Attorney Says Rambus Ruling 'Devastating' to FTC Case
Wednesday October 8, 8:30 pm ET
By Mark Wigfield
WASHINGTON-- A U.S. Supreme Court decision that is favorable to Rambus Inc. (NasdaqNM:RMBS - News) should have no bearing on a separate trial in its final stages at the Federal Trade Commission, an attorney for the FTC said Wednesday.
"It would appear that Rambus won an initial victory" Monday in a case brought against it by a company named Infineon Technologies AG (NYSE:IFX - News) , said FTC attorney Sean Royall. But that private patent litigation was an entirely different case that wasn't geared toward getting a "broad market remedy" like the government's case.
Mr. Royall's comments came in closing arguments in a three-month trial before an FTC administrative law judge. The FTC alleges that Rambus improperly used information it received from its membership on an industry standards-setting body to design a key computer memory chip on which Rambus is now attempting to collect royalties.
"The magnitude of the competitive impact (of Rambus') conduct is staggering," Mr. Royall said. Consumers and companies could wind up paying as much as $3 billion a year if Rambus can enforce its patent on the widely used dynamic random access memory, or DRAM, chips. The market for these chips is worth up to $28 billion a year, Mr. Royall said.
During a recess, Rambus attorney John Danforth said Rambus' victory in the Supreme Court Monday "is really devastating to the FTC's case."
On Monday, Infineon's legal attempt to block Rambus from collecting patent royalties ended when the Supreme Court turned away the company's appeal. That allowed the ruling by an appeals court that is considered the "definitive patent court" in the nation to stand, Mr. Danforth said, showing that Rambus neither violated patent law nor the rules of the industry standards-setting body.
Closing arguments are expected to continue throughout Wednesday.
The Supreme Court's decision Monday to let stand a lower court victory by Rambus was clearly in the FTC judge's mind as closing arguments progressed Wednesday.
The Supreme Court Monday refused to review a finding by the U.S. Circuit Court of Appeals for the federal circuit rejecting Infineon's countersuit against a Rambus patent claim.
But FTC Administrative Law Judge Stephen McGuire noted that the appeals court seemed to find that Rambus was obliged to disclose to the standards-setting body that it intended to file patents.
The FTC attorneys are pressing that point in the agency's own case.
"It seems to me it was pretty clear that the court has drawn the conclusion" that Rambus "was obliged to disclose its patents and applications," Judge McGuire said. "I interpreted that as the court's opinion."
But Judge McGuire also noted that the court seemed to contradict itself on a related point, leading him to declare that the court was "incoherent."
Rambus attorney Greg Stone said that the appellate court decision was merely a matter of granting deference to factual findings by the jury in the original district court decision, which was in favor of Infineon.
The appeals court, Stone said, didn't analyze the issues because it was able to make its ruling on more narrow grounds.
Closing arguments continued late Wednesday. The judge is expected to question attorneys for both sides at the conclusion of the arguments.
In questions after hearing nearly 10 hours of closing arguments in the Rambus antitrust case, Judge McGuire closely questioned the government on a key element of the case.
The FTC argued that Rambus' antitrust violations centered around failing to disclose to an industry standards-setting body, known by the acronym JEDEC, that it was developing patents using some of the same technology that would be part of the standard. The FTC argued that Rambus intentionally didn't disclose the patent applications so that it could earn monopoly profits once the ubiquitous computer chip memory technology standard was adopted.
But Judge McGuire questioned whether JEDEC was clear about whether its disclosure requirements were voluntary or mandatory.
"Can there be an antitrust violation if JEDEC's patent policy is unclear," Judge McGuire asked.
FTC Attorney Geoffrey Oliver said there can be a violation if the evidence shows that the company violated not only the explicit rules but the overall purpose of the organization.
But Rambus has argued that the rules were so unclear that other companies in the standards body, including International Bushiness Machines Corp. (IBM), Toshiba Corp. and others didn't disclose patent applications.
"If that's all they have, they don't have an antitrust claim," said Douglas Melamed, outside counsel for Rambus, of Mr. Oliver's argument.
Judge McGuire also questioned whether the FTC, if it prevails, has the authority to impose the remedy it is seeking. The FTC would deny Rambus of any revenue from its patents for the DRAM memory chip developed before 1996, when it left JEDEC.
Preventing Rambus from exercising its patent rights when there was no fraud involved might be an unconstitutional taking, Judge McGuire said.
Mr. Oliver answered that there is ample authority. In a brief interview after the arguments, Mr. Royall said Dell Inc. (NasdaqNM:DELL - News) in a settlement with the FTC agreed not to enforce its patents in a separate case.
Rambus attorneys asked Judge McGuire to dismiss the case. Judge McGuire gave no sign as to when he would rule, but he faces a monumental task, given the volume of material submitted in the case.
The three-month trial included testimony from 43 witnesses produced 11,000 pages of transcripts, and 1,900 documents were entered as evidence.
"I will not assert that this is an easy case," Mr. Royall said earlier in the day.
-By Mark Wigfield, Dow Jones Newswires; 202-828-3397; Mark.Wigfield@dowjones.com
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