Rambus Faces Antitrust Charges

The FTC is accusing the company of manipulating an industry standards group to secure profits by seeking royalties memory makers worldwide.

The Federal Trade Commission said Wednesday it will file antitrust charges against memory designer Rambus Inc., accusing the company of manipulating an industry standards group to secure profits by seeking royalties from memory makers worldwide.

Many of the worlds largest memory chipmakers have accused Rambus of illegally taking advantage of its access to a nonprofit industry standards body to spur adoption of technologies the company has already patented, information it kept secret from the group.

In a unanimous vote, the FTCs five board members agreed that the evidence gathered during its investigation, including internal Rambus documents, supported memory makers claims that the company manipulated the workings of a nonprofit industry standards body and then sought millions of dollars in licensing fees from manufacturers who adopted those standards.

In a statement, Rambus denied the accusations.

"At the end of the day, we believe that the FTC process, either at the administrative level or on appeal, will conclude that our actions were entirely appropriate and lawful," said John Danforth, general counsel for Rambus, based in Los Altos, Calif.

Among the more damning pieces of evidence cited in an FTC complaint was a internal Rambus document stating that following the adoption of standards it promoted, "we will be in a position to request patent licensing (fees and royalties) from any manufacturer."

The allegations center on Rambus participation in an industry standards body called the Joint Electron Device Engineering Council (JEDEC) from 1992 to 1995. As part of JEDECs rules, participating corporate members are told they must disclose appropriate proprietary claims related to the standards being discussed for possible industry-wide adoption.

JEDEC members have accused Rambus of failing to disclose its patent filings that were relevant to memory technologies that were being considered for industry adoption. As a result, memory makers claim they unknowingly incorporated potentially proprietary technology into their future chip designs.

Rambus was once expected to derive millions of dollars in revenue from the future adoption of its high-speed memory technology, called Rambus DRAM. RDRAM was once heralded by leading industry player Intel Corp. as the likely successor to the popular selling synchronous DRAM (SDRAM).

But the products relatively high costs and the emergence of faster SDRAM and double-date-rate (DDR) DRAM quashed those expectations, leaving RDRAM with only a small niche market.

With demand faltering for RDRAM, Rambus sought to enforce its technology patents to features of the better selling SDRAM and emerging DDR DRAM.

In recent years, several manufacturers, under the threat of litigation from Rambus, have paid the company royalties of up to $100 million, according to the FTC. The companies included Samsung Corp., Hitachi Ltd., NEC Corp. and Toshiba Corp.

Other manufacturers, however, balked at paying and were sued by Rambus, including Micron Technology Inc. and Infineon Technologies Inc.

But Rambus suffered a major setback last fall when a U.S. District Court judge ruled against it and agreed with Infineons claims that Rambus had committed fraud.

The court fined Rambus $350,000, ordered the company to pay $7.4 million to Infineon to cover the Munich, Germany, companys legal fees, and remanded Rambus for filing a "baseless, unjustified and frivolous" lawsuit.

The court then issued a permanent injunction barring Rambus from asserting its claims to SDRAM and DDR SDRAM products made by Infineon. The ruling was largely seen as setting the basis for future government action.

Rambus still has an appeal pending in the Infineon ruling.

Nevertheless, the FTC said Wednesday that it found substantial evidence to support memory makers claims against Rambus.

The companys actions resulted in "substantial harm to important technology markets," said the director of the FTCs Bureau of Competition, Joseph J. Simons. He said the government was sending a message to the technology industry: "If you are going to take part in a standards process, be mindful to abide by the ground rules and to participate in good faith."

Rambus counsel Danforth predicted that the FTC will not be able to prove its allegations. "They have set very high hurdles for themselves," he said.

A federal judge will eventually rule on the FTC complaint after both sides have had an opportunity to present their arguments. Should the judge find in the FTCs favor, industry analysts say, Rambus could lose the potential to lay claim to nearly $1 billion in potential licensing fees.