Rambus Ruling To Fuel Reforms

Washington -- A federal regulator's decision in an antitrust case against Rambus Inc. sends an unambiguous message to the semiconductor industry about the need to disclose patents in industry standards deliberations, legal experts said.

Saying it wants to preserve competition in the memory market, the Federal Trade Commission last week set maximum royalty rates for some Rambus Inc. memory technologies and ordered the intellectual-property (IP) vendor to establish internal procedures to ensure full disclosure of its patents and patent applica- tions to standards groups. The commission ruled last August that Rambus monopolized the memory chip market.

"This does send a clear signal that companies can't expect to engage in willful conduct to deceive standards groups without [legal] consequences," said Sean Royall, a former FTC official who now heads the antitrust practice at the law firm Gibson, Dunn & Crutcher. "This is a precedent-setting case."

The royalty caps apply to Rambus SDRAM and DDR SDRAM licenses. The order prohibits Rambus (Los Altos, Calif.) from attempting to exceed the caps in collecting royalties. The regulator also ordered Rambus to hire an FTC-approved "compliance officer" to ensure full disclosure of the Rambus patent portfolio to the industry standards-setting groups in which Rambus takes part.

"The order is designed to remedy the effects of the unlawful monopoly Rambus established in the markets for four computer memory technologies that have been incorporated into industry standards for ... DRAM chips," the FTC said in a statement.

Rambus, which vowed to appeal, said the ruling would not apply to its DDR2 SDRAM "or other post-DDR Jedec [memory] standards."

"We are nevertheless disappointed that the Commission's remedy ... continues to ignore the extensive findings of fact made by its own Chief Administrative Law Judge McGuire," Tom Lavelle, senior vice president and general counsel for Rambus, said in a statement.

Judge Stephen McGuire dismissed anticompetitive charges against Rambus in February 2004. The FTC overturned McGuire's ruling last July, saying that "Rambus engaged in exclusionary conduct that significantly contributed to its acquisition of monopoly power in four related markets." Last week's decision prescribes remedies to enforce that ruling.

According to Rambus, the ruling prescribes royalty caps of 0.25 percent for SDRAMs; 0.5 percent for DDR SDRAMs; 0.5 percent for SDRAM memory controllers or other nonmemory chip components; and 1 percent for DDR SDRAM controllers or other nonmemory chip components. The maximum rates would be in effect for three years, Rambus said.

The antitrust case stems from Rambus' participation in industry standards deliberations at Jedec during the mid-1990s.

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