Standard setting and patent ambush
8/17/11

Against the Commission, Rambus throws in the towel

On July 30, 2007, following a complaint filed by two companies – Infineon and Hynix – the Commission presented to Rambus a statement of objections, estimating that the latter could have committed an infringement of article 102 TFEU in abusing its position on the DRAM market (more than 95% of the market share). The Commission was in particular worried by the fact that Rambus had launched a patent ambush by deliberately concealing that it held patents and applications for patents concerning the technology used in the JEDEC standard and subsequently claiming royalties for these patents. Two years after the statement of objections Rambus presented a list of commitments aimed at satisfying the concerns expressed by the Commission, thus wishing to bring to an end the proceedings taken out against them. On December 9, 2009, the Commission adopted a decision which makes the commitments made by Rambus legally binding, placing a ceiling on, amongst other things, its royalty rates on certain patents concerning the DRAMs.

‘As far as the definition of abusive practice is concerned, the Commission is thus presenting a new typology of abuse, specially developed for cases of ambush,’ notes Norman Neyrinck. ‘In the words of the Commission, for a dominant company the abuse consists ‘in claiming abusive royalties for the use of its patents at a level which it would not have been able to charge absent its intentional deceptive conduct’. The abuse thus consists of demanding a price higher than the price which could have been requested if the business had not created ‘specific circumstances’ by ‘suppressing relevant information.’    

Comments on the Commission’s decision

Brevet USAAs the Commission stresses, ‘this decision, which does not come to a finding on an infringement, legally binds Rambus to the commitments it offered and ends the Commission's investigation. If Rambus were to break its commitments, the Commission could impose a fine of up to 10 percent of its annual turnover, without having to find an infringement of the antitrust rules’..In the case of Rambus the decision points out that DRAM technology is characterised by rapid obsolescence; as a consequence the commitments are thus limited to a period of five years. As far as the infringement properly speaking is concerned, the Commission has estimated that the dominant position existed because it created a ‘locked-in’ effect – the other companies could not bypass the DRAM standards. Norman Neyrinck is nonetheless more circumspect as to the proof of abuse as such, because of the practical difficulties of calculating the exact level at which a cost should be considered abusive. Let us remember that the American authorities did not conclude that Rambus had committed an infringement. An important point which should be stressed, adds the author, is that the Commission hoped to bring this affair to a rapid conclusion: the Commission’s decision was thus taken as Neelie Kroes was coming to the end of her mandate as Commissioner for Competition and wanted to leave her successor a free hand. And all the more so that in the only other case of a business company suspected of ambushing, in this case Qualcomm, the Commission drew a blank.

‘It is risky to say the least to estimate what the outcome to the affair would have been had Rambus had not submitted Commitments to the Commission for settlement in full. As often happens after a commitments decision the two parties shout from the rooftops: Rambus in stating that in the end the Commission has found it not guilty of any illegality; the Commission in boasting that it has drawn concessions from Rambus,’ concludes Norman Neyrinck.

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