US Appeals Court Overturns FTC Order Versus Rambus

WASHINGTON, April 22 (Reuters) – A U.S appeals court hasoverturned an order issued by the Federal Trade Commissionthat had accused computer chip maker Rambus Inc (RMBS.O: Quote, Profile, Research) ofantitrust violations.

The FTC order accused Rambus of failing to tell astandard-setting organization — JEDEC, short for JointElectron Device Engineering Committee — about its patentedtechnologies while advocating those technologies as the newstandard for computer chips.

The U.S. Court of Appeals for the District of Columbiaoverturned an FTC order which had said the failure to disclosethe patents constituted a violation of antitrust law and hadordered Rambus in February 2007 to stop collecting some patentroyalties.

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

Rambus develops and licenses technology used by computerchip makers.

The court said that the FTC erred in acting on itsconclusion that Rambus failed to disclose the patents either togain a monopoly by having its technology set as the newstandard or to avoid having limits put on its royalties, asfrequently happens when technology is chosen as the newstandard.

"The latter — deceit merely enabling a monopolist tocharge higher prices than it otherwise could have charged –would not in itself constitute monopolization," the court saidin its ruling.

Bob Skitol, an antitrust attorney with the law firm DrinkerBiddle, took vehement exception with that portion of the rulingand warned that it could damage the practice of settingstandards.

"The ruling that that is not exclusionary oranti-competitive conduct is remarkable and quite incorrect," hesaid. "I believe it clearly does constitute monopolization."

"This decision is part of a broader recent trend in theappellate courts to narrow the scope of section 2 of theSherman Act," he said, referring to a measure that forbidsfirms from using misconduct to dominate a market. "That isunfortunate in some respects."

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

Rambus also won a case in San Jose, California, last monthover Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research) which had also allegedthat Rambus failed to disclose relevant patents duringstandard-setting talks. Micron Technology Inc (MU.N: Quote, Profile, Research) has filedsimilar lawsuits.

The appeals court said the FTC "failed to sustain itsallegation of monopolization," while in another portion of theruling it said that the commission took "an aggressiveinterpretation of rather weak evidence."

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

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