FTC Imposes DRAM Royalty Rates on Rambus

The Federal Trade Commission (FTC) today set the maximum royalty that rate chipmaker Rambus can collect for its dynamic random access memory (DRAM) products. The decision comes five months after the FTC ruled Rambus unlawfully cornered the market for DRAM chips by distorting the standards-setting process.

The Los Altos-Calif.-based Rambus said it would seek an immediate stay of the order pending its appeal of the FTC decision.

“Having found liability, we want a remedy strong enough to restore ongoing competition and thereby to inspire confidence in the standard-setting process,” the FTC order states. “At the same time, we do not want to impose an unnecessarily restrictive remedy that could undermine the attainment of pro-competitive goals.”

The FTC set a maximum royalty rate of 0.5 percent for DDR SDRAM products. After three years, the rate falls to zero. The FTC also mandated a 0.25 percent royalty for SDRAM chips. The commission said its remedy would not apply to DDR2 SDRAM or other post-JEDEC (Joint Electron Device Engineering Council) standards.

In addition, the FTC order bars Rambus from enforcing any royalty agreements now in effect that would be prohibited under the terms of Monday’s order. The FTC said the ruling is to ensure that the efforts to restore competition are not undermined by the threat of patent-infringement litigation.

“Because we strongly disagree with a number of the Commission’s determinations, we plan to appeal its decision,” Tom Lavelle, senior vice president and general counsel for Rambus, said in a statement.

In July, the FTC said Rambus deceived the technology industry by participating in the standards-setting process with JEDEC without disclosing that the company was developing patents that involved the specific technology ultimately approved by JEDEC.

JEDEC had 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.

“Royalty rates unquestionably are better set in the marketplace, but Rambus’ deceptive conduct has made that impossible,” the FTC decision states. “Although we do not relish imposing a compulsory licensing remedy, the facts presented make that relief appropriate and indeed necessary to restore competition.”

Rambus’ legal hopes rest with reversing the 2006 FTC order. That order, in turn, reversed a February 2004 decision by FTC Chief Administrative Law Judge Stephen McGuire tossing out the FTC’s antitrust lawsuit against Rambus filed in 2002.

“We believe that a fair review of the underlying facts will restore the perspective of the chief administrative law judge who exonerated Rambus by dismissing the complaint,” Lavelle said.

In its 2006 liability opinion, the FTC found that, “Rambus engaged in exclusionary conduct that significantly contributed to its acquisition of monopoly power in four related markets.”

DRAM is the most commonly used semiconductor memory product, providing high-speed storage and retrieval of electronic information for a wide variety of computer, telecommunication and consumer electronic products. There were approximately $7.7 billion in DRAM sales in the United States in 2004.

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