June 6, 2001 

We are pleased to bring you Rambus’ Limited Patent Disclosure To A Standard Setting Body Was Found To Be Fraudulent But Not An Antitrust Violation by Veronica Lewis. Ms. Lewis is a partner with Vinson & Elkins and is located at the firm's Dallas office. Ms. Lewis specializes in complex commercial litigation, including intellectual property and antitrust matters. As shown by the recent report that "separate antitrust complaints against Rambus Inc. and Sun Microsystems Inc." the FTC was considering adopting a "rule {that } would clearly state that a company hiding its pending patents would be considered as acting in restraint of trade in violation of antitrust statutes." June 4, 2001 EBN, available at http://www.edtn.com/story/biz/OEG20010601S0070-R. According to the article, the FTC " is disturbed that the issue of open disclosure of patents keeps surfacing on a case-by-case basis {and} is considering codifying the disclosure policy to head off the continued spate of antitrust complaints over the issue…"

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In August 2000, Rambus sued Infineon in the Eastern District of Virginia for infringement of patents covering technology related to semiconductory memory devices. Rambus maintained that certain forms of Infineon’s Dynamic Random Access Memory ("DRAM"), including Infineon’s Synchronous Dynamic Random Access Memory ("SDRAM") devices and double data rate ("DDR") SDRAM devices, infringed Rambus patents issued in 1999 and 2000.[1] DRAM chips are the dominant form of memory employed in the semiconductor industry today.

Rambus believes its patents cover the technology incorporated in the SDRAM and DDR SDRAM industry standards, and as a result, virtually all manufacturers of such devices are obligated to obtain licenses under its patents. Rambus has thus taken a very aggressive stance on licensing. It has publicly asserted: "[t]hose companies that decide to litigate" rather than voluntarily enter into licensing agreements "will pay higher royalty rates."[2] This is a significant threat given the fact that industry heavyweights such as Samsung, NEC, and Toshiba have apparently entered into Rambus licensing agreements with royalty rates as high as 3.5‑percent.[3] A company forced to pay an even higher rate would be at a significant competitive disadvantage. Moreover, Rambus has made the stakes even higher by explaining that it "may not license those companies that litigate and lose."[4] Thus, if Rambus is right about the scope of its patents, a company may be foreclosed from production of SDRAM and DDR SDRAM devices altogether if it does not voluntarily enter into a licensing agreement with Rambus.

The pressure on Infineon to acquiesce to Rambus’ licensing demands was thus immense. Infineon, nevertheless, chose to counter Rambus’ infringement claims using two, seemingly, inconsistent theories. Defensively, Infineon maintained that its industry standard SDRAM and DDR SDRAM devices do not infringe Rambus’ patents. Infineon also simultaneously raised offensive counterclaims premised on the notion that Rambus had, while participating in the industry group that established the SDRAM and DDR SDRAM standards, surreptitiously obtained patents that covered all products that comply with these standards.[5]

Infineon’s offensive claims raised a number of important questions about the patent disclosure obligations that arise when a company participates in a standards setting body. Infineon claimed that Rambus was a long time member of the body that established the SDRAM and DDR SDRAM industry standards, Committee Number 42.3 of the Joint Electronics Devices Engineering Infineon Council ("JEDEC"). Infineon alleged that JEDEC policy requires members of such committees to disclose all known patents and pending patent applications that relate to technology under consideration for adoption as part of an industry standard and to state whether they are willing to license any such patented technology for free or on reasonable, non-discriminatory terms.[6] According to Infineon, this policy serves a number of important purposes:

First, it operates to prevent any single company from secretly capturing the industry standard by remaining silent while JEDEC adopts a standard that, unbeknownst to the other JEDEC members, is encompassed by a member’s patent or pending patent application. In other words, the policy operates to provide the industry an opportunity to develop open standards free from potential blocking patents. Second, the policy operates to prevent an unscrupulous member from manipulating the standards setting process to its advantage by filing patent applications on technology learned about through participation in JEDEC. Finally, the policy ensures that licenses to patent rights that are implicated by a JEDEC standard are offered to members of JEDEC for free or for a reasonable and non-discriminatory royalty. This disclosure obligation also allows JEDEC and its members to design around such potential or actual patent rights if JEDEC members are unable to obtain a license under satisfactory terms.[7]

Infineon asserted that Rambus had failed to disclose relevant patent applications it had pending while it was a member of JEDEC Committee 42.3, made disclosures that led other members of that Committee to believe Rambus was in fact properly disclosing all relevant patents and applications, and used information obtained as a result of its participation in JEDEC Committee 42.3 to draft patent claims that covered the SDRAM and DDR SDRAM standards. This conduct was said to constitute fraud and breach of contract and to violate the Racketeer Influenced and Corrupt Organizations Act ("RICO") as well as the antitrust laws.[8]

Rambus claimed it could not be found to have failed to comply with JEDEC’s disclosure requirements because it did not file the applications which resulted in the SDRAM and DDR SDRAM patents at issue until after it had ended its membership in JEDEC Committee 42.3. Rambus asserted it surely was not required to disclose what did not exist while it participated in the standards setting process.[9] Moreover, Rambus explained that the specification for the issued patent that it did disclose while a member of JEDEC Committee 42.3 was identical to the specifications for the SDRAM and DDR SDRAM patents at issue. A patent specification provides a description of the subject matter of the claimed invention. Rambus thus claimed it disclosed the entire body of its invention with the patent disclosure it did make and such disclosure put all relevant observers on notice that it was seeking patent protection in technological areas related to the SDRAM and DDR SDRAM industry standards under consideration.[10]

Infineon found these arguments "disingenuous."[11] The applications for the SDRAM and DDR SDRAM patents at issue were continuations or divisions of patent applications that were filed and pending while Rambus was an active JEDEC participant. Infineon claimed Rambus was required to disclose these predecessor pending patent applications, and pointed out that if it had done so, other participants in the standards setting process would have known Rambus was seeking patent coverage in areas of technology that may be implicated by the standard chosen.[12] Infineon further explained that Rambus’ limited disclosure of a single patent, in fact, affirmatively misled the standards setting body. The patent Rambus disclosed had a specification identical to the ones for the patents in suit, but it did not have claims covering the technology that would be utilized for a SDRAM and DDR SDRAM standard. Infineon thus argued that Rambus’ disclosure caused the participants in the standards setting body to believe Rambus was not seeking to appropriate the technology relevant to their undertaking. Rambus’ limited disclosure was also said to have misled the standards setting body into believing Rambus was complying with its disclosure obligations. Infineon further claimed that, because Rambus disclosed only one patent, the participants in the standard setting process were led to believe Rambus had no other pending or actual relevant patent coverage.[13]

Infineon maintained that Rambus’ improper disclosures were predatory acts taken as part of a scheme to monopolize the "DRAM technology market" and raised both monopolization and attempted monopolization claims under 15 U.S.C. § 2.[14] This claim never reached the jury. After both parties had concluded presentation of evidence in support of their case, the court ruled that Infineon’s industry standard SDRAM and DDR SDRAM products indeed do not infringe Rambus’ patents as a matter of law.[15] Infineon thereafter withdrew its monopolization claims.[16]

At the conclusion of evidence, the court also granted Rambus’ motion for judgment as a matter of law on Infineon’s attempted monopolization claim, concluding that Infineon had failed to submit evidence establishing the scope of a relevant geographic market.[17] Infineon had pled a relevant United States market and argued that such a geographic market was necessarily "implicit" given that Rambus relied upon United States patents as the basis for its alleged predatory conduct.[18] Infineon maintains that the "U.S. patent laws compel the definition of the relevant geographic market as the United States in a monopolization case based on U.S. patent enforcement"[19] and relies upon a decision from the Northern District of Texas, Buehler A.G. v. Ocrim S.p.A.,[20] in support of its position. There, the court explained: "The geographic market in this patent case is limited to the United States . . . . The limitation reflects the view that the United States is the only geographic market where a U.S. patent can be ‘misused’ in a manner leading to antitrust violations . . . ."[21]

Fourth Circuit precedent consistently requires a party asserting a Section 2 antitrust claim to offer proof of a geographic market.[22] An appeal of the court’s ruling on Infineon’s attempted monopolization claim thus may provide interesting precedent regarding the type of geographic market proof an antitrust plaintiff must submit to establish antitrust claims based on alleged misuse of United States patent rights. Interestingly, it would be the Federal Circuit, which would hear an appeal, that would establish this precedent.[23] However, it appears unlikely that any precedent addressing antitrust liability based on alleged improper patent disclosure before a standards setting body is likely to arise from appeal of Rambus v. Infineon.

The resolution of Infineon’s antitrust claims is likely to provide little guidance to those attempting to assess the antitrust implications of patent disclosure issues arising as a result of participation in an industry standard settings body. The In re Dell Computer Corp. consent decree makes it clear that the Federal Trade Commission believes it is a violation of antitrust law for a company to make the false affirmative certification that it has no relevant issued patents to a standard setting body that requires disclosure of such patents.[24] However, a host of issues remain unresolved. Can an antitrust violation be premised on a mere failure to speak up rather than affirmative false or misleading statements? Are participants in a standards setting body required to disclose patent applications as well as issued patents? Is such disclosure required for foreign filings? If so, what level of knowledge or state of mind must be demonstrated for the individuals who allegedly fail to make such disclosure? Must the company representative on a standards setting body be knowledgeable about all aspects of the company’s actual and prospective patent portfolio? The existence and facts of the Rambus/Infineon disputes suggest that standard setting bodies should specify the nature and scope of required patent disclosure in detail and should attempt to establish protocols for the continuation of prior patent disclosure representations notwithstanding resignation from the group.

[1] First Amended Complaint for Patent Infringement, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. 3:00CV524).

[2] Substituted First Amended Answer and Counterclaims to Rambus’ First Amended Complaint at pp. 35-36, Rambus, Inc. v. Infineon Technologies, AG, E.D. Va. (No. 3:00CV524) [hereinafter "Infineon Answer and Counterclaims"].

[3] Tony Smith, Rambus’ "very high" DDR royalty revealed; The Register, May 25, 2001, available at http://www.theregister.co.uk/content/3/18706.html.

[4] Infineon Answer and Counterclaims at pp. 35-36.

[5] See id.

[6] See id at pp. 33-57.

[7] See id. at pp. 39-40.

[8] See id. at pp. 30-77.

[9] See Plaintiff Rambus Inc.’s Brief in Support of its Motion to Dismiss, Motion to Strike and Motion for a More Definite Statement at pp. 2-3, 6-10, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. 3:00CV524).

[10] See id. at pp. 2-3, 7-8, 13-15.

[11] See Defendants’ Opposition to Rambus’ Motion to Dismiss and Motion to Strike at p. 3, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. 3:00CV524).

[12] See id. at pp. 3, 10-11.

[13] See id. at pp. 8-10.

[14] See Infineon Answer and Counterclaims at pp. 32-33, 70-75.

[15] May 4, 2001 Transcript of Trial Proceedings at p. 28, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. 3:00CV524).

[16] See id. at p. 100.

[17] See id. at pp. 158-59.

[18] See Infineon Answer and Counterclaims at p. 32; Id. at pp. 138-43.

[19] Infineon’s Motion for Reconsideration of the Court’s May 4, 2000 Ruling Granting Judgment as a Matter of Law on Infineon’s Attempted Monopolization Claim at p. 1, Rambus, Inc. v. Infineon Technologies A.G., E.D. Va. (No. 3:00CV524).

[20] 836 F. Supp. 1305 (N.D. Tex. 1993).

[21] Id. at 1325.

[22] See, e.g., Consul Limited v. Transco Energy Co., 805 F.2d 490, 493 (4th Cir. 1986), cert. denied, 481 U.S. 1050 (1987); Satellite Television & Associates Res., Inc. v. Continental Cablevision of Va., Inc., 714 F.2d 351, 355 (4th Cir. 1983), cert. denied, 465 U.S. 1027 (1984).

[23] The Federal Circuit has exclusive jurisdiction over any appeal from a final decision of a United States District Court when the jurisdiction of the District Court was based, in whole or in part, on the presence of a claim arising under the patent laws. See 28 U.S.C. §§ 1295(a)(1), 1338(a).

[24] Consent Decree No. C3658, 121 F.T.C. 616, 1996 WL 350997 (May 20, 1996). Notably, in In re Dell, the Federal Trade Commission proceeded under Section 5 of the Clayton Act which makes unfair methods of competition and unfair or deceptive acts or practices unlawful. The Federal Trade Commission was not required to and did not allege any relevant geographic or product market. See id.