By David T. Beddow and Gregg H. Vicinanza,

The FTC complaint alleges that in or about 1992, Rambus became a member of JEDEC, an electronics industry standard setting organization that was developing standards for SDRAM chips. According to the complaint, JEDEC’s policies, practices and procedures created a duty upon its members to disclose the existence of any patents or patent applications that might be implicated by a standard under consideration. If JEDEC proposed a standard that did implicate a member’s pending or issued patent, the complaint further alleges that the JEDEC member was required to state whether it would make the technology available to adopters of the standard for free or on reasonable and non-discriminatory terms and conditions; if the member would not agree to one of these conditions, JEDEC would not adopt a standard that incorporated the technology.

The complaint alleges that Rambus devised a scheme to ensure that JEDEC adopted an SDRAM standard that incorporated Rambus technology, with the intent of obtaining royalties from companies that used the standard. A Rambus representative allegedly attended numerous JEDEC meetings at which standards were discussed that clearly would implicate pending Rambus patents, but Rambus in bad faith concealed the existence of these patent applications from the group. The complaint specifically alleges that "Rambus never disclosed to JEDEC the fact that, throughout the duration of its membership in the organization, Rambus had on file with the PTO, and was actively prosecuting, patent applications that, in its view, either covered or could easily be amended to cover elements of the existing and future SDRAM standards." The complaint alleges that Rambus thereby violated JEDEC’s disclosure rules.

The Complaint further alleges that Rambus withdrew from JEDEC in 1996, and that in its withdrawal letter, Rambus advised JEDEC that it held a number of patents. However, the letter allegedly did not explain how any of these patents might relate to the standard being considered. Moreover, the complaint asserts that the letter failed to disclose that Rambus had pending patent applications that could cover the standard being considered, and failed to identify the one patent actually obtained by Rambus while a member of JEDEC that arguably covered the standard.

According to the complaint, JEDEC issued its first SDRAM standard in 1993, and by 1999, JEDEC-compliant SDRAM chips had largely replaced the predecessor technology. In late 1999, Rambus began contacting chip manufacturers and asserting that their sale of JEDEC-compliant SDRAM chips infringed Rambus’ patent rights. The complaint further alleges that Rambus thereafter entered into licenses with seven major DRAM manufacturers and initiated patent infringement lawsuits against others. The complaint asserts that Rambus is currently collecting royalties in the range of $50-$100 million per year, and that if it succeeds in its patent suits, it could collect over $1 billion in royalties.

In addition, the complaint alleges that Rambus engaged in a systematic effort to destroy documents related to its participation in JEDEC to avoid the adverse legal repercussions that might be caused by their discovery, and that this lead a district court to order Rambus to pay $7 million to Infineon, an SDRAM manufacturer that Rambus had sued for patent infringement. The complaint also notes that a jury found that Rambus’ conduct relating to JEDEC amounted to fraud and that the court overseeing the case ruled that Infineon did not infringe Rambus’ patents. According to the complaint, these issues were appealed to the Federal Circuit, which heard argument on June 3, 2002.

The complaint alleges that Rambus violated Section 5 of the FTC Act by unlawfully monopolizing, unlawfully attempting to monopolize, and unreasonably restraining trade, in the world-wide market for SDRAM technology, and narrower markets contained therein including the markets for four distinct types of technology needed to address issues that arise in the design of SDRAM.

Among other relief, the complaint seeks an order directing Rambus to cease and desist from enforcing its patent rights—including certain foreign as well as U.S. patent rights—against firms that manufacture, sell or use JEDEC-complaint SDRAM technology.

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David T. Beddow, an O'Melveny partner licensed to practice law in the District of Columbia, and Gregg H. Vicinanza, an O'Melveny counsel licensed to practice law in New York and the District of Columbia, have contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted. This article is intended for informational purposes only and is not intended as legal advice or as a substitute for legal consultation in a particular case or circumstance.

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AT-IP Report is the electronic Newsletter of the Intellectual Property Committee of the American Bar Association, Section of Antitrust Law. The views expressed in the AT-IP Report are the authors' only and not necessarily those of the ABA, the Section of Antitrust Law or the Intellectual Property Committee. If you wish to comment on the content of this Electronic Newsletter, please write to the ABA, Section of Antitrust Law, Attention: Intellectual Property Committee, 750 North Lake Shore Drive, Chicago, Illinois 60611. Copyright 2002 American Bar Association.