Wednesday, June 11, 2008

FTC Seeks En Banc Review of D.C. Circuit’s Rambus Decision

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Federal Trade Commission has asked the U.S. Court of Appeals in Washington, D.C. for an en banc rehearing of a three-judge panel’s decision overturning a Commission finding of monopolization against Rambus, Inc.

The panel ruled on April 22 that the FTC failed to demonstrate that Rambus’s actions before a standard setting organization (SSO) amounted to exclusionary conduct “under settled principles of antitrust law” (2008-1 Trade Cases ¶76,121).

Agency Decision

The agency had found that Rambus unlawfully acquired its monopoly power through exclusionary conduct before the SSO (2006-2 Trade Cases ¶75,364) and ordered compulsory patent licensing on a reasonable royalty basis (2007-1Trade Cases ¶75,585).

The Commission opinion was vacated and the case and desist order was set aside by the panel. According to the panel decision, the agency did not prove that the licensor of computer memory technologies unlawfully acquired its monopoly power in the relevant markets for four technologies that had been incorporated into industry standards for dynamic random access memory (DRAM) chips.

Conflict with Precedent

The FTC contended that en banc review was appropriate because the panel decision conflicts with the District of Columbia Circuit’s en banc decision in U.S. v. Microsoft Corp. (2001-1 Trade Cases ¶73,321) and U.S. Supreme Court precedent. The agency suggests that the causation standard for monopolization articulated by the panel in the Rambus case is inconsistent with the standard articulated by the panel in Microsoft. In addition, the panel decision improperly extends the Supreme Court’s 1998 holding in NYNEX Corp. v. Discon, Inc. (1998-2 Trade Cases ¶72,362) to protect a firm’s use of deception to achieve monopoly power, according to the Commission.

The agency contends that “[t]he case has broad implications for the ability of antitrust law to protect against ‘hold-up’ by patent owners who acquire market power by engaging in deception or other exclusionary conduct in the standard-setting process.”

The June 6 petition for rehearing en banc is Rambus, Inc. v. FTC, Nos. 07-1086 and 07-1124. Text of the petition is available here at the FTC website.

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