If you help your industry adopt your patented technology as a standard and then sue companies that use the standard, bad things can happen. You might lose your patent rights, be sued or prosecuted for antitrust violations, unfair competition, and fraud. Even if you ultimately win your case at trial ... or on appeal ... the cost of getting mired in allegations of abusing the standards process can be high. Rambus, a memory design and patent licensing company, presents a case study in how costly and time consuming standards-related patent disputes can be. The cost to the industry can be even higher, which is why some standards bodies have been reacting to the problem by changing their patent polices to require more disclosure of patents and licensing plans.
THE RAMBUS SAGA
Rambus is a licensing company that holds a number of patents relating to DRAM memory architecture. In the early 1990s, representatives from Rambus attended meetings of the JEDEC working group that was developing new standards for what became known as the double data rate, or "DDR" type of DRAM. During those meetings, Rambus did not disclose some of its patents and patent applications to the committee. The new technology was included in the standard, and became widely used.
Beginning in 1999, after the new standard was well established, Rambus informed many of the major players in the DRAM market that it held patent rights that covered the standard, and warned them that they'd better pay for licenses. Rambus extracted substantial license fees from Samsung and Toshiba, and increased the pressure on others by suing several industry participants. This led the FTC bring an antitrust lawsuit against Rambus in 2002, alleging unfair and deceptive acts or practices in violation of the FTC act, and unlawful monopolization in violation of the Sherman Antitrust Act. Meanwhile, Infineon, who Rambus accused of patent infringement, countersued Rambus for fraud due to its conduct before the JEDEC standards committee.
Both the FTC and a jury in the Eastern District of Virginia found that Rambus conduct was wrong, and that Rambus was liable for antitrust and fraud. However, both decisions were ultimately overturned because the then-prevailing language of JEDEC's patent policy was found to be less-than-clear, both results were ultimately overturned. The Federal Circuit Court of Appeals overturned the jury's finding of fraud in 2003 because the wording of JEDEC's patent policy was found not to create a clear duty for Rambus to have disclosed its patents. Rambus, Inc., v. Infineon Tech. AG, 318 F.3d 1081, 1098 (Fed. Cir. 2003). However, Rambus quickly settled its remaining patent dispute with Infineon after the Virginia trial court found Rambus guilty of spoliation of evidence. In a subsequent dispute with Samsung, Rambus dismissed its patent claims and agreed to pay Samsung's attorney's fees to avoid further adverse decisions. On Tuesday, the Federal Circuit found that by dismissing the dispute and offering to pay Samsung's attorney's fees, Rambus rendered all remaining disputes moot. See Rambus v. Samsung Decision. As for the FTC action, last week, the DC Court of Appeals overturned the judgment of the FTC because the FTC failed to prove that Rambus had injured competitors. See Rambus Inc. v. FTC, Slip Op. 07-1086, 4/22/2008.
IMPLICATIONS FOR STANDARD SETTING
The Rambus cases, and the allegations associated with them have been closely watched by standards organizations, and the companies that participate in standards efforts. While Rambus appears to have avoided disaster, some standard setting bodies are beginning to change their policies and procedures to make patent obligations, and positions more clear. Historically, this has been a sticky area for standards organizations. On the one hand, standards organizations and their members wish to avoid "hold up" situations like the Rambus case. On the other hand, standards organizations and their members do not wish to be accused of price fixing or other anti-competitive behavior by adopting coercive polices that are later found to injure competition.
Recently, two standards bodies have sought and obtained approval from the department of justice of patent policies that should lead to increased patent disclosure. The IEEE obtained approval from the Department of Justice to adopt a policy that requires participants in standard setting initiatives to take a definitive, binding position regarding their willingness to license patents, or to expressly refuse to provide assurance. IEEE Announcement Another standards organization, VITA, which creates standards for certain computer bus architectures, also obtained DOJ approval of its new standards policy requiring disclosure of patents and licensing terms by industry participants. VITA Letter from DOJ.
At the same time, three of the worlds largest standards organizations, namely the IEC, ISO, and ITU, have adopted patent policies that strongly encourage disclosure of patents that are necessary for standards, and require participants in the standard setting practice to make patent positions more clear. See IEC, ISO, and ITU press release.
As more standards organizations change their polices to favor increased disclosure and more transparent obligations on their members, "hold-up" situations, such as happened in Rambus, should become less common. However, the new policies are likely to increase the burden on participating organizations that find themselves under increased pressure to commit to licensing terms before they fully understand the value of their patents.