[Ip-health] FTC compels Compulsory License in Rambus antitrust case

[Judit Rius Sanjuan]

http://www.mondaq.com/article.asp?articleid=3D46112&email_access=3Don

FTC Compels Rambus To License Patented Technology And Limits Royalty Rates
08 February 2007
Article by Jonathan Gowdy and Jeny M. Maier

Following its decision last summer that Rambus had violated the
antitrust laws by deceiving an industry-wide standard-setting
organization, the Federal Trade Commission (FTC) issued its remedial
order yesterday.^1 The Commission=92s long-awaited order is significant
because it (1) places specific limits on Rambus=92 licensing and patent
enforcement activities and (2) sets forth a framework that U.S. courts
can follow when fashioning a remedy in future antitrust cases that
involve deceptive conduct before standard-setting organizations.

Specifically, the FTC=92s order (1) compels Rambus to license its patented
technology on certain specified terms; (2) places limits on the maximum
royalty rates that Rambus can collect for use of its patents; and (3)
imposes other significant conduct remedies that limit Rambus=92 ability to
engage in future deceptive conduct relating to standard-setting
organizations. The Commission did not require Rambus to surrender past
royalties; nor did it limit Rambus=92 royalties on DDR2 SDRAM technology.
Rambus has said it will appeal the decision.

The Commission=92s Opinion and Remedial Order

The FTC=92s opinion and final order contain several notable holdings and
important restrictions on Rambus=92 ability to enforce its intellectual
property rights:

* Compulsory Licensing. The FTC rejected Rambus=92 contention that the
Commission=92s remedial power was limited to issuing a "cease-and-desist"
order prohibiting future deceptive conduct. In order to "stop Rambus
from continuing to exploit its illegally acquired monopoly power . . .
and terminate the anticompetitive effects of the deceptive course of
conduct by which it acquired that monopoly power," the Commission has
required Rambus to make available a worldwide, nonexclusive license
under its U.S. patents to make, use, and sell JEDEC-compliant DRAM and
non-DRAM products.

* Maximum Royalty Rates. The order also bars Rambus from collecting or
attempting to collect more than certain maximum allowable royalty rates
for the sale, manufacture, or use of JEDEC-compliant DRAM and non-DRAM
products. Although the FTC held that it was within its power to require
royalty-free licensing (and two Commissioners voted in favor of imposing
royalty-free licensing obligations), the Commission did not find that
the factual circumstances of this case justified such a remedy. The
maximum allowable royalty rates that Rambus may now charge licensees (on
net sales of JEDEC-compliant DRAM and non-DRAM products) are:

* From February 2, 2007 =96 February 2, 2010:

    * 0.25% for JEDEC-Compliant SDRAM
    * 0.50% for JEDEC-Compliant DDR SDRAM
    * 0.50% for JEDEC-Compliant non-DRAM products that comply with SDRAM
    standards
    * 1.0% for JEDEC-Compliant non-DRAM products that comply with DDR
    SDRAM standards


* From February 2, 2010, until the expiration of the last of Rambus=92
relevant patents, the royalty rate is 0.0% on JEDEC-Compliant DRAM and
non-DRAM products.

The FTC=92s order limiting the maximum royalty rate applies to certain
U.S. patents and non-U.S. patents (with respect to imports and exports
to and from the U.S.) that are owned by Rambus, and bars
Rambus from enforcing any royalty agreements now in effect that would
exceed these rates. Existing licensees may terminate or rescind their
license agreements without penalty, and Rambus must release
them from any further payments.

* Other Conduct Remedies. The FTC=92s order also contains several other
conduct remedies, including:

* Rambus is prohibited from making any future misrepresentations or
omissions to any standard-setting organization or its members
regarding Rambus=92 patents or patent applications;

* Rambus is required to employ a Commission-approved compliance
officer to ensure that Rambus=92 patents and patent applications are
disclosed to industry standard-setting bodies in which it
participates; and

* Rambus is required to cease and desist from any ongoing or future
efforts to pursue patent infringement claims or suits against any
person for manufacturing, selling, or otherwise using any
JEDEC-Compliant DRAM or non-DRAM product.

* Remedy Excludes DDR2 SDRAM/. Because the Commission concluded in its
liability decision that there was not a sufficient causal link between
Rambus=92 deceptive conduct and the
adoption of JEDEC=92s DDR2 SDRAM standard, the FTC=92s order does not exten=
d
the compulsory licensing and maximum royalty rate provisions to products
that are compliant with DDR2. Thus,
Rambus remains free to collect royalties for any of its patents that
read on this next-generation standard.

Public versions of the Commission=92s opinion and order are available on
the FTC=92s website.^2 Rambus has announced that it intends to move for a
stay of the Commission=92s order pending its appeal of both the finding of
liability and the remedy. Absent a stay, the Commission=92s order will
become effective in 60 days.

Footnotes

1. For a description of the Commission=92s decision on Rambus=92 liability
for violating the antitrust laws, see our legal update, Overview of
FTC's Rambus Decision
<http://www.mondaq.com/redirection.asp?article_id=3D46112&company_id=3D1035=
&redirectaddress=3Dhttp%3A//www.mofo.com/news/updates/files/update02229.htm=
l>,
August 2006.

2. See, http://www.ftc.gov/os/adjpro/d9302/070205opinion.pdf and
http://www.ftc.gov/os/adjpro/d9302/070205finalorder.pdf ^.

--
Judit Rius Sanjuan
Attorney
judit.rius@keionline.org

Knowledge Ecology International (KEI)
www.cptech.org
1621 Connecticut Ave, NW, Suite 500 Washington, DC 20009 USA
Tel.: +1.202.332.2670, Ext 18  Fax: +1.202.332.2673