United States: Overview of FTC´s Rambus Decision

Today, the Federal Trade Commission (FTC) issued its opinion in the Matter of Rambus, Inc., Docket No. 9302, and found that the technology company engaged in exclusionary conduct that enabled it to monopolize markets for computer memory technology. The Commission has requested additional briefing of remedial issues before it "exercise[s] its broad remedial powers."

The original FTC complaint against Rambus, Inc. was issued on June 18, 2002, charging that the company monopolized certain computer memory technology markets through a pattern of anticompetitive and exclusionary conduct during its participation in the Joint Electron Device Engineering Council (JEDEC), an industry-wide standard-setting organization for technologies for dynamic random-access memory (DRAM) chips. The complaint alleged that Rambus concealed its patents and patent applications until after the standards were adopted, and then later brought patent infringement lawsuits against JEDEC members who practiced the standard. In 2004, Administrative Law Judge Stephen J. McGuire dismissed the complaint, holding that: (i) JEDEC’s rules did not impose a clear duty on Rambus to disclose its patents and patent applications; (ii) Section 5 of the FTC Act did not impose a duty on Rambus to disclose its relevant patents to JEDEC or act in good faith towards other members; and (iii) Rambus’s failure to disclose its patents and patent applications could not constitute "exclusionary conduct" sufficient to support a claim for monopolization pursuant to Section 2 of the Sherman Act.

Today’s unanimous FTC opinion, written by Commissioner Pamela Jones Harbour, reversed ALJ McGuire’s decision and found that Rambus violated Section 5 of the FTC Act by engaging in exclusionary conduct, and that Rambus’s conduct contributed to its acquisition of monopoly power in markets for computer memory technology.

The FTC’s de novo review of the evidence led it to set aside all the findings and conclusions of the ALJ and instead find that Rambus "exploited its participation in JEDEC to obtain patents that would cover technologies incorporated into now-ubiquitous JEDEC memory standards, without revealing its patent position to other JEDEC members." The FTC concluded that "[a]s a result, Rambus was able to distort the standard-setting process and engage in an anticompetitive ‘hold-up’ of the computer memory industry."

The FTC found:

• Despite JEDEC’s policy and practice that members were expected to reveal their patents and applications that later might be enforced against those practicing the standard, Rambus refused to disclose the existence of its patents and applications.

• Rambus took actions to purposefully mislead members of JEDEC, causing them to believe that Rambus was not seeking patents that would cover the standards under consideration by JEDEC.

• Rambus was able to gain information about the pending standard via its participation in JEDEC and then successfully amend its existing patent applications to ensure that the company’s patents would cover the standard ultimately decided upon by JEDEC.

Using the analytical framework of Section 2 of the Sherman Act, the FTC found that Rambus’s conduct was deceptive, had the purpose and effect of gaining market power, and constituted exclusionary conduct for purposes of Section 2. The Commission rejected each of the company’s proffered procompetitive justifications for its conduct and further explained that even if Rambus had been successful in establishing a procompetitive justification for its conduct, such a justification would not outweigh the anticompetitive effects of the exclusionary conduct, particularly considering the potential of such conduct to distort the processes of industry-wide standard-setting bodies.

While the Commission found that Rambus violated Section 5 of the FTC Act, it did not order a remedy for the violation. The Commission has requested additional briefing of remedial issues before it "exercise[s] its broad remedial powers."

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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