FTC Appeals Rambus Dismissal

The federal government is reviving its fight against dynamic random access memory (DRAM) maker Rambus , according to court documents made public Thursday.

The U.S. Federal Trade Commission (FTC) filed an appeal in court April 16 that was later made public Thursday outlining its case. The FTC has accused the company of violating federal antitrust laws by “deliberately engaging in a pattern of anti-competitive acts and practices that served to deceive an industry-wide standard-setting organization, specifically, not disclosing that it was in the process of seeking patents related to the proposed standards.”

The 125-page appeal comes two months after Chief Administrative Law Judge (ALJ) Stephen McGuire dismissed the antitrust lawsuit, which included a U.S. Supreme Court decision, a two-year investigation and a recent three-month hearing.

The FTC said the judge’s ruling effectively “allows Rambus to command the monopoly power it unquestionably enjoys: the power to reap from $1 billion to $3 billion in royalties, ultimately from consumers.”

Representatives for Rambus were not immediately available for comment.

The appeal also comes at a troubling time in the PC manufacturing cycle because the price of DRAM has skyrocketed to as much as $7 per chip on the spot market in the last month. As a result, Original Equipment Manufacturers (OEM) have had to choose between rising prices just before the summer buying season and leaving out additional memory from their systems.

Back in June 2002, the FTC claimed that Rambus violated Section 5 of the Federal Trade Commission Act (“FTC Act”), as amended.

In its case, the FTC attempted to invalidate Rambus’ synchronous memory patents obtained during its membership on the Joint Electron Devices
Engineering Council (JEDEC), a non-profit organization that promotes technological standards. Rambus participated in the standard setting process
between 1991-95.

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

In addition, FTC attorneys 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 made moves to either collect on royalties or sue those companies that
refused to comply, which at the time included Intel, Micron Technology, Infineon Technologies,
Samsung, Hitachi, Hyundai, and Hynix.

The FTC warned those royalties collected by Rambus would drastically impact the $20 billion memory industry.

“The Commission should correct the mistakes of law contained in the Initial Decision,” the FTC said in its appeal. “Although the ALJ’s erroneous
interpretation of the scope of Section 5 is of utmost concern, his standards for causation and anticompetitive harm also could have serious implications if followed by other judges or courts and could set dangerous precedent if not corrected by the Commission.”

In a show of solidarity, Boston-based law firm Gesmer Updegrove filed an amicus brief with the courts last week asking that the courts rethink their decision. The law firm said it has clout in that it represents the interests of 11 major standard setting bodies, as well as a standard-setting joint venture.

“The impact of the case goes far beyond just the memory industry,” the firm said in a prepared statement. “If the FTC does not reverse the ruling
of the ALJ, the process that sets the more than 100,000 standards that affect nearly every aspect of daily life in this country will be undermined.”

Rambus will now have five weeks to respond to the FTC brief and the briefs of the Friends of the Court. Brief oral arguments before the FTC by counsel to Rambus and the FTC Complaint Counsel are expected later this summer.

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