Electronic Newsletter of the
Intellectual Property Committee
ABA Section of Antitrust Law
September 24, 2001
Following a jury verdict in Rambus v. Infineon on May 9, 2001, Veronica Lewis accepted an invitation to explain this fascinating litigation to members of the AT-IP Listserv. Her June 6, 2001 article resulted in a number of additional members to our listserv.
In anticipation of our September 25, 2001 program, Ms. Lewis has revised and expanded her earlier article to reflect subsequent developments. We are pleased to bring you Rambus v. Infineon—The Latest Standard Setting Patent Disclosure Guidance. Ms. Lewis is a partner with Vinson & Elkins and is located at the firm's Dallas office. Ms. Lewis specializes in complex commercial litigation, including intellectual property and antitrust matters.
Since a number of papers, including USA Today (September 10,2001) and the Wall Street Journal (September 11, 2001) have reported that the FTC has commenced an investigation into whether Rambus and Sun Microsystems Inc. "encouraged standards organizations to adopt new computer-memory technologies covered by patents they owned but didn't disclose" we will await to learn how the next chapter develops.
Vice Chair-Electronic Communication
Intellectual Property Committee
281.834.1642 or 713.256.7941
Rambus v. Infineon—The Latest Standard Setting Patent Disclosure Guidance
Veronica Smith Lewis
Vinson & Elkins, l.l.p.
The recent rulings in Rambus v. Infineon provide the most comprehensive guidance thus far regarding the existence and scope of the patent disclosure obligations that arise as a result of participation in a standard setting body.
Rambus sued Infineon in the Eastern District of Virginia for infringement of four (4) patents covering technology related to semiconductory memory devices. Rambus maintained that certain forms of Infineon’s Dynamic Random Access Memory ("DRAM"), including Infineon’s Synchronous Dynamic Random Access Memory ("SDRAM") devices and double data rate ("DDR") SDRAM devices, infringed Rambus patents issued in 1999 and 2000. DRAM chips are the dominant form of memory employed in the semiconductor industry today.
Rambus believes its patents cover the technology incorporated in the SDRAM and DDR SDRAM industry standards, and as a result, virtually all manufacturers of such devices are obligated to obtain licenses under its patents. Rambus has thus taken a very aggressive stance on licensing. It has publicly asserted: "[t]hose companies that decide to litigate" rather than voluntarily enter into licensing agreements "will pay higher royalty rates." This is a significant threat given the fact that industry heavyweights such as Samsung, NEC, and Toshiba have apparently entered into Rambus licensing agreements with royalty rates as high as 3.5‑percent. A company forced to pay an even higher rate would be at a significant competitive disadvantage. Moreover, Rambus has made the stakes even higher by explaining that it "may not license those companies that litigate and lose." Thus, if Rambus is right about the scope of its patents, a company may be foreclosed from production of SDRAM and DDR SDRAM devices altogether if it does not voluntarily enter into a licensing agreement with Rambus.
The pressure on Infineon to acquiesce to Rambus’ licensing demands was thus immense. Infineon, nevertheless, chose to counter Rambus’ infringement claims using two, seemingly, inconsistent theories. Defensively, Infineon maintained that its industry standard SDRAM and DDR SDRAM devices do not infringe Rambus’ patents. Infineon also simultaneously raised offensive counterclaims premised on the notion that Rambus had, while participating in the industry group that established the SDRAM and DDR SDRAM standards, surreptitiously obtained patents that covered products that comply with these standards.
Infineon’s offensive claims raised a number of important questions about the patent disclosure obligations that arise when a company participates in a standards setting body. Infineon claimed that Rambus was a long time member of the body that established the SDRAM and DDR SDRAM industry standards, Committee Number 42.3 of the Joint Electronics Devices Engineering Infineon Council ("JEDEC"). Infineon alleged that JEDEC policy requires members of such committees to disclose all known patents and pending patent applications that relate to technology under consideration for adoption as part of an industry standard and to state whether they are willing to license any such patented technology for free or on reasonable, non-discriminatory terms. According to Infineon, this policy serves a number of important purposes:
First, it operates to prevent any single company from secretly capturing the industry standard by remaining silent while JEDEC adopts a standard that, unbeknownst to the other JEDEC members, is encompassed by a member’s patent or pending patent application. In other words, the policy operates to provide the industry an opportunity to develop open standards free from potential blocking patents. Second, the policy operates to prevent an unscrupulous member from manipulating the standards setting process to its advantage by filing patent applications on technology learned about through participation in JEDEC. Finally, the policy ensures that licenses to patent rights that are implicated by a JEDEC standard are offered to members of JEDEC for free or for a reasonable and non-discriminatory royalty. This disclosure obligation also allows JEDEC and its members to design around such potential or actual patent rights if JEDEC members are unable to obtain a license under satisfactory terms.
Infineon asserted that Rambus had failed to disclose relevant patent applications it had pending while it was a member of JEDEC Committee 42.3, made disclosures that led other members of that Committee to believe Rambus was in fact properly disclosing all relevant patents and applications, and used information obtained as a result of its participation in JEDEC Committee 42.3 to draft patent claims that covered the SDRAM and DDR SDRAM standards. Infineon maintained that Rambus was guilty of monopolization and attempted monopolization under 15 U.S.C. § 2, fraud, breach of contract, and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") as a result of this conduct.
Infineon has, thus far, been successful on both its defensive and offensive fronts. After both parties concluded presentation of evidence in support of their case, the Court ruled that Infineon’s SDRAM and DDR SDRAM products do not infringe Rambus’ patents as a matter of law. In fact, the Court has now ruled that Rambus’ patent infringement claims were so baseless that Infineon should be awarded $7,123,989.52 in attorneys’ fees and costs. Rambus’ infringement allegations were clearly believed to have no merit whatsoever. The Court explained:
the clear and convincing evidence shows that Rambus knew, or should have known, that its patent infringement suit was baseless, unjustified, and frivolous—one in which reasonably ‘intelligent people should have known would have no chance of success’ . . . . Rambus’ construction of the disputed claim terms and its theory of infringement were directly at odds with the intrinsic evidence contained in specifications and prosecution histories of the patents-in-suit . . . . Rambus’ view of the patents was completely untethered to the language of the patent claims or the written description, and in many cases, flatly contradicted the written description.
Nevertheless, the Court allowed Infineon’s fraud and RICO theories to go to the jury. The jury concluded that Rambus was liable for actual and constructive fraud as a result of its improper SDRAM and DDR SDRAM related patent disclosure and awarded Infineon $1 in nominal damages and punitive damages of $3.5 million. The Court has now reduced the punitive damages award to $350,000, granted Rambus judgment as a matter of law on the constructive fraud claim, and granted Rambus judgment as a matter of law on the actual fraud claim to the extent that it was based upon failures to disclose to the JEDEC DDR SDRAM standard committee. However, the Court has upheld the actual fraud verdict premised on Rambus’ improper patent disclosure to the JEDEC SDRAM standards committee.
Rambus has thus been found to be guilty of fraud for failing to disclose information related to its SDRAM patents to a JEDEC Committee notwithstanding the fact that the Court has ruled that Rambus’ SDRAM patents do not cover the JEDEC SDRAM standard as a matter of law. This anomalous result raises a host of questions about the patent disclosure obligations of an industry standard setting participant. The latest answers from Rambus v. Infineon are outlined below.
What Needs to Be Disclosed—Issued Patents, Patent Applications, Predecessor Applications?
Rambus claimed it could not be found to have failed to comply with JEDEC’s disclosure requirements because: (1) the JEDEC Manual of Organization and Procedure did not explicitly require it to disclose patent applications until it was amended in 1993; (2) it disclosed the only issued patent that it obtained while a member of JEDEC Committee 42.3; and (3) it did not file the applications which resulted in the SDRAM and DDR SDRAM patents it asserted against Infineon until after it had ended its membership in JEDEC Committee 42.3. Rambus asserted it surely was not required to disclose what did not exist while it participated in the standards setting process.
Infineon found these arguments "disingenuous", and the Court ultimately agreed. The Court found that although "the JEDEC manual did not explicitly provide, until 1993, that pending patents were to be disclosed, Infineon presented clear and convincing evidence at trial, through JEDEC members and representatives, that, at all times at issue before 1993, the duty to disclose applied to pending applications." Significantly, the Court found that "Infineon demonstrated that Rambus officials themselves understood that it was JEDEC’s practice to require disclosure of pending patent applications." The Court found that Rambus’ disclosure of its single issued ‘703 patent "actually misrepresented the scope of Rambus’ pending patents because the ‘703 patent admittedly did not relate to the SDRAM work" of Committee 42.3. Moreover, the Court rejected Rambus’ contentions regarding the timing of the applications for and issuance of the patents asserted against Infineon noting that "Infineon did not circumscribe its fraud claim only to the four patents-in-suit; instead, it alleged that Rambus committed fraud upon Infineon (as a member of the JEDEC committee), by failing to disclose any pending patents related to the SDRAM work", and "the four patents-in-suit are divisional or continuation applications of other Rambus patents which were pending during the time that Rambus was a member of the JEDEC and at a time when Rambus had a duty to disclose its pending patents."
Which Patents or Applications Must be Disclosed?
Rambus was found to be guilty of fraud because it failed to disclose pending patent applications "relating to JEDEC’s SDRAM work". The JEDEC disclosure standard was quite broad and vague. JEDEC participants were "to inform the meeting of any knowledge they may have of any patents, or pending patents, that might be involved in the work they are undertaking." Infineon presented no expert testimony regarding the scope of the patent applications Rambus was alleged to have improperly failed to disclose or their relationship to the SDRAM standards. Instead, the Court found that evidence which demonstrated that Rambus intentionally set out to draft patent claims that were designed to cover the technology under consideration by JEDEC was sufficient to establish a relationship between the patent applications and the JEDEC standard.
How Much Disclosure is Required?
Rambus maintained that it met its disclosure obligations because its application for an international patent through the World Intellectual Property Organization ("WIPO") became public information in October 1991. Rambus’ WIPO application had a written description that was identical to the one in all Rambus’ U.S. patents, including the SDRAM and DDR SDRAM patents asserted against Infineon. Rambus’ WIPO application was discussed during JEDEC meetings, and Rambus claimed that, as a result, all its inventions were disclosed, and such disclosure put all relevant observers on notice that it was seeking patent protection in technological areas related to the SDRAM and DDR SDRAM industry standards under consideration.
The Court rejected this contention. While the written description in the WIPO patent application was the same as that in the undisclosed SDRAM patents, "Rambus presented no evidence at trial indicating that the description, on its face, relates to SDRAMS." Moreover, the WIPO patent claims, at the relevant time, related only to a predecessor RDRAM technology.
At What Point in The Standard Setting Process Must Disclosure be Made?
The Court’s judgment as a matter of law ruling with respect to the DDR SDRAM actual fraud claim turned on a resolution of this issue. Rambus maintained that it had no duty of disclosure with respect to DDR SDRAM standard setting because it was no longer a member of JEDEC when one of its Committees began to work on that standard. Infineon claimed Rambus did have a DDR SDRAM duty of disclosure because "certain ‘concepts’ which ultimately made their way into the DDR SDRAM standard, were discussed while Rambus was a member of JEDEC."
The JEDEC witnesses who testified gave conflicting evidence on this point. The Court concluded that Infineon "failed to prove, by clear and convincing evidence, that, before the DDR SDRAM standard-setting process actually began, Rambus had a duty to disclose." Because there was no clear DDR SDRAM duty to disclose, Rambus’ failure to do so could not be a basis for a fraud finding, and accordingly, the Court granted Rambus judgment as a matter of law on this claim.
Can Improper Standard Setting Patent Disclosure be The Basis For an Antitrust Violation?
Infineon’s claim that Rambus’ improper disclosures were predatory acts taken as part of a scheme to monopolize the "DRAM technology market" never reached the jury. After the Court ruled that Infineon’s industry standard SDRAM and DDR SDRAM products indeed do not infringe Rambus’ patents, Infineon withdrew its monopolization claims, and the Court granted Rambus’ motion for judgment as a matter of law on Infineon’s attempted monopolization claim, concluding that Infineon had failed to submit evidence establishing the scope of a relevant geographic market.
Infineon had pled a relevant United States market and argued that such a geographic market was necessarily "implicit" given that Rambus relied upon United States patents as the basis for its alleged predatory conduct. Infineon maintains that the "U.S. patent laws compel the definition of the relevant geographic market as the United States in a monopolization case based on U.S. patent enforcement" and relies upon a decision from the Northern District of Texas, Buehler A.G. v. Ocrim S.p.A., in support of its position. 
Fourth Circuit precedent consistently requires a party asserting a Section 2 antitrust claim to offer proof of a geographic market. An appeal of the court’s ruling on Infineon’s attempted monopolization claim thus may provide interesting precedent regarding the type of geographic market proof an antitrust plaintiff must submit to establish antitrust claims based on alleged misuse of United States patent rights. Interestingly, it would be the Federal Circuit, which would hear an appeal, that would establish this precedent. However, it appears unlikely that any precedent addressing antitrust liability based on alleged improper patent disclosure before a standards setting body is likely to arise from appeal of Rambus v. Infineon.
Thus, ultimate resolution of Rambus v. Infineon is not likely to provide guidance to those attempting to assess the antitrust implications of patent disclosure issues arising as a result of participation in an industry standard settings body. The In re Dell Computer Corp. consent decree makes it clear that the Federal Trade Commission ("FTC") believes it is a violation of antitrust law for a company to make the false affirmative certification that it has no relevant issued patents to a standard setting body that requires disclosure of such patents. Notably, the FTC proceeded under Section 5 of the Clayton Act which makes unfair methods of competition and unfair or deceptive acts or practices unlawful. The FTC was not required to and did not allege any relevant geographic or product market. or the existence of market power in any such markets.
While the standard setting patent disclosure arena thus remains an antitrust minefield, Rambus v. Infineon makes one thing clear. Limited or improper patent disclosure to a standards setting body can have serious adverse consequences.
 Rambus, Inc. v. Infineon Technologies AG, No. Civ. A. 3:00CV524, 2001 WL 913972 (E.D. Va. Aug. 9, 2001).
 See id. at *1; First Amended Complaint for Patent Infringement, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. Civ. A. 3:00CV524).
 Substituted First Amended Answer and Counterclaims to Rambus’ First Amended Complaint at pp. 35-36, Rambus, Inc. v. Infineon Technologies, AG, E.D. Va. (No. Civ. A. 3:00CV524) [hereinafter "Infineon Answer and Counterclaims"].
 Tony Smith, Rambus’ "very high" DDR royalty revealed; The Register, May 25, 2001, available at http://www.theregister.co.uk/content/3/18706.html.
 Infineon Answer and Counterclaims at pp. 35-36.
 See id. at p. 17.
 See id.
 See id at pp. 33-57.
 See id. at pp. 39-40.
 See id. at pp. 30-77.
 May 4, 2001 Transcript of Trial Proceedings at p. 28, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. Civ. A. 3:00CV524).
 Rambus, Inc. v. Infineon Technologies AG, No. Civ. A. 3:00CV524, 2001 WL 913973 (E.D. Va. Aug. 9, 2001),
 Infineon withdrew its monopolization claim, and the Court granted Rambus judgment as a matter of law on Infineon’s breach of contract and attempted monopolization claims. Rambus, 2001 WL 913972, at *1.
 Id. at *2. The jury rejected Infineon’s RICO claim. Id.
 The Court reduced the punitive damages award in accordance with Va. Code § 8.01-38.1. Id.
 See id. at *5-*6 ("constructive fraud cannot, as a matter of Virginia law, be premised on an fraudulent omission or concealment of a material fact").
 See id. at *18-*20.
 See id. at *6-*18.
 See Plaintiff Rambus Inc.’s Brief in Support of its Motion to Dismiss, Motion to Strike and Motion for a More Definite Statement at pp. 2-3, 6-10, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. Civ. A. 3:00CV524) (hereinafter "Rambus Motion to Dismiss"). Rambus attended Committee 42.3 meetings from December 1991 until December 1995. It formerly withdrew from the Committee by letter dated June 17, 1996. Rambus disclosed U.S. Patent No. 5,243,703, which issued on September 7, 1993, to the Committee. The applications for the Rambus patents asserted against Infineon were submitted between 1997 and 1999 and issued in 1999 and 2000, long after Rambus left Committee 42.3. See Rambus, 2001 WL 913972, at *4, *18.
 See Defendants’ Opposition to Rambus’ Motion to Dismiss and Motion to Strike at p. 3, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. Civ. A. 3:00CV524).
 Rambus, 2001 WL 913972, at *3.
 Id. at *6-*7.
 Id. at *10.
 Id. at *4, *9 (emphasis in original).
 Id. at *7-*8.
 Id. at *3 (emphasis added). This was the standard set forth in the 1993 amended JEDEC Manual of Organization. The Court accepted Infineon’s witnesses’ testimony that this requirement was practiced prior to 1993. See id. at *8.
 See id.
 See id. at *7-*8.
 See id. at *9; Rambus Motion to Dismiss at pp. 2-3, 7-8, 13-15.
 Rambus, 2001 WL 913972, at *9.
 Id. at *18. JEDEC Committee 42.3 did not begin working on the DDR SDRAM standard until December 1996. Rambus attended its last JEDEC meeting in December 1995 and formally withdrew from JEDEC by letter dated June 17, 1996. Id.
 Id. at *19.
 The Chairman of Committee 42.3 testified that the duty to disclose was triggered during the balloting of a proposed standard. However, a JEDEC consultant testified that Rambus had a duty to disclose when several presentations related to technology ultimately incorporated in the DDR SDRAM standard were made. See id. at *19-*20.
 Id. at *20.
 See Infineon Answer and Counterclaims at pp. 32-33, 70-75.
 May 4, 2001 Transcript of Trial Proceedings at p. 100, Rambus, Inc. v. Infineon Technologies AG, E.D. Va. (No. Civ. A. 3:00CV524).
 See id. at pp. 158-59.
 See id. at pp.138-43; Infineon Answer and Counterclaims at p. 32.
 Infineon’s Motion for Reconsideration of the Court’s May 4, 2000 Ruling Granting Judgment as a Matter of Law on Infineon’s Attempted Monopolization Claim at p. 1, Rambus, Inc. v. Infineon Technologies A.G., E.D. Va. (No. Civ. A. 3:00CV524).
 836 F. Supp. 1305 (N.D. Tex. 1993). There, the court explained: "The geographic market in this patent case is limited to the United States . . . . The limitation reflects the view that the United States is the only geographic market where a U.S. patent can be ‘misused’ in a manner leading to antitrust violations . . . ." Id. at 1325.
 See, e.g., Consul Limited v. Transco Energy Co., 805 F.2d 490, 493 (4th Cir. 1986), cert. denied, 481 U.S. 1050 (1987); Satellite Television & Associates Res., Inc. v. Continental Cablevision of Va., Inc., 714 F.2d 351, 355 (4th Cir. 1983), cert. denied, 465 U.S. 1027 (1984).
 The Federal Circuit has exclusive jurisdiction over any appeal from a final decision of a United States District Court when the jurisdiction of the District Court was based, in whole or in part, on the presence of a claim arising under the patent laws. See 28 U.S.C. §§ 1295(a)(1), 1338(a).
 Consent Decree No. C3658, 121 F.T.C. 616, 1996 WL 350997 (May 20, 1996).
 See id.
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