Rambus DRAM Royalties to be Capped

Following a ruling in August that found memory chip maker Rambus liable for monopolizing the DRAM market, the Federal Trade Commission has imposed caps on royalty rates it can charge for its patented technologies. The company vows to appeal.

In a 3-to-2 decision, the FTC ruled that the company could charge a maximum royalty rate of .5 percent for DDR SDRAM, and .25 percent for SDRAM for a period of three years after the order is issued. Following this period, the company would be barred from collecting royalties.

The decision would not cover patents surrounding technologies used in either DDR2 SDRAM or other DDR technologies developed after the Joint Electron Device Engineering Council, or JEDEC

While royalty rates are best set in the marketplace, the agency said, Rambus' conduct has made the FTC's action necessary. It has also ordered that the company would be mandated to hire an approved compliance officer to ensure disclosure of patents and patent applications.

Rambus was accused of withholding information from JEDEC while the group was developing its DRAM standard. Once the company's technology was included, it then attempted to collect royalties and would sue companies who failed to settle, the ruling says.

The Commission took exception to this, and first went after Rambus over antitrust concerns in 2002. However, the company won on appeal from an administrative judge, and the case was brought before the full commission.

With this ruling, not only would royalty payments be capped, but also it would also effectively cancel any current agreements that are not in compliance with the order. Barring any stay won by Rambus, the decision would become final within 60 days.

Although there were two dissenters from the majority opinion in this case, Commissioners Pamela Jones Harbour and J. Thomas Rosch, it should be noted neither disagreed with the need for the ruling itself. Instead, both advocated a royalty-free settlement.

"I conclude that licensing on terms above zero would enable Rambus to obtain royalties it would not have obtained," and enable it to "continue to reap the fruits of its ongoing violation of Section 2," Rosch said in his opinion.

Harbour went further, suggesting that the ruling should cover modern DRAM technologies, such as DDR2. "The Commission can and should impose a remedy reaching the DDR2 generation of SDRAM. A remedy extending to DDR2 would be a legitimate and appropriate exercise of the Commission's remedial discretion," she said.

In a statement opposing the ruling, Rambus said that the ruling ignored several "findings of fact" made by the administrative law judge which ruled in its favor. "We believe that a fair review of the underlying facts will restore the perspective of the Chief ALJ who exonerated Rambus by dismissing the complaint," it said.

Rambus' decision to appeal was looked favorably upon by those on Wall Street: in midday trading, its stock was up some 16.4 percent to $22.04 in heavy trading.