Antitrust: Commission confirms sending a Statement of Objections to Rambus

The European Commission can confirm that it has sent a Statement of Objections (SO) to Rambus on 30 July 2007. The SO outlines the Commission’s preliminary view that Rambus has infringed EC Treaty rules on abuse of a dominant position (Article 82) by claiming unreasonable royalties for the use of certain patents for “Dynamic Random Access Memory” chips (DRAMS) subsequent to a so-called "patent ambush".

Rambus is a US company incorporated in Delaware, USA with its principal place of business is Los Altos, California. Rambus designs, develops and licenses high bandwidth chip connection technologies for computers, consumer electronic and communication products (including systems memory, PC graphics, multimedia, workstations, video game consoles and network switches) but it does not manufacture any of the products itself.

The SO concerns “Dynamic Random Access Memory” chips (DRAMS) a type of electronic memory primarily used in computer systems, but also used in a wide range of other products which need to temporarily store data, including servers, workstations, printers, PDAs and cameras.

DRAMs have been standardised by an industry-wide US based standard setting organisation – JEDEC. Rambus owns and is asserting patents which it claims cover the technology included in these JEDEC standards. Therefore, every manufacturer wishing to produce synchronous DRAM chips or chipsets consequently must either acquire a licence from Rambus or litigate its asserted patent rights.

The SO outlines the Commission’s preliminary view that Rambus engaged in intentional deceptive conduct in the context of the standard-setting process, for example by not disclosing the existence of the patents which it later claimed were relevant to the adopted standard. This type of behaviour is known as a "patent ambush". Against this background, the Commission provisionally considers that Rambus breached the EC Treaty's rules on abuse of a dominant market position (Article 82) by subsequently claiming unreasonable royalties for the use of those relevant patents. The Commission's preliminary view is that without its "patent ambush", Rambus would not have been able to charge the royalty rates it currently does.

This is the first time that the Commission is dealing with a "patent ambush" under EC antitrust law, but the approach reflects well-established general case-law under Article 82 of the Treaty.

In parallel proceedings in the US, the Federal Trade Commission (FTC) issued an order in August 2006 and in February 2007 whereby it found that Rambus had engaged in illegal monopolisation and imposed a remedy applicable to US patents and foreign patents to the extent that they relate to import or export of relevant products into or from the US.

As Rambus is active worldwide, has obtained patent protection for the relevant technologies in Europe and it is enforcing its patents against companies applying the relevant standards in Europe, these companies are therefore exposed to litigation over the relevant European patents and may not seek relief on the basis of the US decision. Commission action is therefore appropriate.

If the Commission were to decide to adopt a decision finding that Rambus was abusing a dominant market position, any remedy would be designed so as to fully comply with the Community's international obligations.

The Statement of Objections preliminarily concludes that the appropriate remedy to such an abuse would be that Rambus charge a reasonable and non-discriminatory royalty rate, the precise amount of which should be determined having regard to all the circumstances of the case.

Background

A Statement of Objections is a formal step in Commission antitrust investigations in which the Commission informs the parties concerned in writing of the objections raised against them. The addressee of a Statement of Objections can reply in writing to the Statement of Objections, setting out all facts known to it which are relevant to its defence against the objections raised by the Commission. The party may also request an oral hearing to present its comments on the case.

The Commission may then take a decision on whether conduct addressed in the Statement of Objections is compatible or not with the EC Treaty’s antitrust rules. Sending a Statement of Objections does not prejudge the final outcome of the procedure.

Rambus has nine weeks to reply to the SO, after which it will have the right to be heard. If the preliminary views expressed in the SO are confirmed, the Commission may require Rambus to cease the abuse and may impose a fine.