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FTC: Rambus Deceptive in DRAM

The Federal Trade Commission (FTC) ruled today memory chipmaker Rambus unlawfully cornered the market for dynamic random access memory (DRAM) by distorting the standards-setting process.

The ruling only establishes Rambus' liability and does not address financial remedies.

The FTC plans further hearings to determine appropriate damages for the "substantial competitive harm that Rambus' course of deceptive conduct has inflicted."

The FTC said Rambus deceived the technology industry by participating in the standards-setting process with the Joint Electron Device Engineering Council (JEDEC) without disclosing the company was developing patents that involved the specific technology ultimately approved by JEDEC.

JEDEC sought to avoid the incorporation of patented technologies in its standards. At a minimum, JEDEC hoped that any patented technology adopted would be available to be licensed on a royalty-free basis.

"We find that Rambus' course of conduct constituted deception under Section 5 of the FTC Act," the FTC ruling states. "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 FTC said JEDEC members acted "reasonably when they relied on Rambus' actions and omissions and adopted the SDRAM and DDR SDRAM standards."

Since the standards were adopted, DRAM chips have been used extensively in personal computers, printers, cameras and a host of other electronic products, and Rambus has sued competitors for patent infringement.

"Rambus withheld information that would have been highly material to the standards-setting process with the JEDEC," the ruling states.

"JEDEC expressly sought information about patents to enable its members to make informed decisions about which technologies to adopt."

"We are disappointed. We believe the ALJ guy got it right," Rambus lawyer John Danforth said in a teleconference early Wednesday morning. "It's extremely likely we'll be [appealing]."

The decision reverses a 2004 ruling by an FTC administrative law judge (ALJ) dismissing the antitrust charges.

During Rambus' membership in JEDEC from 1991-1995, the FTC said the company understood that knowledge of its patent position would be material to JEDEC's standards but Rambus "avoided disclosure for that very reason."

In that time, JEDEC developed and adopted a standard for synchronous dynamic random access memory (SDRAM). When Rambus joined the group, it had applied for a patent on RDRAM, a competing technology.

During the 2004 hearing, the FTC produced documents that showed the company made repeated filings to ensure intellectual property rights to the SDRAM standard before, during and after Rambus dropped its JEDEC membership,.

In addition, the FTC produced confidential notes from Rambus' outside legal counsel advising the company to resign from JEDEC and cease applying for patents on SDRAM.

Once the SDRAM standard was adopted, Rambus attempted to either collect on royalties or sue those companies that refused to comply, which included Infineon, Samsung, Hitachi, Hyundai, and Micron Technology.

"Through its successful strategy, Rambus was able to conceal its patents and patent applications until after the standards were adopted and the market was locked in," the FTC ruled.

"Only then did Rambus reveal its patents -- through patent infringement lawsuits against JEDEC members who practiced the standard."

In a separate statement, FTC Commissioner Jon Leibowitz wrote, "Rambus' abuse of JEDEC's standard-setting process was intentional, inappropriate and injurious to competition and consumers alike."

He added that Rambus' conduct not only violated antitrust laws, but also constituted an unfair method of competition in violation of the broader reach of the FTC Act.

Shares in the Los Altos, Calif.-based Rambus  initially dropped 20 percent in early trading to $13.55 a share.