• FTC Finds Rambus Inc. Guilty of Abusing Industry Standards-Setting Procedures
  • September 26, 2006 | Authors: Barry J. Reingold; Susan E. Foster; Thomas L. Boeder; Benjamin S. Sharp
  • Law Firms: Perkins Coie LLP - Washington Office ; Perkins Coie LLP - Seattle Office ; Perkins Coie LLP - Washington Office
  • The FTC recently found Rambus Inc., a developer and licensor of computer-memory technologies, guilty of violating the antitrust laws through its participation in a committee of the Joint Electron Device Engineering Council (JEDEC), convened to develop standards for dynamic random access memory (DRAM) devices. Rambus's scheme was designed to force all firms that made, used, or sold DRAMs that complied with the JEDEC standards to enter into licenses with Rambus to avoid patent infringement lawsuits. The total royalties, Rambus estimated, would have been in the billions of dollars, with individual DRAM manufacturers liable for hundreds of millions of dollars of license fees.

    The decision is a reminder to technology firms about the legal obligations that flow from participating in industry standards setting.

    Background and Holding

    During the late 1990's Rambus, like many electronics companies, participated in JEDEC standards-setting programs. While JEDEC's rules were not as clear as those of many standards-setting organizations, they were interpreted, in accordance with the duty of good faith, to require all participants to disclose all patents and patent applications that might impact a proposed standard. The rules were designed to provide an opportunity for JEDEC to consider whether it was possible and, if so, desirable to adopt a standard that avoided infringing any disclosed patents and applications. Where JEDEC decided to adopt a standard that impacted a member's patent or application, the rules required the member to agree to enter into reasonable and nondiscriminatory (RAND) licenses with all firms that made, used, or sold products that complied with the standard.

    Rambus violated these rules and obligations. Specifically, Rambus: (a) failed to disclose to JEDEC Rambus's patents and patent applications applicable to proposed standards for DRAM devices; (b) supported the adoption of standards that Rambus believed would infringe its patents and to-be-issued patents; and (c) used information obtained in the JEDEC standards-setting proceedings to ensure that its patent filing strategy covered the key elements of the forthcoming JEDEC standards. After JEDEC adopted the standards, Rambus filed infringement lawsuits against all of the major DRAM manufacturers.

    The FTC found that Rambus's practices permitted it unlawfully to monopolize the market for the four DRAM technologies encompassed by the patents. The FTC is now considering the remedy it should impose on Rambus, which may consist of an order barring Rambus from enforcing the patents and permitting companies that entered into licenses for use of the patents to void the licenses. The FTC has not yet issued a decision on this aspect of the case.

    Recommendation

    Companies involved in industry standards-setting proceedings should follow these procedures:

     

    • Carefully review all of the rules, procedures, and protocols governing the proceedings and remember that potentially deceptive conduct may include either misrepresentation, omission, or practice;

       

    • Where disclosure may be required, weigh the benefits of participation against the loss of potential license revenue and other ramifications (e.g., disclosure of potential trade secret information contained in undisclosed patent applications); and

       

    • If participation is the better course of action, disclose fully and on a timely basis all patents and patent applications, including amendments, that may impact proposed standards.