US Appeals Court Overturns FTC Order Versus Rambus

By Reuters -  |  Posted 2008-04-22 Print this article Print

Rambus wins on appeal. 

WASHINGTON, April 22 (Reuters) - A U.S appeals court has overturned an order issued by the Federal Trade Commission that had accused computer chip maker Rambus Inc (RMBS.O: Quote, Profile, Research) of antitrust violations.

The FTC order accused Rambus of failing to tell a standard-setting organization -- JEDEC, short for Joint Electron Device Engineering Committee -- about its patented technologies while advocating those technologies as the new standard for computer chips.

The U.S. Court of Appeals for the District of Columbia overturned an FTC order which had said the failure to disclose the patents constituted a violation of antitrust law and had ordered Rambus in February 2007 to stop collecting some patent royalties.

The FTC amended that order in March 2007 to allow the royalties to be collected but put into escrow.

Rambus develops and licenses technology used by computer chip makers.

The court said that the FTC erred in acting on its conclusion that Rambus failed to disclose the patents either to gain a monopoly by having its technology set as the new standard or to avoid having limits put on its royalties, as frequently happens when technology is chosen as the new standard.

"The latter -- deceit merely enabling a monopolist to charge higher prices than it otherwise could have charged -- would not in itself constitute monopolization," the court said in its ruling.

Bob Skitol, an antitrust attorney with the law firm Drinker Biddle, took vehement exception with that portion of the ruling and warned that it could damage the practice of setting standards.

"The ruling that that is not exclusionary or anti-competitive conduct is remarkable and quite incorrect," he said. "I believe it clearly does constitute monopolization."

"This decision is part of a broader recent trend in the appellate courts to narrow the scope of section 2 of the Sherman Act," he said, referring to a measure that forbids firms from using misconduct to dominate a market. "That is unfortunate in some respects."

The ruling is one of a series of losses for the FTC, which failed to get an injunction stopping a merger of Whole Foods Market Inc (WFMI.O: Quote, Profile, Research) and Wild Oats last year.

Rambus also won a case in San Jose, California, last month over Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research) which had also alleged that Rambus failed to disclose relevant patents during standard-setting talks. Micron Technology Inc (MU.N: Quote, Profile, Research) has filed similar lawsuits.

The appeals court said the FTC "failed to sustain its allegation of monopolization," while in another portion of the ruling it said that the commission took "an aggressive interpretation of rather weak evidence."

Rambus did not immediately return a message seeking comment. The FTC had no immediate comment.

Shares of Rambus were up 68 cents or 3 percent to $23.22 in afternoon trading on Nasdaq. (Editing by Gerald E. McCormick)


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