for the use of its IP.

71. On September 11, 2000, Rambus issued a release which announced that it had commenced a patent infringement suit against Micron in Germany and France, and again stated that, as a result of the claims made by the Company in 1990, Rambus owned the rights to synchronous memory, and that the Company fully expected to be able to license this technology. This release stated the following:

Rambus attempted to initiate negotiations with Micron to license Rambus' IP for use in SDRAMs and DDR SDRAMs. Micron preempted Rambus' attempts to negotiate by filing a lawsuit in the United States.

Rambus is seeking injunctions to halt the sale, manufacture and use of Micron SDRAM and DDR SDRAM memory devices which infringe the Rambus intellectual property protected by European Patent EP 0 525 068. This patent stems from Rambus' original 1990 disclosure and covers fundamental aspects of high-speed memory invented by Rambus that are currently being implemented in SDRAM and DDR SDRAM.

* * *

"IP is our business and we will not hesitate to protect our IP when it is being used without a license," said Geoff Tate, Rambus' chief executive officer. "Rambus develops and licenses intellectual property - since the early 1990s, we established and still maintain the leadership in high bandwidth chip connection technology. Our objective is to continue to produce innovations that will benefit the semiconductor and systems industries, and by licensing these innovations to generate a return on investment to our shareholders."

Rambus Inc. has filed suit in Germany and France, against Hyundai Electronics Industries Co. Ltd. for patent infringement. The suits were filed after negotiations over Rambus' intellectual property rights were preempted by the filing of a lawsuit by Hyundai in the United States.

Rambus is seeking injunctions to halt the sale, manufacture and use of Hyundai SDRAM and DDR SDRAM memory devices which infringe the Rambus intellectual property protected by European Patent EP 0 525 068. This patent stems from Rambus' original 1990 disclosure and covers fundamental aspects of high-speed memory invented by Rambus that are currently being implemented in SDRAM and DDR SDRAM.

* * *

"IP is our business and we will not hesitate to protect our IP when it is being used without a license," said Geoff Tate, Rambus' chief executive officer. "Rambus develops and licenses intellectual property - since the early 1990s, we established and still maintain the leadership in high bandwidth chip connection technology. Our objective is to continue to produce innovations that will benefit the semiconductor and systems industries, and by licensing these innovations to generate a return on investment to our shareholders."

74. On September 13, 2000, the Company issued a release which announced that it had initiated a patent-infringement suit against Munich-based, Infineon Technologies AG ("Infineon"), in the District Court in Mannheim, Germany. Again, Rambus stated that it was seeking injunctions to halt the sale, manufacture and use of Infineon SDRAM and DDR SDRAM memory devices that purportedly infringed on Rambus' intellectual property protected by its European Patent EP 525 068. In addition, Rambus announced that it had also filed suit in the Eastern District of Virginia against Infineon for willful patent infringement, relating to Rambus SDRAM patents which "stem from Rambus' original 1990 disclosure and cover fundamental aspects of high-speed memory invented by Rambus which are currently being implemented in SDRAM and DDR SDRAM."

75. The statements made by defendants and contained in the August 29, 2000, August 30, 2000, September 11, 2000 and September 13, 2000 releases were false and materially misleading and were known by defendants to be false at that time, or were deliberately disregarded as such, for the reasons stated herein in ¶¶38, 43, 48 and 54, above.

76. On October 18, 2000, Rambus issued a release announcing "Record Royalties, Revenue and Earnings for the Quarter and Year Ended September 30, 2000; Fiscal Q4 Royalties Triple Sequentially to $19.9 Million." According to this release:

Rambus Inc. today reported financial results for its fourth fiscal quarter and year ended September 30, 2000. Revenues for the quarter were a record $26.9 million, up 119% over the same period last year and up 52% from the previous quarter. For the full fiscal year the Company reported revenues of $72.3 million, an increase of 67% from the previous year.

Included in fourth quarter results was a record $19.9 million in royalties, more than three times the amount reported in the previous quarter. The fourth quarter results included both increased royalties received from licensees based on their shipments of RDRAMs and controllers that connect to RDRAMs (RDRAM- compatible ICs) as well as the first royalties from licensees for the use of Rambus intellectual property (IP) in SDRAMs, DDR SDRAMs and controllers that connect to them (SDRAM-compatible ICs). Royalties for the fiscal year were $32.6 million, more than four times the amount recorded in fiscal 1999.

* * *

"We are obviously very pleased with our financial performance in fiscal 2000 and especially in the fourth quarter," said Geoff Tate, CEO of Rambus Inc. "The tremendous leveraging impact of receiving royalties - from the sale of both RDRAM-compatible and SDRAM-compatible ICs - on our financial model can be seen both in our operating statement, where our operating margin in fiscal Q4 exceeded 50% for the first time, and on the balance sheet where our total cash balances increased by $35 million during the quarter to a total of $132 million. We are confident in our long term outlook: our patent position is strong and RDRAMs offer the best solution for high performance computer, communications and consumer systems. However, near-term earnings growth will depend on the ramps of the Sony PlayStation2 into the U.S. and the Intel Pentium 4, the relative price of RDRAMs to SDRAMs and the timing of additional licensees for the use of our IP in SDRAM-compatible ICs. In addition, we anticipate increased costs in the near term due to our vigorous legal defense of our IP and a move to larger facilities for long-term growth."

77. The statements made by defendants and contained in the October 18, 2000 release were false and materially misleading and were known by defendants to be false at that time, or were deliberately disregarded as such, for the reasons stated herein in ¶60, above.

78. As further evidence that analysts' considered the Company's ability to license SDRAM technology as critical to Rambus' near- and long-term financial outlook, on October 19, 2000, USB Warburg analyst Gregory Micshou issued a report in which he reiterated a "Strong Buy" rating on Rambus and maintained a near-term price target of $165. Analyst Mischou stated:

Licensing agreements - Rambus signed two more agreements this quarter for Non-RDRAM royalties (NEC and OKI). Prior to these, Hitachi and Toshiba signed agreements with similar terms. We believe that Rambus is in discussions with other major companies and could announce additional licenses over the next two quarters. We believe that Rambus also continues to make progress in defending its intellectual property position. Through leveraging the German courtsystem, the company is slated to go to trial with Infineon in December and with Hyundai and Micron in Q101, greatly accelerating the timeline that might be expected in a domestic venue. However, Rambus announced that in defending its position, its legal costs are expected to rise to $1m per month.

80. According to Dow Jones, Rambus' chief financial officer, defendant Harmon, downplayed the impact of the Intel announcement by stating that Rambus was reducing its dependence on Intel through its aggressive licensing practice, as follows:

[Defendant] Harmon said Rambus isn't as dependent as it once was on Intel's business, which he said makes up less than 10% of Rambus' total revenue. He said Rambus is starting to get royalties from technology it invented that is used by all DRAM companies.

Dataquest ranks Samsung as the world's leading DRAM supplier with revenues of $4,774M and 20.7% market share and the world's fourth largest semiconductor supplier with revenues totaling $7,125M in 1999.

* * *

Five companies, Samsung, NEC, Toshiba, Hitachi and Oki, have so far signed SDRAM and DDR SDRAM licensing agreements with Rambus. According to Dataquest, their cumulative DRAM market share in 1999 was greater than 40% and four of these companies are listed among the top 10 semiconductor suppliers in the world.

The agreement, which includes an up-front license fee and quarterly royalty payments to Rambus, is effective for shipments of licensed products by Samsung beginning July 1, 2000. The first royalties from the Agreement will be recognized by Rambus in the current (December) quarter. Rambus plans to utilize a portion of the incremental revenues for increased promotional activities during the next several quarters.

83. Analysts' considered the Samsung license as being critical to the Company's near- and long-term financial outlook. As evidence of this, on November 2, 2000, UBS analyst Gregory Mischou raised EPS estimates on the Company and reiterated a "Strong Buy" rating on its shares, stating the following:

Rambus and Samsung announced an agreement today pursuant to which Samsung will license from Rambus patented IP for SDRAM, DDR SDRAM and controllers that interface with these two types of memory. We view this as a significant announcement that should give increased credence to Rambus' IP position. Samsung joins 4 other companies (NEC, Toshiba, Hitachi and Oki) that have signed SDRAM and DDR SDRAM license agreements with Rambus. Based on 1999 market share information, Rambus has now licensed IP in respect to approximately 40% of the total DRAM market. Adding projected royalty revenues (to begin in the current quarter) due under the Samsung agreement to our Rambus revenue model, we increase our EPS estimates to $0.12 from $0.10 for Q1FY01 (December) and to $0.59 from $0.50 for FY01.

* * *

Maintain Strong Buy Rating. We continue to believe that Rambus has a dominant IP position in the arena of memory and memory interface designs. The agreement with Samsung, in our opinion, demonstrates the kind of momentum that will provide significant challenges to Micron and Hyundai relative to their lawsuits with Rambus relating to SDRAM and DDR SDRAM designs. We reiterate our Strong Buy rating on Rambus stock.

85. In furtherance of the Company's strategy of strong-arming the Japanese, Korean and Taiwanese memory manufacturers into signing licenses, cajoled through litigation or the threat thereof, and then attempting to use these agreements to support the validity of their patent claims and force European and U.S. manufacturers into similar deals, while at the same time knowing that Rambus did not have any proprietary right to the SDRAM technology which was developed as an open standard through JEDEC, on or around December 1, 2000, the Company provided a purported "litigation update." Analysts at UBS Warburg reported this update, as follows:

Update On Pending Legal Actions: RMBS continues to leverage European court systems to accelerate its legal proceedings. RMBS is scheduled to go to trial in Germany with Infineon on December 22, 2000 and with Hyundai and Micron on February 16, 2001. A trial with Micron in Italy is likely in April 2001. RMBS remains confident in its patents and infringement claims, stating that defenses asserted thus far do not materially threaten its position. Decisions in RMBS' favor in these venues would result in an injunction preventing the opposing party from manufacturing or selling infringing products without a license in the subject country. We believe this result would be serious for Micron in particular, in light of its wafer fab in Italy. We maintain our FY01 EPS estimate of $0.59, our $165 12-month price target and reiterate our Strong Buy rating on Rambus.

* * *

We also believe that by waiting for a legal decision, these players risk being put at a disadvantage in negotiating royalty rates, relative to their competitors who have already signed license agreements.

87. On January 11, 2001, Rambus issued a release announcing "Record Royalties, Revenue and Earnings; Fiscal 1Q Royalties Increase 35% Sequentially to $26.8 Million." According to this release:

Rambus Inc. today reported financial results for its first fiscal quarter ended December 31, 2000. Revenues for the quarter were a record $34.7 million, up 191% over the same period last year and up 29% from the previous quarter.

Included in first fiscal quarter results was a record $26.8 million in royalties, more than ten times the amount reported in the same period last year and up 35% from the previous quarter. The quarter's results included the initial royalties from Samsung and Mitsubishi for use of Rambus patents in SDRAMs, DDR SDRAMs and controllers that connect to them (SDRAM-compatible ICs).

* * *

"Our first fiscal quarter results continue to show the strength of the Rambus business model," said Geoff Tate, CEO of Rambus Inc. "We are pleased with the market reception for both the Sony PlayStation2 and the Intel Pentium 4, and we are confident that these products will drive the demand for RDRAM-compatible ICs to higher levels in fiscal 2001. However, we also recognize that an increasing percentage of our revenues is due to royalties on SDRAM-compatible ICs. With the price decrease for SDRAMs in the December quarter, it is unlikely that royalties for these products in our next (March) quarter will exceed the levels included in this report unless we sign additional licensees. In addition, we have moved to larger facilities for long-term growth and will be incurring increased costs in the near term due to the new facilities as well as our continuing vigorous legal defense of our IP."

Intellectual Property rights exist not to just protect Rambus and other companies, but to protect innovation. It is our right and indeed obligation to shareholders to do all in our power to protect our patented innovations. As part of any litigation, there are numerous documents and Rambus makes it a policy not to comment about specific documents. It is irresponsible and misleading to view any document out of context and without seeing all the evidence.

We look forward to an expeditious recognition of Rambus' innovations in court.

90. On March 15, 2001, shares of Rambus plummeted, falling over $11.25 per share to close at $24.09, after a published report sparked speculation that Rambus' lawsuit against Infineon was headed in Infineon's favor.⁽⁹⁾ According to TheStreet.com:

Investors grabbed on to the possibility that a decision in the suit would cost Rambus the royalty revenue it's after from Infineon and other chipmakers. They had driven down Rambus' stock more than 30% by the time the trading day was finished.

* * *

The judge overseeing the case issued a ruling Thursday that will become public Friday. Infineon declined to comment on the contents of that ruling. Rambus spokesman Gary Harmon said that investors' interpretation of the ruling's impact - whether it's for or against Rambus - is wrong.

* * *

Speculation that the judge in the federal court in Virginia was leaning toward an Infineon-friendly ruling - specifically a partial summary judgment on what should be included in the trial - took off Thursday as a report published Wednesday by Cahners publication Electronic News Online gained momentum. The story cites judicial sources as saying that a pretrial ruling from the judge will limit the scope of Rambus' patents on DDR and SDRAM. This ruling is based on testimony from a hearing that took place in February.

The notion became more credible on Thursday morning when investment bank SG Cowen wrote in its morning technology update, TechRadar, that the ruling had come down and was a clear negative for Rambus. The note said that the ruling had sided with Infineon on the scope of Rambus patents, saying that the patents covered the multiplex bus in SDRAM and DDR, which Infineon doesn't use. (SG Cowen hasn't done underwriting for Rambus.)

"I think people are misinterpreting what the ruling might mean when it comes out," Harmon said. "This is a relatively minor part of a patent case."

Harmon went on to explain that at issue in the ruling is the breadth of the definition of a technology term in the patents. If the judge chooses a narrow definition, that could make it more difficult for the jury to understand Rambus' claims regarding its patents, he said.

"I think people jumped from that to, 'Gee, maybe the case against Infineon won't go forward and this will affect the case with Micron (MU:NYSE - news) and Hyundai and that will affect royalties from SDRAM and DDR,' and none of that is true," he said.

In this ruling, the court interpreted the scope of disputed terms in the four Rambus patents in suit. Based on this interpretation, Rambus maintains its allegation that Infineon has infringed these four patents. Rambus is prepared to protect its intellectual property from those who infringe and looks forward to presenting its case to the jury.

Intellectual property rights exist not to just protect Rambus and other companies, but to protect innovation. It is Rambus' right and indeed obligation to our shareholders to do all in our power to protect our patented innovations.

92. Despite Rambus' positive spin on the pre-trial ruling, the market reacted negatively to this announcement. On March 16, 2001, following the release of the Company's announcement, shares of Rambus traded down another $8.25, or 34%, to $15.80 per share. During the two days of March 15, 2001 and March 16, 2001 approximately 40 million Rambus shares traded on the Nasdaq.

93. As further evidence that analysts continued to be misled by Company guidance, following the huge decline in the value of Rambus shares, analysts now stated that the shares were oversold and that this decline in price represented a "more attractive" buying opportunity for investors. In fact, as further evidence that Rambus had misled analysts into believing that the Company had perfected its claims to the valuable SDRAM technology, on March 19, 2001, J.P. Morgan analyst Eric Chen issued a report which still forecasted very positive results for Rambus regardless of the outcome of the patent enforcement actions. Based substantially on the belief that Rambus licenses could withstand the finding that the Rambus SDRAM patents were not valid, analyst Chen stated:

[If] Rambus wins the Infineon and subsequent cases with Micron and Hyundai and thus, collects non-Rambus royalties (providing substantial upside to this worst-case scenario) from the entire DRAM industry - UPSIDE.

[If] Rambus loses the current and upcoming court cases, but retains a given portion of existing non-Rambus compatible royalties due to contractual and/or regional patent considerations - UPSIDE.

[If] Rambus loses all cases and all existing non-Rambus compatible royalties, but effectively removes the legal expense and litigation discount, which has created a burden on the shares - UPSIDE, although with short-term volatility stemming from psychological reaction to potential negative legal news flow.

95. On April 12, 2001, Rambus issued a release announcing results for 2Q:F01, the period ended March 31, 2001, which, for the first time, showed declining sequential royalties from SDRAM-compatible memory licenses. According to this release:

Rambus today reported financial results for its second fiscal quarter ended March 31, 2001. Revenues for the quarter were $31.2 million, up 99% over the same period last year and down 10% from the previous quarter.

Included in second fiscal quarter results was $23.6 million in royalties, nearly seven times the amount reported in the same period last year and down 12% from the previous quarter. The quarter's results included the initial royalties from Matsushita for use of Rambus patents in logic devices which control SDRAMs and DDR SDRAMs.

* * *

''Our second fiscal quarter results show the effect of both declining SDRAM prices and costs associated with the continuing vigorous legal defense of our intellectual property,'' said Geoff Tate, CEO of Rambus Inc....⁽¹⁰⁾

''Royalties on SDRAM-compatible ICs declined in the second fiscal quarter due mainly to a reduction in average selling prices (ASPs). We expect this trend to continue and in fact to accelerate in the next quarter because SDRAM ASPs declined in the latest quarter by an estimated 50% sequentially. Since the majority of our royalties are still from SDRAM-compatible ICs, we anticipate an overall decline in our total revenues from current licensees next quarter by 20% sequentially, plus or minus several points....

"Due to delays in our litigation in Europe against Hyundai and Micron, and in the US against Infineon, expenses associated with this litigation exceeded our expectations....

''Despite the sequential decline in revenues and net income, Rambus remains solidly profitable and cash-flow positive.... And we remain highly confident of ultimate victory in the various litigations in defense of our intellectual property.''

Rambus' Patent Infringement Claims
Against Infineon Are Dismissed

97. On May 1, 2001, U.S. District Court Judge Payne issued another ruling against Rambus in the Infineon patent infringement suit. Judge Payne tossed out 54 out of Rambus' 57 claims against Infineon, including the Company's claim of willful patent infringement against Infineon. Following this report, shares of Rambus traded to below $15.25 per share.

98. Soon thereafter, on May 4, 2001, Judge Payne dismissed the remaining patent claims brought by Rambus against Infineon. Shares of Rambus fell another $3.55, or 20%, to close trading at $14.60 per share, on 18.1 million shares traded, after trading to as low as approximately $12.50 per share, a new 52-week low. Rambus vowed to appeal this ruling, however, analysts were quick to note that the loss of this decision could put a rapid end to Rambus' licensing royalty growth, which accounted for over 75% of the Company's revenues during the last two quarters.

99. On May 8, 2001, Reuters News Service reported that Infineon was now cleared to pursue its counterclaims against Rambus. According to Reuters:

The charges, which arise out of a patent infringement suit launched against Infineon by Rambus, allege that Rambus did not disclose patent applications when the industry was developing common technical standards during the 1990s.

Infineon says Rambus deliberately hid the fact that it was applying for patents on so-called synchronous dynamic random access memory (SDRAM) chips at the same time that JEDEC, an industry body of which both firms were members, was working on common standards for the chips.

''We make JEDEC-compliant chips,'' an Infineon spokesman said. ''We do not believe Rambus invented these chips. The industry developed these products by consensus."

100. On May 9, 2001, a federal jury found Rambus liable for fraud and found that the Company should pay at least $3.5 million in punitive damages. Reuters reported the following:

A federal jury on Wednesday ordered Rambus Inc., whose technology helps boost the performance of memory microchips, to pay $3.5 million in punitive damages after finding it liable for fraud in a dispute with German semiconductor maker Infineon Technologies AG.

Los Altos, Calif.-based Rambus said that it would immediately appeal, and file briefs with the U.S. District Court in Richmond, Va., to set aside the verdict.

Infineon alleged that Rambus deliberately hid the fact it was applying for patents for synchronous dynamic random access memory (SDRAM) chips at the same time JEDEC, an industry group, was developing common standards for the chips.

''We said that Rambus attended JEDEC meetings and then drafted the (patent) claims onto the JEDEC standard intentionally, and the jury agreed with us,'' said John Desmarais of [international] law firm Kirkland & Ellis, which represents Infineon.

* * *

Rambus shares closed down 90 cents to $12.80 on the Nasdaq, a 52-week low.

102. Also on May 10, 2001, eWeek published a report on Rambus, which for the first time disclosed that certain, if not all, of Rambus' licensees' patent license and royalty agreements were not binding in the event that Rambus' patents were held to be unenforceable. According to eWeek:

While it's unclear how long it could take before the court hears Rambus' appeal, the more immediate threat to the company is that the judgment could spur those who have already agreed to pay Rambus royalties to stop making payments.

"According to testimony that came out Monday, Samsung's agreement has a clause that says if the patents are held to be unenforceable, then Samsung is off the hook on paying royal-ties," said Nathan Brookwood, principal analyst with Insight 64 in Saratoga, Calif. "That raises the question whether the current court decision counts or whether a ruling has to be made at another level."

104. The market for Rambus' common stock was open, well-developed and efficient at all relevant times. As a result of these materially false and misleading statements and failures to disclose, Rambus' common stock traded at artificially inflated prices during the Class Period. The artificial inflation continued until the time it was discovered that Rambus did not have a valid claim to ownership over SDRAM technology and that its SDRAM patents were obtained by fraud and this revelation was communicated to, and/or digested by, the securities markets. Plaintiffs and other members of the Class purchased or otherwise acquired Rambus common stock relying upon the integrity of the market price of Rambus' common stock and the market information relating to Rambus, and have been damaged thereby.

105. During the Class Period, defendants materially misled the investing public, thereby inflating the price of Rambus common stock, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants' statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material, adverse non-public information and misrepresented the truth about the Company, its business and operations, including, inter alia:

(a) That defendants, the majority of whom were long-time managers of the Company and who were associated with Rambus from the early 1990's, knew or deliberately disregarded that the synchronous memory patents, upon which its patent infringement suits were brought, were not based on claims which stemmed from the Company's original 1990 disclosures regarding fundamental technology related to SDRAM memory devices and methods of controlling such devices, but rather were based on claims that the defendants added to their original, overbroad application after defendants had participated with industry consortium members of JEDEC, and after the Company illegally misappropriated the technology contributed by such JEDEC members;

(b) That defendants also knew that they had failed to disclose the 1990 patent application to JEDEC or its members, as was required by Rambus' participation in that organization, and also knew that as a result of such non-disclosure and unfair misappropriation of the JEDEC technological standards for SDRAM which defendants appended to their undisclosed patent application, the Company did not possess a valid patent and, as such, had no reasonable basis to claim either that computer memory and memory controller companies had infringed on its proprietary technology, nor that Rambus "invented" fundamental aspects of such high-speed memory interfaces;

(c) That defendants knew that had they disclosed the existence of their 1990 patent applications to the JEDEC members during Rambus' association with the JEDEC during 1990-1996, even if the Company had invented certain aspects of synchronous memory and the methods to control the same, this SDRAM technology would not have been adopted by JEDEC as an "open" industry standard absent a waiver of Rambus' parent claims, and that it was only by failing to disclose the existence of its prior patent applications that Rambus was able to convince JEDEC to adopt synchronous memory as a standard memory form;

(d) That, based on the foregoing, defendants had no reasonable basis to claim that they expected or anticipated that other semi-conductor companies would or did want to license such Rambus SDRAM technology for either compatible or non-compatible Rambus memory;

(e) That it was false and materially misleading to claim that Rambus had " very valuable patents to cover fundamental aspects of synchronous DRAM" when such patents were obtained by fraud, deception and misappropriation;

(f) That it was false and materially misleading for defendants to claim that the Company's patents were "clear and straightforward" when defendants knew that they had misappropriated the technology covered by such patents and that if this misappropriation of the JEDEC technology was disclosed, these patents would be found to be unenforceable and worthless;

(g) That defendants statements regarding quarterly licensing revenue gains created the false impression that, based on the Company's successful enforcement of its patents, Rambus was and would continue to generate significant royalties on its patented technologies. In fact, however, due to the fraud engaged in by defendants in securing the synchronous memory patents, which actions were later ratified by defendants, it was highly unlikely that the Company would be able to continue to generate such licensing and royalty fees in the foreseeable future; and

(h) That it was materially false and misleading to announce that the Company was looking forward to renewing its long-term relationships with Hitachi and Toshiba, after settling their SDRAM patent infringements suits and entering into licensing agreements with these companies, without also disclosing that its new synchronous memory licenses with Hitachi and Toshiba were wholly dependent upon the validity of the SDRAM patents and that such licenses would be void if Rambus' patents were found to be invalid. The undisclosed contingent nature of these and other licensing agreements for synchronous memory created an enormous undisclosed risk to Rambus investors, in that if the Company's SDRAM patents were found to be invalid (i.e., if the fraudulent activities surrounding the filing of these patents was eventually discovered), the Company would instantly lose the revenue expected to be generated by its licenses. Just as the Company had failed to disclose its pending patent application to JEDEC years before, defendants again failed to disclose important and material terms of its licensing agreements to investors. Instead, the Company merely heralded its triumph in obtaining such agreements, and said nothing about the interdependence of the patents and its licenses.

106. At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by plaintiffs and other members of the Class. As described herein, during the Class Period, defendants made or caused to be made a series of materially false or misleading statements about Rambus' business, prospects and operations. These material misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of Rambus and its business, prospects and operations, thus causing the Company's common stock to be overvalued and artificially inflated at all relevant times. Defendants' materially false and misleading statements during the Class Period resulted in plaintiffs and other members of the Class purchasing the Company's common stock at artificially inflated prices, thus causing the damages complained of herein.

Name           Date       Action     Shares      Price($)      Value($)

Horowitz:     02/01/01     Sold      20,000       50.25        1,005,000

              01/31/01 -                          51.96 -
              01/03/01     Sold      40,000       52.27        2,084,600

              08/23/00     Sold      20,000       89.75        1,795,000

              08/23/00     Sold      20,000       89.75        1,795,000

              07/24/00     Sold      20,000       91.08        1,821,600

              07/21/00     Sold      20,000       89.25        1,785,000

              05/17/00     Sold      60,000       37.965       2,277,900

              04/17/00     Sold      52,000       37.965       1,974,180

              02/15/00 -                          23.415 -
              02/14/00     Sold      38,400       31.125         997,824

              02/15/00 -                          23.415 -
              02/14/00     Sold      89,600       38.25        2,597,136

       Sub - Total                  380,000                  $18,133,240

Larsen:       02/01/01     Sold      12,083       50.00          604,150

              11/06/00     Sold      10,268       69.41          712,702

              08/03/00     Sold       5,417       65.94          357,197

              07/21/00     Sold      10,838       90.00          975,420

              05/01/00    Disposed   37,228       60.24        2,242,615

              04/17/00    Disposed   60,000       35.72        2,143,200

              02/02/00     Sold       5,416       19.875         107,643

              01/21/00     Sold       8,276       19.345         160,099

        Sub-Total                   149,526                   $7,303,026

Mooring:      01/26/01     Sold     100,000       48.39        4,839,000

              11/29/00     Sold     100,000       41.76        4,176,000

              08/25/00    Disposed  100,000       86.48        8,648,000

              02/29/00 -                          36.522 -
              02/16/00     Sold     120,000       69.345       6,304,700

         Sub-Total                  420,000                  $23,967,700

Tate:         01/26/01     Sold     100,000       48.39        4,839,000

              11/29/00    Disposed  100,000       86.48        8,648,000

              11/29/00     Sold     100,000       41.76        4,176,000

              08/25/00     Sold     100,000       89.48        8,648,000

              05/08/00 -                          49.125 -
              05/05/00     Sold      80,000       51.765       4,087,800

              02/08/00 -                          19.312
              02/02/00     Sold      60,000       20.032       1,179,995

         Sub-Total                  540,000                  $31,578,795

Harmon:       01/24/01     Sold      10,000        53.46         534,600

              02/22/00     Sold      18,664        33.032        616,519

         Sub-Total                   28,664                   $1,151,119

Kanadjian:    01/23/01     Sold      25,000        48.38       1,209,500

              07/25/00 -                           85.00 -
              07/24/00     Sold      29,000        90.53       2,570,070

              04/19/00    Disposed   20,000        42.672        853,450

         Sub-Total                   74,000                   $4,633,020

Donnelly:     11/07/00 -                           69.00 -
              11/06/00     Sold      38,000        69.48       2,630,640

              08/18/00     Sold      12,000        83.20         998,400

              07/24/00 -
              07/21/00     Sold      10,000        91.00         910,000

              05/04/00     Sold      20,000        51.25       1,025,000

              02/25/00 -                           25.845 -
              02/14/00     Sold      31,264        52.312      1,189,150

         Sub-Total                  111,264                  $ 6,753,190

Farmwald:     08/28/00 -                           81.52 -
              08/17/00     Sold      70,000        83.45       5,764,300
 
              04/27/00     Sold      80,000        49.782      3,982,600
 
              02/29/00 -                           36.062 -
              02/15/00     Sold     120,000        71.49      15,156,900
 
         Sub-Total                  270,000                  $24,903,800

Dunlevie:     07/27/00     Sold      30,000        88.98       2,669,400

         Sub-Total                   30,000                   $2,669,400

Toprani:      02/29/00 -                           19.62 -
              02/02/00     Sold     132,000        73.332      4,388,490

         Sub-Total                  132,000                   $4,388,490
 

GRAND TOTAL OF CLASS              2,135,454                 $125,481,780
PERIOD INSIDER SALES/
DISPOSITIONS

107. As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding Rambus, their control over, and/or receipt and/or modification of Rambus' allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Rambus, participated in the fraudulent scheme alleged herein.

108. In addition, the nature and timing of defendants' insider stock sales is a strong indication that defendants acted with scienter. While defendants Tate and Larson sold, in the aggregate, 21,300 Rambus shares during the period from the time the Company went public in mid-1997 through the end of 1999 (Tate sold 20,000 shares on October 21, 1998 and Larson sold 1,300 on November 16, 1998), the same defendants sold over $31.57 million and $7.3 million of their privately held Rambus shares during the Class Period. In addition, other Company insider who had never sold any of their personally held Rambus shares, sold over $87 million worth of Rambus stock during the Class Period. All of these stock sales occurred during the time when defendants were in possession of material, adverse non-public information about Rambus, its claims to the SDRAM technology and the foreseeable impact these undisclosed facts would have on the long-term financial condition of the Company. Moreover, many if not all of defendants' stock sales occurred immediately following the Company's publication of materially false and misleading information which was intended to and which did artificially inflate the price of Rambus shares.

109. At all relevant times, the market for Rambus stock was an efficient market for the following reasons, among others:

(a) Rambus' stock met the requirements for listing, and was listed and actively traded on the Nasdaq, a highly efficient and automated market;

(b) As a regulated issuer, Rambus filed periodic public reports with the SEC and the Nasdaq;

(c) Rambus regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major news wire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and

(d) Rambus was followed by several securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace.

110. As a result of the foregoing, the market for Rambus stock promptly digested current information regarding Rambus from all publicly available sources and reflected such information in Rambus' stock price. Under these circumstances, all purchasers of Rambus' common stock during the Class Period suffered similar injury through their purchase of Rambus' common stock at artificially inflated prices and a presumption of reliance applies.

111. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this complaint. Many of the specific statements pleaded herein were not identified as "forward-looking statements" when made. To the extent there were any forward-looking statements, there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are liable for those false forward-looking statements because at the time each of those forward-looking statements was made, the particular speaker knew that the particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of Rambus who knew that those statements were false when made.

112. Plaintiffs repeat and reallege each and every paragraph contained above as if set forth herein. This Count is asserted against all defendants.

113. The defendants named in this Count knew, or were deliberate in failing to know, of the material omissions from and misrepresentations contained in the statements as set forth above. Each of these defendants: (a) knew or had access to the material adverse non-public information about Rambus' adverse financial outlook and then-existing business conditions, which was not disclosed; (b) knew of the Company's true claims to ownership over the SDRAM technology; and (c) directly or indirectly participated in drafting, reviewing and/or approving the misleading statements, releases, analyst reports and SEC filings and other public representations of and about Rambus.

114. Throughout the Class Period, the defendants named in this Count, with knowledge of or deliberate disregard for the truth, disseminated or approved releases, statements and reports, referred to above, which were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

115. During the Class Period, the defendants named in this Count, individually and via a fraudulent scheme, directly and indirectly, participated in a course of business that operated as a fraud or deceit on purchasers of Rambus stock and concealed material adverse information regarding the then-existing business conditions and financial outlook of the Company as specified herein. Defendants employed devices, schemes and artifices to defraud and engaged in acts, practices and a course of business as herein alleged to commit a fraud on the integrity of the market for the Company's stock and to maintain artificially high market prices for the common stock of Rambus, long enough to allow Company insiders, in the aggregate, to sell or otherwise dispose of over $125 million of their privately held Rambus stock while in possession of material, adverse non-public information. This included the formulation, making of and/or participation in the making of, untrue statements of material facts and the omission to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and engaging in acts, practices and a course of business which operated as a fraud and deceit upon plaintiffs and the Class, all in connection with the purchase or acquisition of Rambus common stock by plaintiffs and members of the Class.

116. By reason of the conduct alleged herein, the defendants named in this Count knowingly or deliberately, directly and indirectly, have violated §10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder in that they: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; or (c) engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiffs and others similarly situated in connection with their purchases of Rambus stock.

117. Plaintiffs and the Class have suffered substantial damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Rambus common stock as a result of defendants' violations of §10(b) of the 1934 Act and SEC Rule 10b-5. Plaintiffs and the Class would not have purchased Rambus common stock at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants' misleading statements and concealment. At the time of the purchases by plaintiffs and the Class of Rambus common stock, the fair and true market value of said common stock was substantially less than the prices paid by them.

118. Plaintiffs repeat and reallege each and every paragraph contained above as if set forth herein. This Count is asserted against all defendants.

119. Each of the Individual Defendants acted as a controlling person of the Company within the meaning of §20 of the 1934 Act. Rambus controlled each of the Individual Defendants. Each controlling person had the power and authority to cause others to engage in the wrongful conduct complained of herein.

120. By reason of such wrongful conduct, the defendants named in this Count are liable pursuant to §20(a) of the 1934 Act. As a direct and proximate result of their wrongful conduct, plaintiffs and the other members of the Class suffered damages in connection with their purchases of Rambus stock.

WHEREFORE, plaintiffs pray for relief and judgment, as follows:

A. Determining that this action is a proper class action pursuant to Rule 23 of the Federal Rules of Civil Procedure;

B. Awarding compensatory damages in favor of plaintiffs and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding extraordinary, equitable and/or injunctive relief as permitted by law, equity and the federal statutory provisions sued hereunder, pursuant to Rules 64, 65 and any other appropriate state law remedies;

D. Awarding plaintiffs and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and

E. Such other and further relief as the Court may deem just and proper.

Plaintiffs hereby demand a trial by jury.
 

DATED: August 14, 2001

MILBERG WEISS BERSHAD  HYNES & LERACH LLP REED R. KATHREIN           ___________________________ REED R. KATHREIN 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax) MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH DARREN J. ROBBINS 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) CAULEY, GELLER, BOWMAN & COATES, LLP PAUL J. GELLER One Boca Place, Suite 421A 2255 Glades Road Boca Raton, FL 33431 Telephone: 561/750-3000 561/750-3364 (fax) SPECTOR, ROSEMAN & KODROFF, P.C. JAMES A. CAPUTO 600 West Broadway, Suite 1600 San Diego, CA 92101 Telephone: 619/338-4514 619/231-7423 (fax) Attorneys for Plaintiffs

Pursuant to Civil L.R. 3-16, the undersigned certifies that as of this date, other than the named parties, there is no such interest to report.

______________________________
ATTORNEY OF RECORD FOR
PLAINTIFFS MATTHEW GREENBLATT
and CHARLES A. HARAD
 

1. All share prices and share amounts have been adjusted to account for the Company's June 15, 2000 4:1 stock split.

2. Unbeknownst to investors, until the belated disclosure in 7/00, the Intel warrant deal had been amended within 10 months of its adoption to allow Intel to purchase the low-cost Rambus shares if Intel was able to achieve the 20% benchmark in any two quarters, regardless of whether or not they were consecutive. In addition to the other undisclosed risks involved in investing in Rambus stock during the Class Period, the revision of the Intel warrant deal also created the undisclosed risk that Intel would be able to achieve its benchmark much sooner than originally agreed and, as such, a significant share overhang existed which investors did not, and could not, know.

3. This in addition to cajoling manufacturers into manufacturing Rambus memory and controllers by offering them low-cost warrants to purchase Rambus stock if certain product quantity benchmarks were met. While this strategy did result in some payments to leading Rambus memory manufacturers, by and large it did little to encourage new manufacturers to begin production of Rambus products.

4. While a patent gives its owner exclusive proprietary interests in the subject of the patent, patents alone provide no revenue. To exploit technology which is the subject of a patent, its owner must enter into a contractual relationship with a licensee, whereby the licensee agrees to pay for the use of such property. The royalty paid under a license is independent of any patent, and as such licenses may also be negotiated on non-patented property. A license, however may be dependant upon the validity of a patent if the parties to a license specify this in their agreement.

5. The same day, the Company also announced its financial results for 1Q:F00, the period ended December 31, 1999. According to the Company:

First quarter revenues of $11.9 million were up 13% over the same period last year, but down 3% compared to the previous quarter. Operating income for the quarter was $2.8 million, compared to $2.4 million in the same period last year and $3.4 million in the previous quarter. First quarter diluted earnings per share were $0.10 compared to $0.08 in the same period last year and $0.10 in the previous quarter.

The Company reported royalties for the quarter of $2.6 million, an increase from $1.7 million reported in the previous quarter.

7. As previously disclosed in its Form 10-Q for the first fiscal quarter of 2000, the Company granted all its employees performance-based options and CSEs which vest based on the achievement of key indicators of success for Rambus. In order to tie rewards to employees closer to an increase in stockholder value, vesting for one portion of the options and CSEs was made contingent on an increase in the price of Rambus common stock to greater than $200 per share (pre-split) for 30 consecutive days. This target was achieved by the end of March 2000, and resulted in the one-time $171 million charge to earnings in the second quarter. The other portion of these performance-based employee options and CSEs vest on the same basis as the Intel and DRAM warrants (two consecutive quarters in which Rambus-based chipsets are greater than 20% of Intel's total chipset shipments) and will result in another non-cash charge to the statement of operations based on the fair value of the options and CSEs at the time achievement becomes probable.

8. The royalty rates for synchronous memory would be higher than those charged to Toshiba for Direct Rambus memory.

9. In addition to the one-day decline on March 15, 2001, as news of this result leaked to the market, between March 7, 2001 and March 14, 2001, shares of Rambus traded for a high of $46.25 to a low of $33.71.

10. During 2Q:F01, Rambus spent over $7.3 million - or 23% of its revenues and 170% more than in 1Q:F01 - on legal fees related to the enforcement of Rambus' purported patent rights to SDRAM and DDR SDRAM.