In recent years, China's electronics industry has struggled to compete in the manufacture and sale of products ranging from MP3 players to digital TVs.1 Many of the most challenging disputes involve industry standards. Rather than conceding, however, China's electronics industry has responded aggressively. For example, leading Chinese digital TV makers formed Shenzhen CTU Hi-Tech Ltd. in 2007 to handle patent disputes related to the ATSC standard.2
Recognizing that China's electronics industry is entering unchartered territory, this article attempts to provide lessons for Chinese companies, based on a recent development regarding standards and patents involving Rambus Inc.
The story traces back to early 1990s, when the Joint Electron Devices Engineering Council (JEDEC) was standardizing DRAM technologies for the computer memory industry. Rambus, a company that develops computer memory technology, was a member of JEDEC when it approved the SDRAM standard, but withdrew from JEDEC before it approved the DDR SDRAM standard.3 Rambus then sought royalties from major DRAM and chipset manufacturers, claiming patent rights covering these two JEDEC standards.4
JEDEC's patent policy called for disclosing patent rights.5 Although Rambus disclosed its first issued patent, it did not disclose pending patent applications.6 Therefore, some companies have accused Rambus of committing fraud and achieving monopoly power by misleading JEDEC to adopt the standards.
On April 22, 2008, the United States Court of Appeals for the District of Columbia Circuit ruled that Rambus did not violate the Federal Trade Commission's (FTC) rules on monopoly and unfair competition, reversing an earlier FTC decision.7 The DC Circuit held that the FTC had not demonstrated that JEDEC would not have adopted Rambus's technologies, if Rambus had fully disclosed its patent rights.8
Rambus has thus survived yet another major challenge. In 2003, the United States Court of Appeals for the Federal Circuit held that Rambus did not commit fraud under the laws of the Commonwealth of Virginia. Specifically, the Federal Circuit found that (1) the JEDEC policy lacked "defining details,"9 (2) substantial evidence did not support the jury's verdict that Rambus breached its duties under the JEDEC policy regarding the SDRAM standard,10 and (3) Rambus did not commit fraud regarding the DDR SDRAM standard, because it withdrew from JEDEC before formal consideration of this standard.11
The real question for Chinese companies, however, is what they can learn from these Rambus cases. Keeping in mind that each standard-setting organization's (SSO) patent policy and facts may be different, Chinese companies should consider taking the following actions.
- Participate the Standardizing Process: To improve their strategic positions, Chinese companies should be proactive and participate in the standardizing process. Otherwise, Chinese companies would continue to have no influence over what technologies the SSOs adopt. At a minimum, Chinese companies should attend SSO meetings as guests or monitor the standardizing process.
- Analyze Patent Disclosure Policies: Rambus strategically withdrew from JEDEC to protect its sensitive competitive information. Similarly, Chinese companies should analyze SSOs' patent policies carefully to decide the exact scope of the required disclosure. In an extreme scenario, a company may choose to withdraw from an SSO. Conversely, when approached by patent owners, Chinese companies should analyze whether those owners have fully complied with SSOs' patent policies.
- Patent Chinese Companies' Own Technologies: Typically, using the technologies covered by standards requires the users to pay reasonable licensing fees. Chinese companies, however, can improve their bargaining positions by patenting their own technologies related to the standards.
As Chinese companies start grasping the rules of engagement and learning lessons from others, prevailing in future patent wars may only be a matter of time.