Wednesday, August 02, 2006

FTC Commission - Rambus has monopoly power

A unanimous decision of the full commission of the Federal Trade commission kicked the February 17, 2004, initial decision of Chief Administrative Law Judge Stephen J. McGuire to the curb. Whereas Judge McGuire opined in a 348 page opinion (public record version) found that complaint counsel "failed to sustain their burden to establish liability for the violations alleged," the Commission found in opposite:

VI. Conclusion
We find that Rambus engaged in exclusionary conduct that significantly contributed to its acquisition of monopoly power in four related markets. By hiding the potential that Rambus would be able to impose royalty obligations of its own choosing, and by silently using JEDEC to assemble a patent portfolio to cover the SDRAM and DDR SDRAM standards, Rambus's conduct significantly contributed to JEDEC's choice of Rambus's technologies for incorporation in the JEDEC DRAM standards and to JEDEC's failure to secure assurances regarding future royalty rates - which, in turn, significantly contributed to Rambus's acquisition of monopoly power.

Rambus claims that the superiority of its patented technologies was responsible for their inclusion in JEDEC's DRAM standards. These claims are not established by the record. Nor does the record support Rambus's argument that, even after two JEDEC standards were adopted and substantial switching costs accrued, JEDEC and its participants were not locked into the standards. Rambus now claims that we can and should blind ourselves to the link between its conduct and JEDEC's standard-setting process and Rambus's acquisition of monopoly power. These claims fail, both as a matter of fact and as a matter of law. To hold otherwise would be to allow Rambus to exercise monopoly power gained through exclusionary conduct. We cannot abide that result, given the substantial competitive harm that Rambus's course of deceptive conduct has inflicted.

VII. Remedy
Complaint Counsel seek an order preventing Rambus from enforcing, against JEDEC-compliant products, (1) any patents that claim priority based on applications filed before Rambus withdrew from JEDEC and (2) any existing licensing agreements. Rambus argues that the Commission lacks authority to impose such a remedy and that royalty rates set by its existing licenses already satisfy all remedial concerns.

Both parties' arguments regarding remedy have been scant and, for the most part, reflective of opposing extremes. Now that the Commission has found, and determined the scope of, liability, the Commission believes it would exercise its broad remedial powers most responsibly after additional briefing and, if necessary, oral argument devoted specifically to remedial issues.

The accompanying order establishes a briefing schedule. The parties' written presentations directed by the accompanying order will be confined to remedy; re-argument of issues of liability will not be permitted in those presentations. The Commission is most interested in the parties' views regarding possibilities for establishing reasonable royalty rates for JEDEC-compliant products affected by Rambus's exclusionary conduct. The parties should address, without limitation: (1) means for the Commission to determine, based on the existing record, reasonable royalty rates for licensing all technologies applicable to JEDEC-compliant products and covered by relevant Rambus patents; (2) alternative mechanisms and procedures for determining reasonable royalty rates, such as an independent arbitrator, a special master, or an ALJ; (3) qualitative characteristics descriptive of appropriate relief, against which specific royalty proposals might be evaluated; and (4) appropriate injunctive and other provisions that should be incorporated in the Final Order in this proceeding.
Rambus Inc. held a conference call this morning (8/2/06) at 5:30 a.m. Pacific Time just prior to the public release of the Opinion Of The Commission. The recorded webcast may be accessed at Rambus's site linked here.

John Danforth, Rambus senior legal advisor, indicated that Rambus will vigorously brief and argue the remedy issue and is likely to appeal the decision of commission.

Stay tuned, the Rambus saga continues . . .

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