Antitrust Advisory: FTC's Rambus Decision Concerning Patent Holder's Behavior in Standard-Setting Process Reversed by D.C. Circuit

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On April 22, 2008, the U.S. Court of Appeals for the D.C. Circuit reversed and remanded an earlier ruling of the Federal Trade Commission (FTC) in In re Rambus, Inc.1 In a unanimous decision, the appellate court ruled that the FTC erred in holding that Rambus violated Section 2 of the Sherman Act by attempting to enforce patent rights covering technology that was essential to implement the SDRAM and DDR SDRAM standards, both of which define operational interfaces for random access memory chips. The court also questioned whether, on remand, the FTC would be allowed to ground a violation on the theory that Section 5 of the Federal Trade Commission Act (FTC Act) gives the agency a broader mandate to challenge conduct than is found in the Sherman Act and other antitrust statutes. The court’s decision is clearly a setback for the FTC in its effort to use antitrust theories to challenge the exercise of patent rights in certain situations where a patent owner may have participated without full disclosure in the adoption of an industry standard. In addition, the D.C. Circuit’s

reversal of the FTC’s decision demonstrates that the line in the sand the FTC attempted to draw in its Rambus decision is not set in stone; the FTC must meet a high burden to prove that deceptive behavior by a monopolist is anticompetitive.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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