The Implications of Rambus for Antitrust and IP Practitioners ISBA Antitrust and Unfair Competition Law Section and Intellectual Property Section September 11, 2009 Rambus is Final: Where Do We Go From Here? The Implications of Rambus for Antitrust and IP Practitioners Richard P. Beem Chicago USA www.BeemLaw.com BEEM | patent law

Disclosure of Interest Richard Beem formerly represented Qualcomm in a non-patent, non-FTC matter, and he also previously represented Apotex and Torpharm in Hatch-Waxman generic drug patent litigation, including certain litigation against Glaxo SmithKline. This presentation reflects only the views of Richard Beem and not necessarily those of his firm or his clients. BEEM | patent law

Setting the Standard Yesteryear: Cadillac was “Standard of the World” Today’s standard-setters may be tomorrow’s antitrust targets Enforce patents, but play it straight BEEM | patent law

Patent: “Right to Exclude” The Congress shall have power to ... promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. U.S. Const., Art. I, § 8, Clause 8. Every patent shall contain a … grant to the patentee … of the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States. 35 USC §154(a)(1). BEEM | patent law

Patent: Not “Exception” to Antitrust “The patent system, which antedated the Sherman Act by a century, is not an ‘exception’ to the antitrust laws, and patent rights are not legal monopolies in the antitrust sense of that word.” American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1367 (Fed. Cir.), citing Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978) (Markey, J., sitting by designation) BEEM | patent law

The “M-------” Word The loose application of the pejorative term "monopoly," to the property right of exclusion represented by a patent, can be misleading. Unchecked it can also destroy the constitutional and statutory scheme reflected in the patent system. Panduit v. Stahlin Bros., supra. (6th Cir. 1978) BEEM | patent law

The “M-------” Word (cont’d) If the patent be valid, it takes nothing from the public, as does the "monopoly" against which our anti-trust laws are directed. On the contrary, it gives to the public, by definition, that which the public never before had. Panduit v. Stahlin Bros., supra., (6th Cir. 1978) BEEM | patent law

Sherman Act Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine… Sherman Act, 15 USC § 2. BEEM | patent law

FTC Act § 5 (a)(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful. (b) Proceeding by Commission… 15 USC §45 (§ 5 of FTC Act) BEEM | patent law

FTC Cases Standard Setting Deals (Settlements) with Competitors Rambus not liable under antitrust laws for standard setting conduct Rambus, Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) N-Data settled with FTC, agreed not to enforce patents and take $1,000 for each paid-up license Unocal and Chevron settled with FTC, agreed not to enforce gasoline formulation patents Deals (Settlements) with Competitors Bristol Myers Squibb made deal with generic competitor, settled with FTC & paid $2MM fine BEEM | patent law

Rambus v. FTC Rambus owned DRAM patents SSO adopted DRAM standard FTC found Rambus violated § 5(a) of FTC Act by failure to disclose patent applications, monopolistic conduct prohibited by Sherman Act D.C. Circuit reversed FTC: No monopolization violation, thus, no antitrust liability Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) BEEM | patent law

Rambus v. FTC (cont’d) D.C. Circuit found FTC failed to prove Rambus caused anticompetitive (“exclusionary”) effect on consumers Burden on antitrust plaintiff (FTC) Even deception—malice to competitor—is not enough to prove exclusionary FTC found Rambus prevented SSO from Adopting nonproprietary standard Or extracting RAND commitment from Rambus Latter is not antitrust violation Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) BEEM | patent law

Rambus v. FTC (cont’d) D.C. Circuit doubted whether Rambus acted deceptively SSO policy suffered “staggering lack of defining details” No requirements stated re pending patent applications or amendments “Vague but broad disclosure obligations among competitors” “Mere chance” of adoption “someday” (2 yr later) “Unlikely” that SSO “participants placed themselves under… sweeping and early duty to disclose” Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) BEEM | patent law

Rambus v. FTC (cont’d) For Release: 05/14/2009 Statement in the Matter of Rambus The Federal Trade Commission has formally dismissed the complaint in the Rambus matter. “While we remain disappointed by the decision of the Court of Appeals, we of course respect the Court’s opinion and will move forward,” said Richard A. Feinstein, Director of the Bureau of Competition. “The standard-setting issues that were at the heart of this case remain important, both as a matter of antitrust policy, and in order to protect consumers, and we will remain vigilant in this area.” http://www.ftc.gov/opa/2009/05/rambus.shtm BEEM | patent law

Qualcomm Court Cases WCDMA standard-setter Qualcomm potentially liable to Broadcom for monopolization Broadcom v. Qualcomm, 501 F.3d 297 (3rd Cir. 2007) Qualcomm liable for infringing Broadcom’s video compression patents Broadcom v. Qualcomm, 543 F.3d 683 (Fed. Cir. 2008) Qualcomm’s video compression patents unenforceable against Broadcom Qualcomm v. Broadcom, 548 F.3d 1004, 1027 (Fed. Cir. 2008) BEEM | patent law

Qualcomm’s Unenforceable Patents Standard Setting Organization JVT’s Written Policy Subsection 3.2:  members/experts are encouraged to disclose as soon as possible IPR information (of their own or anyone else's) associated with any standardization proposal (of their own or anyone else's). Such information should be provided on a best effort basis. Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, 1013 (Fed. Cir. 2008) BEEM | patent law

Does any company know its own patent holdings? Rambus owns 680 patents Qualcomm – 2,730 Broadcom – 3,348 By comparison: Microsoft – 12,343 Micron – 18,335 * Sept. 10, 2009 search of issued patents by assignee, www.uspto.gov BEEM | patent law

Play it straight Know your patent holdings Take care in standard setting State your holdings truthfully Honor your commitments, e.g., to grant licenses on certain terms Enforce patents against infringers BEEM | patent law

Conclusion Play it straight If your company owns and asserts patents, the FTC and your competitors are watching you. Rambus (DRAM) won on appeal Qualcomm (WCDMA cell phones) has taken its licks, esp. from Fed. Cir. Unocal (gasoline blending) settled with FTC N-Data (Ethernet) settled with FTC Bristol Myers (made deal with generic drug maker), paid $2MM fine to FTC Play it straight BEEM | patent law

ISBA Antitrust and Unfair Competition Law Section and Intellectual Property Section September 11, 2009 Thank you. Richard P. Beem Chicago USA www.BeemLaw.com BEEM | patent law