Compulsory Licensing As An Antitrust Remedy

The Federal Trade Commission has issued its final order in the remedy phase of its proceedings against Rambus, Inc. The Commission previously ruled that Rambus' false statements about its patent portfolio to a standard-setting organization enabled it to monopolize the markets for four technologies incorporated into standards set by the Joint Electron Device Engineering Council (“JDEC”).  At that time, the Commission deferred ruling on the remedy for this violation. In an earlier decision with respect to similar violations by Dell Computer Corporation (121 F.T.C. 616), the Commission had ordered that Dell not seek to enforce its undisclosed patents against persons practicing the industry standard at issue.

By order released February 5, 2007, the Commission, by a three-to-two vote, has now ordered Rambus to license its SDRAM and DDR SDRAM technology at royalty rates not to exceed a maximum set by the Commission – 0.5% for DDR SDRAM, for three years and then going to zero, and 0.25% for SDRAM. The two dissenting Commissioners argued that the license should be royalty-free since JDEC would not likely have incorporated the Rambus technology had it known about the patents. One dissenting Commissioner would also have required a royalty-free license with respect to another related patented technology (DDR2 SDRAM). 

This latest decision with respect to the alleged failure to disclose by Rambus is important for at least three reasons:

• First, like the July order on liability, it is premised on the Commission's view that false statements to standard-setting organizations can in certain situations constitute predatory or exclusionary conduct under Section 2 of the Sherman Act and Section 5 of the Federal Trade Commission Act.
  
• Second, unlike its prior order in the 1996 Dell Computer case, here the Commission orders compulsory licensing at rates capped by Commission decree.
  
• Third, the Commission continues to take positions on the antitrust merits of patent issues arising in industry standard-setting situations which may be viewed as at odds with the Federal Circuit Court of Appeals. Compare, Rambus, Inc. v. Infineon Technologies AG, 318 F.3d 1081 (2003) (reversing finding of fraud due to non-disclosure of patents to JEDEC).