EXCELLENT: FROM THE YAHOO BOARD...
My Email to Mercury News - P1
by: stk_hawk 05/05/03 09:54 pm
Msg: 490154 of 490313
Dear Mr Gillmor
I am writing this email in response to your article on Timothy Muris, “Chairman leads surprisingly vigilant FTC”. I read your
article with great interest, especially the portions concerning the FTC's case against Rambus. In your article, you note that you
intend to follow up with a closer look at the Rambus case next week. This is the primary purpose of my email, to hopefully call
to your attention a few issues in this case that you might not be aware of or you might find of interest.
My guess is that you are asking yourself right now why I would take the time to write this long email. I have followed the
Rambus story for several years now and I am also a Rambus investor. As you can imagine, I was very concerned when the
FTC announced they were filing an antitrust case against Rambus. I was especially concerned about the accusations the FTC
was making against the company and the conduct of their management.
(FTC Issues Complaint Against Rambus, www.ftc.gov/opa/2002/06/rambus.htm)
As a result, I felt I needed to take a hard look at the company and research the accusations that were being made by the FTC
against the company.
The information I want to bring to your attention primarily comes from FTC court documents that can be accessed from the
FTC's web site. The site that is specific to the Rambus case can be accessed at www.ftc.gov/os/adjpro/d9302/. As you can
see from scanning this web site, millions of tax payer dollars have been spent pursing this case against Rambus and millions of
dollars have been spent by Rambus collecting discovery evidence in an attempt to defend their reputation.
As you noted in your article, the FTC case against Rambus, under Timothy Muris, is a very high profile case and is obviously
very important to the reputation of the FTC. The question that many Rambus investors have is to what extent the FTC will go in
order to win this “pivotal action” against Rambus? One reason many Rambus investors are extremely skeptical that Rambus will
get a fair shake in the FTC trial is that the new FTC Administrative Law Judge (ALJ), Stephen J. McGuire, has just recently
been appointed by Mr Muris. (www.ftc.gov/opa/2003/02/mcguirestephenj.htm) Of particular concern to Rambus investors is
the way in which FTC Complaint Counsel, under Sean Royall, has vigorously tried to block Rambus from collecting discovery
evidence that may show the very same companies accusing Rambus of violating JEDEC disclosure rules (and the very same
witnesses the FTC is relying on for evidence in this case), could very possibly have been involved in an antitrust scheme to
force Intel away from their selection of RDRAM for use in the P4.
You may recall that in the middle of 2002, the DOJ launched an antitrust probe into the DRAM industry.
archive.infoworld.com/articles/hn/xml/02/06/20/020620hnchipprobe.xml
Details have been sketchy to date but apparently when Rambus started collecting discovery evidence in their FTC case, they
began uncovering evidence closely related to the DOJ investigation into a possible DRAM price fixing scheme. As a
consequence, the DOJ stepped in to try and limit Rambus's discovery in this area to avoid any possible interference with their
investigation. When FTC Complaint Counsel saw that Rambus was collecting potentially damaging evidence to their case, they
vigorously inserted themselves into the process in an attempt to limit further Rambus discovery in this area. The following
sequence of trial motions tells the story.
DOJ motion to limit Rambus Discovery
www.ftc.gov/os/adjpro/d9302/021227dojmotincam.pdf
Complaint Counsel's Statement in support of DOJ motion to limit Discovery
“Complaint Counsel does, for basically two reasons, strongly urge Your Honor to grant DOJ's Motion. First of all, it is clear
that the discovery at issue here - that is, Respondent Rambus Inc.'s (“Rambus”) efforts to probe the merits of an alleged
pricing-related conspiracy among DRAM manufacturers - has no bearing on or relevance to this case.” (Page 1)
www.ftc.gov/os/adjpro/d9302/030103ccsstmntsupdoj.pdf
Memorandum by Rambus in response to DOJ motion to limit Discovery
“Rambus will not burden your honor with all the evidence of concerted action that it has obtained to date. The evidence set out
below is sufficient to demonstrate that collusion is highly likely to have occured….(Page 12-20)
www.ftc.gov/os/adjpro/d9302/030107rammemo.pdf
Complaint Counsel Response to Memorandum by Rambus in opposition to DOJ request
“Rambus further argues, in its memorandum opposing DOJ's Motion, that it should be permitted to conduct discovery relating
to a potential conspiracy affecting downstream DRAM prices, as such discovery, it claims, is relevant to show “bias” on the
part of witnesses who may “have had involvement in or knowledge of unlawful concerted action.” Rambus Mem.20. In this
regard, Rambus states: “If these witnesses are willing to ignore the antitrust laws to assist their employer in an effort to eliminate
Rambus as a competitive threat, their testimony in this proceeding about such issues as their recollection of oral presentations
about patent policy at JEDEC meetings, or their own awareness of patent rights, will be subject to serious doubt.” Complaint
Counsel finds this argument to be incoherent.” (Page 11-12)
www.ftc.gov/os/adjpro/d9302/030106ccresptoramredoj.pdf
Rambus Reply to Complaint Counsel's Response regarding motion by the DOJ
“Complaint Counsel evidently wants very badly to limit discovery by Respondent Rambus Inc., (“Rambus”) into possible
collusion by DRAM manufacturers, so much so that they have taken the extraordinary step of filing an unauthorized Response
to Rambus's Memorandum (“Response”) on the issue and in that Response have retracted their earlier assertion that Rambus's
conduct has caused consumer harm. Complaint Counsel's concern is to some extent obvious: If the evidence shows that the
DRAM manufacturers conspired in violation of the antitrust laws about the very DRAM products that are the subject of this
litigation, it would cast further doubt on the credibility of those firms and their representatives, whose complaints to the
Commission instigated this case and on whose self- serving testimony it largely rests.” (Page 1)
www.ftc.gov/os/adjpro/d9302/030108ramcorrectedreply.pdf
FTC ALJ Order granting DOJ Motion
“It may be, as Rambus alleges, that DRAM manufactures took actions to derail the acceptance of the RDRAM, a DRAM
technology over which Rambus had even greater control. It may also be that DRAM manufactures engaged in collusive price
fixing conduct that had greater impact on the market for DRAMs than any action taken by Rambus. And it may be that, as a
result of collusive actions by DRAM manufactures. Intel rejected the RDRAM. But Rambus has not shown that any of these
issues are directly relevant and material in this proceeding.” (Page 7)
www.ftc.gov/os/adjpro/d9302/030115aljopsuporder.pdf
Is it any wonder that Rambus investors are highly skeptical about the FTC's motives in the Rambus case and to what lengths
the FTC, under Timothy Muris, will go to prove this pivotal case? Simple common sense says that when a group of memory
manufactures are accusing Rambus of violating JEDEC rules which could ultimately protect them from infringement, while
simultaneously engaging in possible anticompetitive conduct to remove RDRAM as competition in the market is clearly related
and could easily explain the underlying motives behind the JEDEC accusations that are being made against Rambus. It seems
incredibly disingenuous to me that a Judge who is suppose to be seeking the truth for the benefit of all consumers would rule
that Rambus should not be allowed to pursue this type of discovery evidence. How did Mr Muris put it in your article “the heart
of antitrust is stopping agreements among competitors.” This purported boycott evidence against RDRAM is clearly relevant
for several reasons. Rambus investors simply have a hard time understanding why the FTC would be try to block the collection
of this evidence if the FTC was truly out to uncover all the facts. Even recently, FTC Complaint Counsel filed another motion to
prevent Rambus from presenting the RDRAM boycott evidence they collected before the DOJ motion and the ALJ ruled that
Rambus should be blocked from further discovery. (note: the ALJ ruling in this matter has not be made public. Rambus may not
even be allowed to present this evidence at trial.)
Complaint Counsel Motion to bar presentation of testimony and arguments regarding purported collusion among DRAM
manufactures.
“Such testimony and argumentation would merely be an attempt to exonerate Rambus's own anticompetitive conduct on the
ground that other companies also engaged in anticompetitive conduct. Judge Timony has already ruled that such evidence is
“irrelevant” to this proceeding.” (Page 1)
www.ftc.gov/os/adjpro/d9302/030326memoinsupinlimi.pdf
You may have noticed while reading the legal briefs that the original ALJ (James Timony) in the Rambus case was replaced in
early February with Stephen McGuire. Apparently, Judge Timony surprised the FTC with is retirement announcement and he
would not be presiding over the trial even though he issued a large number of pre-trial rulings. In any event, upon leaving his
post at the FTC, Judge Timony issued a string of negative rulings against Rambus including the DOJ discovery ruling shown
above. This string of negative rulings made it very difficult for Rambus to overcome significant issues with the new ALJ going
into the trial. For obvious reasons, this string of negative rulings against Rambus only further raises the concern of Rambus
investors that Rambus will get a fair FTC trial. I will not go into the other issues surrounding these negative rulings but I would
like to call to your attention a couple of other facts supported by the evidence in regards to the FTC's core allegation against
Rambus. These facts never seem to get reported in the press.
The original FTC accusation against Rambus stated in part that Rambus failed to make the required patent-related disclosures
and Rambus conveyed a materially false and misleading impression that JEDEC was not at risk of adopting standards that
Rambus could later claim to infringe upon its patents. When the FTC case was filed, Rambus was in the process of appealing
the negative court ruling in the Virgina IFX case that had previously found Rambus guilty of SDRAM fraud (not DDR) with the
Federal Circuit of Appeals (CAFC). The central issue in the Virginia fraud appeal, was whether Rambus violated JEDEC's
patent disclosure rules. This issue is also central to the core allegations the FTC is making against Rambus. The CAFC ruled
that Rambus had not violated any JEDEC disclosure duty and therefore could not be guilty of SDRAM fraud. The CAFC
reaffirmed the DDR non-fraud ruling. www.fedcir.gov/opinions/01-1449.doc
As a result of the CAFC ruling and the negative impact on the core FTC allegations against Rambus, the FTC is now trying to
morph the JEDEC disclosure duty into a much broader “good faith” and “conduct” duty. The primary FTC accusation now
states that due to Rambus's silence, Rambus conveyed a materially false and misleading impression on both SDRAM and
DDR. The amazing thing is that Rambus was not even a member of JEDEC when the DDR specification was 1st proposed and
voted on. The following is a copy of Rambus's withdrawal letter from JEDEC. After reading this withdrawal letter, it is hard to
understand how the FTC can accuse Rambus of a “false and misleading impression” in regards to their patent position,
especially on DDR which was developed after Rambus left JEDEC.
Rambus JEDEC withdrawal letter
(page 74)
www.ftc.gov/os/adjpro/d9302/030417ramrespccsupp.pdf
Another accusation against Rambus that gets widely reported in the press is that Rambus did not make any disclosures to
JEDEC while they were a member but the evidence on record shows that Rambus did make disclosures. Unfortunately, this
never gets reported. Rambus disclosed their 1st patent, the 5,243,703 (not to mention the WIPO application was publicly
available in Europe). What the press fails to ever mention, or the FTC in their accusations, is that the '703 patent has a
specification that is identical to all of the other patents that the FTC is accusing Rambus of not disclosing. The amazing thing is
that the FTC would have everyone believe from their argument that the tech savy engineers representing the major DRAM
companies at JEDEC, were not capable of evaluating the '703 specification and understanding what the broader implications
were. This also ignores the individual NDA discussions between Rambus all the major DRAM companies in JEDEC. This is
simply beyond creditability in my opinion. The following expert report explains what a knowledgeable engineer or patent
attorney would understand when reading '703 specification.
Expert Report of Martin Fliesler
“Thus a reasonable patent lawyer or knowledgeable engineer reading the '703 patent would look at its issued claims to see
what the '703 patent actually covered, and would also read the entire disclosure to determine what else might be claimed in
related applications. Upon a review of the '703 patent, such a lawyer or engineer would have noted from the disclosure in
Column 1 of the patent the existence of nine other divisional applications relating back to the filing date of the '898 application
and realized that Rambus was actively pursuing numerous claims other than what was actually claimed in the '703 patent. My
opinion that a knowledgeable engineer reviewing the '898 application would have realized that the application could support
claims to a variety of inventions independent of any particular architecture is supported by the fact that the PTO allowed
numerous such claims to issue.” (Page 46-48)
www.ftc.gov/os/adjpro/d9302/030417ramrespccsupp.pdf
The evidence in the record goes on to show that one JEDEC member, Mitsubishi, was very much aware of Rambus patent
potential.
Mitsubishi (MELCO) knowledge of Rambus Patent Position
“Rambus contends in its pending Motion for Summary Decision that JEDEC members understood in the early 1990's that
Rambus might assert intellectual property claims over features being considered for use by JEDEC members and/or for
incorporation within JEDEC standards. The documents produced by MELCO in late February 2003 include documents
relating to MELCO's 1993 review of Rambus's possible future intellectual property claims….” (Page 2)
www.ftc.gov/os/adjpro/d9302/030318ramsepstmnt.pdf
There is also evidence in the record suggesting the Micron was researching Rambus's patent position while Rambus was a
member of JEDEC and just prior to DDR balloting when Rambus was no longer a member. Unfortunately the actual details of
these investigations are not available because Micron has claimed attorney-client privilege to protect this evidence.
Another FTC accusation that frequently shows up in the press is that Rambus's conduct was inappropriate because they
“remained silent.” The implication being that Rambus was trying to trick JEDEC into using their technology via silence.
Unfortunately, what never gets reported in the press is that Rambus's conduct is consistent behavior with legal advice for any
technology company trying to protect their intellectual property rights. Rambus's business plan was primarily built around
protecting their IP and collecting royalties. It was no mystery to JEDEC members that Rambus was not a manufacture of
DRAMs and that Rambus was relying on IP licensing to generate revenue. Therefore, it should be no surprise to any JEDEC
member that Rambus would be very cautious when it came to disclosing sensitive intellectual property. It is simply unrealistic to
assume that Rambus, or any other company in JEDEC, would make any patent related disclosures beyond what the written
JEDEC rules called for. The following is a summary of the legal issues and risks surrounding the disclosure of IP and what type
of conduct one should expect from any company wanting to protect their intellectual property rights.
Policy and Practice Regarding Confidentiality of Patent Applications
(Page 52-55)
www.ftc.gov/os/adjpro/d9302/030417ramrespccsupp.pdf
In conclusion, I am looking forward to reading your upcoming article on the FTC Rambus case. I hope the above information is
useful. Just one last comment in regards to your previous article, I found it very interesting that Mr Muris stated he is very
concerned about antitrust activities that misuse government. A very popular topic in the Rambus discussion groups these days is
the close connection between FTC Complaint Counsel and ex-FTC Micron lawyers. It certainly appears that a least one large
DRAM manufacture may be attempting to use a governmental agency (the FTC) to protect them from infringement. If you are
interested in seeing some of the evidence supporting this speculation, I would be more than happy to forward it to you.
Best Regards
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