Semiconductor Antitrust Case Can Power Forward

(CN) - A federal judge refused to dismiss claims that Cypress Semiconductor Corporation intentionally cornered the market for memory chips.

Cypress' alleged conduct should go to trial because, if true, it "is the type that antitrust laws were intended to prevent," U.S. Judge Edward Davila of San Jose, Calif., wrote.

In 1999, Cypress teamed up with two of its competitors, Micron Technology Inc. and Integrated Device Technology Inc., in the business of manufacturing memory chips known as static random access memory (SRAM).

The companies formed a consortium meant to "develop standards for higher performance networking SRAM products outside of the open and public standard-setting organizations to obtain a competitive advantage over other competitors," according to the Northern District of California. "The consortium members shared information and combined their market power to define and promote a family of SRAMs that would address the new market standard."

The consortium excluded many competitors including GSI Technology, which requested membership in 1999, 2003, 2004, 2008 and 2011.

GSI said the exclusion allowed the evolving consortium membership to lock in customers and prevent other companies from entering the SRAM market.

"As a direct result of the consortium's exclusionary combination from 1999 to and including the present date, the consortium collectively designed, developed, manufactured and introduced generations of its QDR and DDR SRAM and several enhanced product family devices in the market free of any timely and effective competition from any other networking SRAM vendors," according to the court's summary of the complaint. "With each new product released, the consortium delayed the public release of its data sheets inflicting independent and accumulating injury on plaintiff and other SRAM competitors outside the consortium."

The court found that GSI's complaint adequately shows the two components necessary to support a claim of unreasonable restraint under the Sherman Antitrust Act: that Cypress had market power and that its conduct harmed competition within that market.

"The facts pleaded in this case illustrate the existence of a relevant market and that the defendant has power within that market," Davila wrote.

In this particular case, the complaint "provides an outline of the injury to competition by describing the harmful effects the consortium's horizontal agreement has on outside competitors," he added.

GSI says several SRAM vendors were forced out of the market because their inability to participate in the development of product standards affected their ability to make a timely entry into the market.

The exclusion let Cypress and other consortium members lock in customers, including Cisco Systems Inc., one of the largest network-equipment manufacturing companies in the world.

GSI seeks relief under the Business and Professions Code and the Cartwright Act, a California antitrust law modeled after the federal Sherman Act.

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