FTC Outlines Appeal in Rambus Case
Associated Press April 27, 2004 7:34 p.m.
SAN JOSE, Calif. – Computer-chip designer Rambus Inc. could pocket up to $3 billion in royalties and raise prices for consumers of all manner of computing devices if an administrative law judge's ruling in its favor is allowed to stand, the Federal Trade Commission argued in an appeal.
In the filing, the FTC legal staff said Chief Administrative Law Judge Stephen J. McGuire's ruling was "fatally flawed" as well as based on factual and legal errors. In February, Judge McGuire dismissed charges that Rambus had lulled chip makers into including its patented technology in their standards.
"This decision is wrong in its premises, wrong in its analysis, and wrong in its outcome," according to the appeal, which was made public last week.
The filing warns that any Rambus royalties collected by chip makers would ultimately be paid by consumers who buy personal computers, gadgets and a variety of other devices that rely on silicon-based memory.
The commission is expected to hear the FTC staff's appeal, though the timing hasn't been announced. Any decision could then be brought before a federal appellate court.
Rambus licenses technology that speeds up computer memory. In its June 2002 complaint, the FTC alleged Rambus failed to disclose a patent and applications that involved several technologies that were eventually adopted by a standards-setting group.
As a result, the Los Altos, Calif.-based company actively sought royalties and sued semiconductor makers who based their fast memory chips on the standard.
But in his 334-page decision, Judge McGuire found the rules for the standards-setting group were vague. He also cited numerous cases in which chip makers appeared to be working together to stop Rambus' RDRAM memory from making inroads in the PC industry.
At the time, Rambus seemed to have considerable momentum. Its technology was backed by Intel Corp., the leading maker of microprocessors. In e-mails quoted by Judge McGuire, memory chip makers complained they didn't want to pay royalties to Rambus or have their business decisions dictated by Intel, which had stopped making memory in the 1980s.
Ultimately, Intel backed off its support of Rambus and supported alternative memory designs.
"We think the administrative law judge devoted an extraordinary amount of time analyzing a very complicated set of facts," said John Danforth, Rambus' general counsel. "[The decision] holds up on a number of independent grounds."
Mr. Danforth also took issue with the FTC staff's claims that Rambus stands to earn up to $3 billion in royalties from its alleged anticompetitive behavior.
"Those numbers have been inflated significantly," he said. "We don't give out information about royalties. Even the analysts who cover us don't have numbers like that."
Separately, Rambus said the retrial of its patent claims against Infineon Technologies AG has been pushed back from June 10 to the fall because of a number of pretrial issues that need to be resolved, as well as the possible time needed for Rambus to appeal certain of those rulings prior to the trial.
A new date is expected to be set before the end of May. Mr. Danforth said the judge's move to delay the trial shows he is being "mindful of the complexity" of the trial. He expects the new date will be set for some time in September or early October.
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