European Commission accepts commitments offered by Rambus

29 January 2010

Jeremy Robinson

On 9 December 2009, the European Commission announced that it had adopted a decision making legally binding the commitments offered by Rambus, to address the Commission’s Article 102 TFEU case.  The Commission alleged that Rambus had infringed Article 102 TFEU by engaging in a “patent ambush” in relation to Dynamic Random Access Memory (DRAM) chips. Rambus has committed to cap royalty rates for these products.

Background

A patent ambush relates to deceptive conduct in the context of a standard-setting process. A firm carrying out a patent ambush declines or omits to disclose the existence of patents and patent applications before the standard is set, but later claims that those patents and patent applications are relevant to the standard which has been adopted.  Such patentee then claims higher royalties for use of its technology than would be possible if it were subject to the standardisation agreement requirements to set FRAND rates (fair, reasonable and non-discriminatory terms).

The Commission began its investigation into Rambus following receipt of a joint complaint from Infineon and Hynix (Infineon subsequently withdrew the complaint). A statement of objections was issued to Rambus on 30 July 2007. The Commission’s preliminary view was that the level of royalties claimed by Rambus from industry standard-compliant DRAM chips (which Rambus would not have been able to charge had it not carried out allegedly deceptive conduct) may have infringed Article 102 TFEU. The Commission also provisionally found that Rambus’ behaviour had undermined confidence in the standard-setting process. The Commission noted that an actual breach of the relevant standard-setting body’s rules was not a precondition for a finding of abuse in such circumstances.

If the Commission finds that there has been an infringement of Articles 101 or 102 TFEU, it may under Article 7 of Regulation 1/2003 impose “any behavioural or structural remedies which are proportionate to the infringement committed and necessary to bring the infringement effectively to an end”. Under Article 9 of Regulation 1/2003, where the Commission intends to adopt a decision requiring that an infringement be terminated, the undertaking(s) concerned may offer commitments to meet the Commission’s concerns. Such commitments are made legally binding by a “commitment decision” of the Commission, which also states that there are no longer grounds for action by the Commission. If the company concerned breaches the commitments, under Article 23(2)(c) of Regulation 1/2003 the Commission may impose a fine of up to 10% of that company’s turnover, without needing to demonstrate an infringement of Article 102.

Commitments

Rambus has committed to the following royalty caps, which will be binding on it for a total period of five years:

  • For the SDRAM and DDR DRAM standards, which were adopted during the time in which the Commission considers Rambus may have been carrying out a patent ambush, Rambus agrees not to charge royalties.

  • For subsequent standards (DDR2, GDDR3 and GDDR4 DRAMs), Rambus commits to a maximum royalty rate of 1.5% per unit of selling price.

  • For SDR Memory Controllers, Rambus commits to a maximum royalty rate of 1.5% per unit of selling price until April 2010, after which the maximum royalty rate will drop to 1.0%.

  • For DDR, DDR2, GDDR3 and GDDR4 Memory Controllers, Rambus commits to a maximum royalty rate of 2.65% per unit of selling price until April 2010, after which the maximum royalty rate will drop to 2.0%.

 Comment

This is a useful commitment decision insofar as it indicates in a specific context the level of royalties the Commission may be taken to regard as not being abusive.

However, as an Article 9 commitments decision, its value as a precedent for other cases will be limited by two factors: (i) the decision is in short-form, rather than being fully-reasoned and (ii) this means that there is no scope for the European Courts (The Court of Justice of the European Union – formerly ECJ, and the General Court - formerly CFI) to review the legality of the decision and in particular the legal basis of finding an abuse of dominant position by way of patent ambush.  The Commission has indicated that it will continue to monitor activity in standard-setting organisations and to take enforcement action.

Source: Commission press release and commitment decision, 9 December 2009