FTC-Rambus Trial To Set The Standard For Antitrust-IP Overlap
Against the backdrop of multiple, private patent infringement cases, as well as a two year Federal Trade Commission investigation, the trial of the Commission's case against Rambus, Inc. began on April 30, 2003. In the Matter of Rambus, Incorporated, Docket No. 9302. Although former FTC Administrative Law Judge (ALJ) James Timony handled most of the pre-trial process, recently sworn-in ALJ Stephen McGuire will be presiding over the trial. The case–similar to the FTC's 1995 settlement of charges against Dell Computer Corporation, FTC File No. 931 0097–deals with a corporation's failure to disclose certain patents within the context of a legitimate standard setting process. According to the FTC's complaint, the patents at issue would allow Rambus to essentially control the standards promulgated by the Joint Electron Device Engineering Council, or JEDEC. The FTC's case revolves around the extent to which Rambus' failure to disclose its '898 patent and related patents during the JEDEC standard setting process could foreclose or make it exceedingly difficult for its competitors to develop dynamic random access memory (or "DRAM") technology.
Rambus and other JEDEC participants compete in the DRAM technology market. DRAM is the most common form of computer memory currently in use. According to the FTC's complaint, total sales of DRAM in the United States exceeded $12 billion in 2000, and for the same year worldwide DRAM sales exceeded $28 billion. Around 1990, JEDEC began working on developing standards relating to the development of synchronous DRAM ("SDRAM"), an improvement to DRAM technology that alleviated memory bottlenecks associated with DRAM. Standards relating to SDRAM were considered necessary for technological development and innovation. Rambus, a designer and patent-holder of DRAM-related technologies, owned a proprietary SDRAM architecture but also, according to the FTC's complaint, sought to obtain patent rights on other SDRAM technologies that the company believed could potentially become adopted as the industry standard.
The essential element of the FTC's case is Rambus' alleged failure to disclose its existing and potentially future patent rights throughout the JEDEC SDRAM standard setting process. The FTC's complaint describes Rambus' representatives' silence over the course of JEDEC meetings on the issue of whether certain discussed technology proposals were subject to Rambus' patent claims. As the FTC notes in its complaint, JEDEC participants were required by the organization's manual to disclose any patents that might be involved in JEDEC's work.
JEDEC issued SDRAM standards between 1993 and 1999. Shortly after the announcement of the FTC's Dell Computer Corporation consent, Rambus formally withdrew from JEDEC participation. In late 1999, Rambus began contacting major DRAM related technology manufacturers worldwide to assert their patent rights. Rambus obtained licensing agreements with seven major DRAM manufacturers, and then asserted patent litigation claims against Hitachi, Infineon, and other DRAM manufacturers who were unwilling to enter into license agreements. Hitachi settled Rambus' claims. Rambus was sued by Hynix and Micron, who sought declaratory judgements that their JEDEC-compliant technologies did not infringe on Rambus' patents.
At the beginning of March, ALJ Timony ruled that Rambus was negligent in its duty to preserve documents in anticipation of litigation, but refused to grant the FTC's motion for default judgment, and so the trial began on April 30, 2003. The outcome of the trial will have a tremendous impact on Rambus' royalty stream. Since the company owns the patents but does not manufacture any SDRAM technology itself, any potential limitations on the company's ability to recoup these royalties would substantially impede the company's profitability.
More importantly, the Rambus trial is an important step in defining the extent to which the protection of intellectual property -particularly enforcing those rights implicated in any formal or de facto standard setting process-can be exclusionary and anticompetitive. The FTC has taken a number of actions in the pharmaceutical industry that limit the anticompetitive exercise of patent rights. However, Rambus is one of few actions that would test the FTC's regulatory oversight of anticompetitive patent abuse outside of the pharmaceutical industry. As a result, the outcome of the trial will serve to guide the agency's further enforcement actions on such matters.
The extensive trial docket for the case can be found on the FTC's website at