SANTA CLARA, Calif. -- Intel Corp. would earn royalty fees from Rambus Inc. if Direct RDRAMs ever takes off in the memory marketplace, according to a provision in the 1997 licensing agreement between the two copmpanies. However, sources said Intel insisted on the clause, not to get a royalty revenue stream but also to put a cap on the fees Rambus would demand from DRAM suppliers to make its memory chip design.

The 1997 agreement says Rambus would pay Intel all its royalties received from DRAM Manufacturers above a 2% level from each producer, if certain milestones are met.

Some industry sources attending this week's Platform 2000 Conference in San Jose said they believe Intel wasn't trying to obtain a share of royalties for Direct Rambus DRAMs from Rambus, but rather to prevent the Mountain View, Calif., company from charging excessive fees for its high-bandwidth memory interface.

"Intel reasoned that Rambus would have little incentive then to negotiate a Direct RDRAM royalty fee much above 2%, which it would never get itself," said a memory chip maker official attending the San Jose conference.

The royalty fees Rambus negotiated with DRAM makers on the Direct RDRAM chip have always been confidential. But sources said they believe Intel's agreement with Rambus has place a ceiling on Direct RDRAM royalties at around 2-to-2.5%. A sliding scale lowers that rates as chip makers increase their Rambus memory volumes.

Intel and Rambus officials did not responded to requests for comment on the royalty provisions in the 1997 licensing agreement. The three-year-old agreement also virtually bars Intel from making its own double- data rate (DDR) chip sets for PC microprocessors until 2003 in an effort to boost the volumes of Rambus DRAMs (see July 18 story). Until now, little has been known about these provisions, buried in the 1997 pact between Intel and Rambus.

At present none of the milestones have been met to trigger the Rambus royalty fees to Intel. Under the accord, Intel must ship at least 20% of its total chip sets as Rambus-enabled units for two consecutive quarters before it can start collecting royalties from Rambus. The 1997 pact also requires Rambus to continue to upgrade the Direct Rambus design regularly. Should it falter, Intel could collect larger royalty fees above 1% that each DRAM maker pays Rambus.

In another limitation, Intel doesn't start receiving its reverse royalty payment from Rambus from any given DRAM firm until that producer is shipping 25% of its total DRAMs by units as Direct RDRAM chips.

For its part, Intel makes payments to Rambus for its technology, but the sum is kept confidential in the published version of the 1997 agreement. Intel also pays an undisclosed royalty to Rambus on any Direct RDRAM chips, modules or boards that Intel buys from suppliers to resell.

Good news for system manufacturers in the agreement is a Rambus promise not to seek any royalty payments from OEMs for interfacing components, such as clocks, connectors, and other parts used with Direct RDRAM chips.

Ironically, Rambus has indicated that it might pursue just the opposite policy with OEMs when it comes to high-speed synchronous DRAMs and logic interface patents. The Mountain View firm accused Sega Enterprises Ltd.--the Japanese electronic games maker--of violating synchronous DRAM patents, which were not licensed to the company, in suits that were later dropped in June with the signing of a new technology agreement between Rambus and Hitachi Ltd. (see June 22 story).

Another part of the agreement allows Rambus to terminate Intel if certain milestones aren't met. First, the market for Direct Rambus must be established -- at least six DRAM firms must be shipping at least 1 million RDRAM chips a month, and the production cost of the chip must be within 5% of the cost of making 100-MHz 64-megabit SDRAMs. After that Rambus can terminate its agreement with Intel if the microprocessor giant fails to ship at least 20% of its total chip sets as Rambus-enabled in any two consecutive quarters.

However, industry sources said Rambus is so dependent on Intel to promote Direct RDRAM that the Mountain View company is unlikely to terminate Intel even if special clause kicked in.

The two partners reportedly were at odds late last year when Intel announced it would develop its own chip set to support PC133 SDRAMs. The chip set later became Intel's new 815 logic controller. Sources said Rambus argued that the higher speed PC133 memory gave the chip set a bandwidth capability of 1 gigabit per second, which the 1997 licensing agreement barred. But Intel claimed the PC133 chip set was only "an evolution" of existing PC66 and PC100 SDRAM chip sets, which was allowed under the 1997 licensing accord.