Rambus victory upends an FTC unfair monopoly practices finding

A long-standing claim was that Rambus behaved unfairly by withholding secrets from competitors in standards committees. But an appeals court today erased an FTC decision, on the grounds that those committees may have been useless anyway.

An August 2006 US Federal Trade Commission decision finding Rambus illegally garnered monopoly power in the memory market by manipulating standards agencies, was voided yesterday by the Federal Circuit Court of Appeals, on the grounds that the standards agency in question -- JEDEC -- did not provide its members with enough guidelines for properly sharing information the FTC said Rambus withheld.

It was a unanimous overturning of what was a unanimous FTC finding: Rambus was thought to have willfully withheld information about its memory technology from the JEDEC standards organization, in order that JEDEC might adopt those standards, forcing memory manufacturers to become indebted to Rambus for royalties.

"Beginning in 1990, Rambus tried to license its RDRAM technology to manufacturers of DRAM chips and DRAM-compatible microprocessors," reads the FTC's August 2006 decision (PDF available here). "Rambus attempted to position RDRAM as the de facto standard. Rambus made numerous presentations on RDRAM to the major DRAM manufacturers in an effort to persuade them to adopt the technology. Rambus also tried to develop relationships with major systems companies, and pursued commitments from these companies to introduce systems using RDRAM technology. RDRAM failed to achieve significant market success, however, at least in part because manufacturers were reluctant to pay royalties and licensing fees to Rambus."

Among those "major systems companies" the FTC was referring to was Intel, which was the first manufacturer to commit to RDRAM support on a high level. That commitment included investments, which did not go unnoticed by the technology community.

In 2000, in a landmark declaration that put his online publication on the map, Tom's Hardware founder Thomas Pabst publicly declared Rambus non-trustworthy, in a reputation-staking move that, in the end, hurt Rambus a lot worse than it did him.

The real death knell for RDRAM, however, was the onset of Double Data Rate (DDR) SDRAM, which was a standard that didn't require huge royalties, and which rising competitor AMD could effectively tout as both a performance and price advantage over Intel.

SDRAM was another JEDEC standard, and at the time of its adoption, JEDEC's rules apparently stated that member companies were obliged to report on work they were doing to amend existing JEDEC standards...and RDRAM was already on the books. Rambus had an opportunity here to claim SDRAM infringed on its intellectual property, and passed, for reasons the FTC seemed to imply, according to the Circuit Court's ruling yesterday, had more to do with maintaining its SDRAM secrets than securing its intellectual property.

"The case appears (and we emphasize appears, as the Commission's opinion leaves us uncertain of its real view) to turn on the idea that JEDEC participants were obliged to disclose not merely relevant patents and patent applications, but also their work in progress on amendments to pending applications that included new patent claims," reads the court's decision to overturn (PDF available here). "We do not see in the record any formal finding that [JEDEC's] policies were so broad, but the Commission's opinion points to testimony of witnesses that might be the basis of such a finding. Five former [JEDEC committee] JC 42.3 participants testified (in some cases ambiguously) that they understood JEDEC's written policies, requiring the disclosure of pending applications, to also include a duty to disclose work in progress on unfiled amendments to those applications, and JEDEC's general counsel testified that he believed a firm was required to disclose plans to amend if supported by the firm's current interpretation of an extant application...JEDEC participants did not have unanimous recollections on this point, however, and the Commission noted that another JC 42.3 member testified that there was no duty to disclose work on future filings.

"Reading these statements as interpretations of JEDEC's written policies seems to significantly stretch the policies' language," the decision continued.

And thus was the technicality laid forth that became the unraveling of the FTC's opinion. JEDEC's compliance rules, the Court found, were so vague anyway that many other companies besides Rambus failed to comply. In fact, non-compliance was sadly almost the order of the day; in one instance, a member company that sought interest in discussion of a potential standard, and that requested disclosure from other member companies as to what technologies they may be working on that may possibly coincide or collide, only received a formal response to its inquiry from one company: itself.

Rambus' general counsel Tom Lavelle yesterday was ecstatic, as a several-years-long nightmare may finally be given an end. "As we have contended all along, Rambus did nothing wrong during its participation in the JEDEC standard-setting organization, and now the Court of Appeals has confirmed our point of view," Lavelle wrote. "Rambus has had to endure years of uncertainty, lost business and enormous legal fees defending this case, and we are thrilled to have this portion behind us."

The overturning comes on the heels of a jury decision last month in favor of Rambus, overturning a previous jury verdict in a case brought against it by Hynix Semiconductor in August 2000. Along the way, Rambus managed to successfully defend its counterclaims against Hynix, winning some $133.6 million in damages.

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