Rambus Ruling Overturned: A Legal Dispute of Dickensian Proportions Lurches On
The one great principle of the English law is, to make business for itself. There is no other principle distinctly, certainly, and consistently maintained through all its narrow turnings. Charles Dickens, Bleak House
According to John the Apostle, the poor will be always with us. So too, it seems, will the never-ending skein of cases enmeshing Rambus, Inc., the brash memory design company that famously participated in a JEDEC standard setting process in the early 1990s, and later asserted various patent claims against implementers of the very standards created by the working group in which it participated. And while the lawyers may not be to blame in this case (or more properly, these many cases), the flood of litigation involving more than a half a dozen different vendors and government agencies certainly rivals the worst that Jarndyce ever threw against Jarndyce in Charles Dickens' epic tale of litigation gone wild.
The latest turning of the screw was announced this Tuesday, when the US Court of Appeals for the District of Columbia overturned a unanimous ruling by the five Commissioners of the Federal Trade Commission (who had, in their own turn, earlier overturned the decision of an FTC Administrative Law Judge, who had reached a similar result to the Federal Circuit, which had itself earlier overturned the verdict of a trial court that...well, you get the idea). In a related decision, the FTC had capped the royalties that Rambus could require implementers of the standards to pay. Now that Jill, too, will go tumbling down after the Jack that fell to the Appeals Court's reinterpretation of the law.
The long and the short of the latest decision is that the Court of Appeals disagreed with the FTC's conclusion that Rambus's activities in JEDEC constituted a violation of antitrust law, and also questioned whether the Commissioners had properly concluded that Rambus had violated JEDEC's patent disclosure policy. Summarizing and oversimplifying a complex analysis, the FTC had based its conclusions on the assumption that if Rambus had disclosed its patentable inventions in timely fashion, JEDEC would have either chosen another, non-infringing option, or would have required Rambus (under its standing rules) to pledge to make patent licenses available on reasonable and non-discriminatory (RAND) terms. The higher court held that under existing precedents, both of these alternatives would need to result in a violation of antitrust laws in order for Rambus to be held accountable .
Fortunately for Rambus, the court held that engaging in deceptive conduct to avoid the latter alternative would not violate anticompetition law, even where the result was to create monopoly power. Or, in the more formalistic language of the Court, "the FTC failed to demonstrate that Rambus's conduct was exclusionary under settled principles of antitrust law".
Meanwhile, there is an ongoing series of cases between Rambus and several implementers of the standards in question, in which Rambus alleges that those vendors colluded against Rambus in connection with the same process. Several of those vendors have already paid heavy fines to US regulators in settlement of similar charges. I have written very extensively on all of this, and you can read more than you will likely ever want to know by sampling from this list.
As increasingly seems to be the be case these days when rutting rival vendors butt heads, the standard setting system has become the most notable and innocent victim of collateral damage. The reason is that whatever the final conclusions at law regarding the bad acts of Rambus et al., documentsdiscovered during the various cases revealed early on that Rambus believed that it was violating JEDEC rules, had been so advised by its counsel, and later destroyed documentary evidence in an attempt to conceal that conduct. In consequence, when Rambus loses, the credibility of the system, including the ability to look to courts and regulators to punish abuse, is bolstered. And when Rambus wins, other participants in standard setting activities may pause and wonder whether it's safer and smarter to cheat than to live by the rules.
As a result, I've filed a total of four pro bono "friend of the court" briefs over the years, advocating for the courts to protect the integrity of the standard setting system. Those briefs were filed with the Federal Circuit Court that hears patent cases, the Supreme Court, which declined to hear the case, and the FTC (two briefs). These briefs have not been welcomed by all concerned, as along the way, Rambus acquired a cult of stock-owning true believers that are convinced that there is a world-wide conspiracy hell bent on destroying this innocent victim. They are a refined and introspective lot, and as luck would have it are characteristically willing to share their opinions with me in a respectful and intellectual exchange of ideas. Consider, for example, this email from "Regina," which I received within hours of the release of this latest opinion:
Looks like the CADC just wiped their collective arses with your precious ”pro bono friend of the court brief”. Hope all those hours whoring yourself for the criminal cartel DRAM makers were worth it.You can read further thought provoking samples here.
Be that as it may, there have been many ups and downs for both sides along the way, not only with respect to the overall question of liability or the lack thereof, but with respect to specific practices and obligations. For example, I was shocked when the FTC Administrative Law Judge ruled that there is no duty of good faith as between those engaged in standard setting. Since the standards process is consensual in nature and inherently based on trust (standard setting organizations rarely have any sanctions, or the means to enforce them), that ruling seriously undercut the entire basis of the standard setting system. Happily, the Commissioners held otherwise, and it does no appear that this ruling has been disturbed.
What happens next? Well, the FTC now needs to decide whether to try again. The Court of Appeals left open to the FTC the opportunity to retreat, or to bravely take the field once again. Certainly there are some aspects of the higher Court's ruling that I find problematic, and would prefer to see challenged. To give one example, the Court justified it's holding that there was no anticompetitive effect from the loss of JEDEC's opportunity to extract a RAND commitment from RAMBUS in part on this reasoning:
Indeed, had JEDEC limited Rambus to reasonable royalties and required it to provide licenses on a nondiscriminatory basis, we would expect less competition from alternative technologies, not more; high prices and constrained output tend to attract competitors, not to repel them. [Opinion, page 18]This represents a rather startling lack of understanding regarding what standards are all about, as the purpose of a standard is not to provide incentives to launch non-compliant alternatives, but to provide incentives for everyone to give up that right in favor of the common good to be found from supporting a single standard. When they do, true competition does result, as more competitors are attracted to the standard, resulting in greater competition not only on price, but also in providing innovative, value-added features above the layer of standardization - and therefore more variety and choice.
Regardless of what the FTC decides to do, this newest reversal of fortunes for Rambus will give it more bargaining power in its private suits against Hynix and others. And it also once again casts an ominous and lengthy shadow across the integrity of the standard setting process.
But still. This is, after all, the Rambus story, and there is always another court, another cause of action, another plaintiff or prosecutor. Recall that the European Commission also has an open investigation against Rambus for "patent ambush." So perhaps yes, Regina, there may be a Santa Claus (after all).
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