Monday, February 05, 2007

Compulsory Licensing Imposed on Rambus for Abusing Standard-Setting Process

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

Rambus Inc., a developer and licensor of computer memory technologies, has been required by the FTC to refrain from making misrepresentations or omissions to standard-setting organizations and to adhere to licensing obligations, under a February 2 final order.

The order was designed to remedy the effects of the unlawful monopoly Rambus established in the markets for four computer memory technologies that were incorporated into industry standards for dynamic random access memory—DRAM chips. DRAMs are widely used in personal computers, servers, printers, and cameras.

A unanimous Commission concluded last summer that Rambus engaged in monopolistic practices in violation of Sec. 5 of the FTC Act by abusing the process for setting industry standards for DRAM chips (2006-2 Trade Cases ¶75,364). However, the five members could not agree on the appropriate extent of the licensing obligations to be imposed.

All five Commissioners agreed that the Commission had the authority to require royalty-free licensing under certain circumstances. Complaint counsel had asked the Commission to impose such a remedy.

According to the majority, however, complaint counsel failed to satisfy their burden of demonstrating that a royalty-free remedy was necessary to restore the competition that would have existed in the “but for” world. The majority instead determined the maximum reasonable royalty rate that Rambus was permitted to charge for the relevant technology.

Rambus was barred from collecting or attempting to collect more than the maximum allowable royalty rates from companies that might already have incorporated its DRAM technology. Commissioners J. Thomas Rosch and Pamela Jones Harbour dissented from the majority's decision to impose above-zero royalty rate licensing provisions.

The final order also prohibits Rambus from misrepresenting its patents or patent applications to any standard-setting organization or its members. It requires that Rambus abide by standard-setting organizations’ requirements or policies to make complete, accurate, and timely disclosures of its patents or patent applications. In addition, the order requires Rambus to employ a Commission-approved compliance officer to ensure disclosure of intellectual property rights to standard-setting organizations and to verify the accuracy of the company’s periodic reports to the Commission.

The February 2 Commission opinion and final order In the Matter of Rambus Incorporated, FTC Dkt. 9302, appear on the FTC web site.

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