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Antitrust: Commission accepts commitments from Rambus lowering memory chip royalty rates

Tags: European Commission, Rambus (NASDAQ:RMBS)

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Press release

The European Commission has adopted a decision that renders legally binding commitments offered by Rambus Inc that in particular put a cap on its royalty rates for certain patents for "Dynamic Random Access Memory" chips (DRAMS). The Commission initially had concerns that Rambus may have infringed EU rules on the abuse of a dominant market position (Article 102 of the Treaty on the Functioning of the European Union - "TFEU" 1 ) by claiming abusive royalties for the use of these patents(see MEMO/07/330 ). DRAMS are used to temporarily store data, for example in PCs. The Commission's decision confirms that it now considers the commitments are adequate to address these competition concerns.

Competition Commissioner Neelie Kroes commented: "An effective standard-setting process should take place in a non-discriminatory, open and transparent way to ensure competition on the merits and to allow consumers to benefit from technical development and innovation. Abusive practices in standard setting can harm innovation and lead to higher prices for companies and consumers. For its part, the Commission will vigorously enforce the competition rules in this area, for the benefit of technical progress and European consumers."

The US-based standard setting organisation JEDEC developed an industry-wide standard for DRAMs. JEDEC-compliant DRAMs represent around 95% of the market and are used in virtually all PCs. In 2008, w orldwide DRAM sales exceeded US$ 34 billion (more than €23 billion).

On 30 July 2007, the Commission sent Rambus a Statement of Objections, setting out its preliminary view that Rambus may have infringed then Article 82 of the EC Treaty (now Article 102 of the Treaty on the Functioning of the European Union) by abusing a dominant position in the market for DRAMs. In particular, the Commission was concerned that Rambus had engaged in a so-called "patent ambush", intentionally concealing that it had patents and patent applications which were relevant to technology used in the JEDEC standard, and subsequently claiming royalties for those patents.

To address the Commission's concerns, Rambus has committed to put a worldwide cap on its royalty rates for products compliant with the JEDEC standards for five years. As part of the overall package, Rambus agreed to charge zero royalties for the SDR and DDR chip standards that were adopted when Rambus was a JEDEC member, in combination with a maximum royalty rate of 1.5% for the later generations of JEDEC DRAM standards (DDR2 and DDR3), which is substantially lower than the 3.5% Rambus is charging for DDR.

On 12 June 2009, the Commission consulted interested parties on Rambus's proposed commitments (see MEMO/09/273 ). In light of the comments received, the Commission asked Rambus to clarify a number of issues, such as that all relevant current and future standards are covered and that sale of patents to a third party would not affect the commitments. The Commission has concluded that the commitments in their final form, as modified by Rambus, are adequate to meet the competition concerns expressed in the Statement of Objections.

Standards bodies have a responsibility to design clear rules that ensure the standard-setting process takes place in a non-discriminatory, open and transparent way and hence reduce the risk of competition problems, such as patent ambushes. The Commission will continue to investigate and intervene as appropriate in specific cases where there are competition concerns.

The full version of the commitments is available on the Commission's website at: http://ec.europa.eu/comm/competition/antitrust/cases .