The US Court of Appeals for the DC Circuit has overturned the Federal Trade Commission’s (FTC) administrative ruling against technology licensing company Rambus Inc., remanding the case to the FTC for further proceedings. Rambus was originally charged with manipulating industry standard setting procedures in favor of its own proprietary technologies. Specifically, the company was alleged to have deceived the Joint Electron Device Engineering Council (JEDEC) and its members by failing to disclose patents on technologies that the JEDEC adopted into industry standards. The technologies involved are widely used in consumer electronics including personal computers and servers.

The FTC brought antitrust charges against Rambus in 2002. The case was argued before the FTC’s Chief Administrative Law Judge, Stephen McGuire, who ruled in favor of Rambus and dismissed the charges. The FTC’s Complaint Counsel appealed the ALJ’s decision to the full Commission, which, in July 2006, reversed the ALJ’s ruling. In a unanimous decision the Commissioners held that Rambus violated Section 2 of the Sherman Act and Section 5 of the FTC Act by monopolizing the markets of four separate dynamic random access memory (DRAM) technologies. (See our August/September 2006 Antitrust Update.) Then, in February 2007, the Commissioners ordered maximum royalty rates for the technologies affected by Rambus’ monopolization. (See our March 2007 Antitrust Update.)

Reversing, the Court of Appeals found that the FTC failed to demonstrate that Rambus harmed competition. In its order, the court stated that “the Commission failed to demonstrate that Rambus’ conduct was exclusionary and thus to establish its claim that Rambus unlawfully monopolized the relevant markets.” First, the court reasoned that Rambus’ deception in failing to disclose plans for forthcoming patents might violate Section 2 if it caused the JEDEC to adopt Rambus technologies over other available technologies. The FTC, however, failed to prove such causation. Next, the court found that Rambus’ conduct allowed it to avoid making a commitment to license its patented technologies on reasonable and nondiscriminatory royalty terms – according to JEDEC policy – but that such conduct was not necessarily anticompetitive. Finally, with respect to the FTC’s deception claim, the court held that the JEDEC’s rules did not clearly require Rambus to disclose plans for patents (before a patent application is filed) and the FTC could not base its claim on ambiguous “expectations” of other JEDEC members.

The FTC has not yet commented on whether it will pursue the matter further on remand. In the meantime it may consider the Court of Appeals’ warning that it had “serious concerns about the strength of the evidence relied on to support some of the Commission’s crucial findings.” Rambus still faces an investigation by the European Commission (EC). In August 2007 the EC initiated proceedings against Rambus by issuing a Statement of Objections alleging that the company engaged in intentional deceptive conduct with respect to industry standard-setting.