FTC slams Rambus for memory industry “hold-up”

August 2, 2006 – Calling it a case of “deceptive conduct” that resulted in an anticompetitive “hold-up of the computer memory industry,” the US Federal Trade Commission (FTC) has overturned a previous court ruling, finding that Rambus Inc. unlawfully monopolized markets for four computer memory technologies that were incorporated into industry standards for SDRAM and DDR SDRAM. The FTC said it will conduct additional briefings to determine punitive actions for any “substantial competitive harm” that resulted from Rambus’s conduct.

The FTC originally filed a federal antitrust lawsuit against Rambus in June 2002, alleging that Rambus participated in the Joint Electron Device Engineering Council (JEDEC) standard-setting process for more than four years, without revealing that it was also working on a patent and several pending patent applications covering technologies ultimately adopted in the standards. Once those standards were adopted, Rambus filed patent infringement lawsuits against JEDEC members who incorporated them into their own products. In Feb. 2004, Chief Administrative Law Judge Stephen J. McGuire dismissed the complaint, saying that the FTC did not establish liability for the alleged violations.

Now, in a unanimous 5-0 vote, the FTC has overturned the ALJ’s 2004 decision, ruling that Rambus’ conduct was “calculated to mislead JEDEC members,” who had relied on the company’s actions and omissions to help avoid use of patented technologies into its published standards. “Rambus withheld information that would have been highly material to the standard-setting process within JEDEC,” according to the FTC opinion, filed by Commissioner Pamela Jones Harbour. “JEDEC members viewed early knowledge of potential patent consequences as vital for avoiding patent hold-up. Rambus understood that knowledge of its evolving patent position would be material to JEDEC’s choices, and avoided disclosure for that very reason.”

The FTC stated that hiding the potential that Rambus could impose royalty obligations, and “silently using JEDEC to assemble a patent portfolio to cover JEDEC’s choice of Rambus’s technologies,” significantly contributed not only to JEDEC’s incorporation of its technology into the DRAM standards, but to JEDEC’s failure to secure assurances regarding future royalty rates — “which, in turn, significantly contributed to Rambus’s acquisition of monopoly power.”

In a separate statement, Commissioner Jon Leibowitz said that Rambus’ claims that its technology’s superiority was the reason for its inclusion in JEDEC standards “are not established by the record,” added that the company’s actions were “intentional, inappropriate, and injurious to competition and consumers alike.”

Rambus plans to appeal, according to the company’s legal advisor John Danforth, who days ago stepped down as the company’s SVP, secretary, and general counsel. “Our technology is what the industry had to use and would have used, and continued to use after we told them about our patents,” he said, quoted by the Wall Street Journal.

Rambus also has been embroiled in litigation against Hynix, Infineon, Micron, and Siemens, alleging they fixed prices and production to undercut Rambus’ SDRAM technology, with damages reportedly estimated at more than $1 billion. Infineon later settled, agreeing to a two-year, $46.8 million licensing deal, with a clause to pay up to an additional $100 million if Rambus signed agreements with other DRAM manufacturers. Days ago Rambus accepted a $133 million settlement with Hynix, half of what it had originally sought. Another phase in that case will continue later this month.


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