As part of its first decision addressing participation in a standard-setting body, the U.S. Federal Trade Commission issued an order imposing penalties on Rambus for its misrepresentations and omissions of relevant information from a standard-setting body known as JEDEC. In the Matter of Rambus, Inc., Docket No. 9302 (F.T.C., Feb. 5, 2007).

In August 2006, the FTC found that Rambus had deliberately withheld from JEDEC (the standards setting body for computer memory), that it possessed patents covering the standard for SDRAM and DDR SDRAM while it participated in the development of the standards. The FTC held that Rambus’s subsequent assertion of these patents against SDRAM and DDR SDRAM manufacturers violated U.S. antitrust laws. Following this finding of liability, the FTC held further hearings and received additional evidence to assist it in determining an appropriate remedy.

The FTC order limits the royalty rates at which Rambus may license its patented technology to SDRAM and DDR SDRAM manufacturers (0.25 percent and 0.50 percent respectively). After three years, Rambus is prohibited from collecting any royalties for SDRAMs or DDR SDRAMs. The Commission also has ordered Rambus to employ an approved compliance officer to monitor Rambus’s participation in standard-setting organizations and ensure that Rambus discloses its intellectual property rights.

Although the majority found that the order restores competition, two Commissioners dissented, asserting that royalty-free licensing was the only relief adequate to restore competition. Moreover, they noted, as the SDRAM and DDR SDRAM technologies are nearly obsolete, any remedy that did not include the next generation of DRAM—DDR2 SDRAM—would be ineffective.

While the majority opinion concedes that royalty-free licensing may have been appropriate, the FTC found that Complaint Counsel failed to establish that royalty-free licensing was warranted because Complaint Counsel failed to demonstrate that the DRAM industry would have negotiated a royalty-free license for SDRAM and DDR SDRAM had Rambus not misled it.

Practice Note: Given the FTC’s approach in this case, plaintiffs appear to now have a higher burden to prove that the requested relief is appropriate and both parties have an increased incentive to obtain evidence of licensing rates for alternative technologies.