Standard setting Rambus FTC – EU implications?

Standard setting is a big issue in patent circles these days, not only in the US, but equally in Europe. One wonders therefore what effect, if any, the decision of April 22 of the US Court of Appeals for the District of Columbia Circuit in Rambus Inc. v. Federal Trade Commission D.C. Cir.”, No. 07-1086) has for Europe.

The Court of Appeals found that the Federal Trade Commission (“FTC”) failed to demonstrate that Rambus Inc. engaged in conduct that was exclusionary “under settled principles of antitrust law”. Setting aside the commission’s orders restricting Rambus’ ability to set licensing fees for its patents related to DRAM technologies, the court said that the (FTC) Commission failed to sustain its allegation of monopolization. The Commission’s conclusion that Rambus deceived the standard setting organization in order to avoid limits on its patent licensing fees- enabling the monopolist to charge higher prices than it otherwise would have charged -“would not in itself constitute monopolization,” the court held. The court also addressed whether there was substantial evidence that Rambus engaged in deceptive conduct at all, and it expressed “serious concerns” about the sufficiency of the evidence presented by complaint counsel.

From a very first reaction to the Rambus decision it seems that what really bothered the court of appeals was the facts, not the law. It can be inferred from the decision that the CAFC believed that the rules and disclosure requirements of the standard-setting body were not very clear or strong. The FTC found in its decision that those provisions were sufficiently clear, and the court should not have second-guessed the FTC on those factual findings. Under U.S. law, the CAFC should uphold an agency’s factual findings unless there is no substantial evidence supporting the findings. And the court of appeals does not say there is no substantial evidence. But, reading between the lines of the last section of the decision, I think the court disagreed with the FTC’s factual findings. Since it could not properly reverse the FTC on that basis, we tend to think it did so on the law instead. If this quick reading is correct, the real lesson of the decision for standard setting operations in the future is that such bodies need to be very clear and detailed about the extent of disclosure and sharing that they are requiring of their members.

A second reaction is that it seems that the Rambus decision is limited because of a combination of the FTC’s decision basis and its litigation strategy. As the court explained, the FTC found that Rambus’s bad behavior prevented the standard setting body either from adopting a different standard or from extracting a RAND commitment. Since the FTC did not conclusively find the first alternative to be the case , the court of appeals required that the latter alternative must be sufficient to justify the FTC’s decision. But, as the court noted, the law is not entirely favorable on the latter alternative as an antitrust violation. Knowing that, the FTC could have found that the latter alternative was, even if not an antitrust violation, nevertheless an “unfair” trade practice. But the FTC chose to rely solely on the antitrust theory and did not appeal on the unfair trade practice theory. So, it seems to me that the possibility of a finding of an “unfair” trade practice in this case, or at least in a similar setting in the future, is still quite possible, either in this case or in a future case. The court opinion suggests that the evidence in this case may not be strong enough to support an unfair trade practice conclusion. But it does not preclude the FTC from making such a determination. And it certainly could do so in other future cases as well. Consequently, the Rambus decision does not fully insulate companies against such allegations in the future.