Update: FTC forces Rambus to license memory chips

Government regulators will cap the royalty fees Rambus can charge DRAM manufacturers

U.S. government regulators will require Rambus to license its DRAM (dynamic RAM) chips to other vendors, and will cap the royalty fees Rambus can charge to both current and future DRAM manufacturers, according to an announcement Monday by the U.S. Federal Trade Commission (FTC).

The order "is designed to remedy the effects of the unlawful monopoly Rambus established in the markets for four computer memory technologies that have been incorporated into industry standards," the FTC said in a release.

Rambus executives vowed to appeal the order to both the FTC and a federal appeals court if necessary. Without a stay, however, the order would become effective in 60 days, said Tom Lavelle, Rambus' senior vice president and general counsel, during a webcast with reporters on Monday.

"We believe the commission got it fundamentally wrong," Lavelle said. "They overlooked or misunderstood certain parts of the record."

Rambus lawyers spent the weekend digesting the order, which the FTC delivered to Rambus on Friday night, he said. So far, they have found "ambiguous language" in the lengthy paperwork, and claim they are disappointed that the FTC set royalty rates below fair market levels, said Lavelle.

The order sets a royalty rate that drops to zero within three years for certain parts governed by standards under the Joint Electron Device Engineering Council (JEDEC). In the meantime, Rambus may charge maximum royalties of 0.25 percent for SDRAM (synchronous DRAM) products, 0.5 percent for DDR (double data rate) SDRAM products, 0.5 percent for SDRAM memory controllers or other non-memory chip components, and 1 percent for DDR SDRAM memory controllers and non-memory chip components.

The order excludes the nascent technologies DDR2 and DDR3, as well as graphics products like GDDR2 and GDDR3, Lavelle said.

In order to ensure that other equipment makers can freely use the technology, the FTC will also require Rambus to hire an FTC-approved compliance officer to ensure that Rambus is honest in revealing its patents to standard-setting bodies.

The announcement followed allegations that Rambus convinced industry groups to declare a standard technology for the memory used in PCs, servers, printers and cameras without admitting that it owned the patents to those technologies. When the groups announced the standards, Rambus had enormous leverage over the entire industry.

The case began in June 2002, when FTC regulators charged Rambus with violating federal antitrust laws by deceiving the JEDEC group during four years of standard-setting meetings. Those charges were dismissed in court in February 2004, but the FTC overruled the judge in July 2006 and promised to deliver a solution.

The FTC passed its new order by a 3-2 vote, with the dissenting commissioners asking for even stricter terms that would set royalty caps at zero immediately.

"Having found liability, we want a remedy strong enough to restore ongoing competition and thereby to inspire confidence in the standard-setting process," the order states. "We therefore are left with the task of determining the maximum reasonable royalty rate that Rambus may charge those practicing the SDRAM and DDR-SDRAM standards. Royalty rates unquestionably are better set in the marketplace, but Rambus' deceptive conduct has made that impossible."

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