Rambus "unlawfully" obtained monopoly power, says FTC

Washington, D.C. - In an unexpected turn of events, the Federal Trade Commission today announced that it has determined that Rambus "unlawfully monopolized the markets" for four DRAM technologies. The ruling will result in a remedy for "the substantial competitive harm" and may provide a new opportunity for memory manufacturers to tackle licensing fees demanded by Rambus.

The FTC decision followed on the heels of a new round of SDRAM and DDR DRAM technology licensing agreements that Rambus had closed just last month with Matsushita and Toshiba. In its announcement released today, the FTC said that, "through a course of deceptive conduct, Rambus was able to distort a critical standard-setting process and engage in an anticompetitive ’hold up’ of the computer memory industry." By a unanimous vote, the commission found that Rambus violated Section 2 of the Sherman Act, which covers unlawful acquisition and maintenance of monopoly powers. Further briefings are scheduled to determine the appropriate remedy for "the substantial competitive harm that Rambus’ course of deceptive conduct has inflicted."

The original complaint filed against Rambus dates back to 18 June 2002. The commission argued that Rambus "deliberately engaged in a pattern of anticompetitive acts." It alleged that Rambus participated in the Joint Electron Device Engineering Council (JEDEC) "for more than four years without disclosing to [the organization and its members] that it was actively working to develop, and possessed, a patent and several pending patent applications that involved specific technologies ultimately adopted in the standards." In February of 2004, an administrative law judge dismissed the case arguing that Rambus technology was adopted not through anti-competitive behavior, but because of its superior nature and market preferences. Furthermore the judge mentioned that he was convinced that JEDEC members were always aware of Rambus’ patent portfolio.

An appeal sent back to the full commission re-opened the case in March of 2004. In today’s opinion, the commission decided in a 5:0 vote confirming the allegations. "Rambus’ conduct was calculated to mislead JEDEC members by fostering the belief that Rambus neither had, nor was seeking, relevant patents that would be enforced against JEDEC-compliant products," the commission said. As a result, the company "was able to conceal its patents and patent applications until after the standards were adopted and the market was locked in," states the opinion. "Only then did Rambus reveal its patents - through patent infringement lawsuits against JEDEC members who practiced the standard."

Micron, one of the companies currently in litigation, was first to react to the FTC ruling. "Micron believes that Rambus has engaged in a pattern of deception, destruction of evidence, false testimony and other improper activities designed to mislead courts and Micron to extract unjust patent licensing fees or damages," said Rod Lewis, Micron vice president of legal affairs and general counsel. "We will continue to vigorously advance those arguments, and the thoughtful ruling today by the FTC supports Micron’s views."

Samsung declined to comment on the decision.

Rambus’ senior legal advisor John Danforth responded saying "We are disappointed with aspects of today’s ruling, but are focused on the remedy stage and believe that, if the Commission tries to set royalty rates, we can demonstrate our rates have been reasonable and fair."

According to FTC spokeswoman Claudia Bourne Farrell, Rambus will have an opportunity to file a response and a possible remedy on or before 15 September. Each party then will be able to file another brief on or before 29 September. On oral argument about the remedy will be held following the filing of the briefs.

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