FTC Pushes Penalties for Rambus

The Federal Trade Commission has asked an administrative law judge to issue a default judgment against memory chipmaker Rambus and go straight to the punishment phase in the FTC's anticompetition case against the company because Rambus allegedly destroyed documents related to the matter.

Rambus has filed a strenuous objection to the motion for default judgment, contending the FTC has not and cannot prove that the company acted in bad faith when it adopted its "document retention" policy in 1998, which is a requirement of a default judgment. Rambus argues that its policy is no different from that of "most" public companies.

Motives Challenged

"Unless intended simply as character assassination, this motion likely reflects a growing recognition ... that there are serious holes in their case," Rambus said in a response it released. The FTC motion has not been made publicly available.

The FTC filed a complaint against Rambus last June, alleging Rambus did not tell the Joint Electron Device Engineering Council Solid State Technology Association (JEDEC) that it held patents on SDRAM technology during standard-setting discussions for that technology.

Rambus has also been involved in several private lawsuits over the past few years with DRAM vendors such as Infineon Technologies, Hynix Semiconductor, and Micron Technology. Rambus claims the DRAM vendors are infringing on its memory technology patents and not paying licensing fees.

The latest turn in the legal battle with the FTC stems from the Commission's misinterpretation of Rambus' internal document policy, said John Danforth, Rambus' general counsel. Like most companies, Rambus backs up its e-mail servers as a hedge against a catastrophic system breakdown. The company erases those tapes every three months under the document policy, instituted years before the FTC filed its formal complaint, Danforth said.

In its motion for summary judgment, the FTC accuses Rambus of "willful and bad-faith destruction of evidence," according to an FTC spokesperson. She declined to comment further regarding specific documents or e-mail until the FTC's motion has been made public.

Danforth denied the claims of document destruction. "It's a way to make the company look bad and to make executives look bad," he said, referring to the public sentiment after a year of high-profile fraud and corruption cases among U.S. companies.

Case Background

The proceeding--which is similar to a trial--before Administrative Law Judge James P. Timony is scheduled for April 9. Both the FTC and Rambus have asked the judge to rule on the motion for default judgment as soon as possible, Danforth said.

The FTC is an independent federal agency created to deal with "unfair methods of competition" and "unfair or deceptive acts or practices." The commission is meant to act on behalf of consumers, and since its creation in 1914 has received authority to enforce a range of consumer protection laws.

In the case of Rambus, the FTC filed an administrative complaint with Judge Timony. FTC administrative law judges are independent, but work for the commission. Decisions by the administrative law judge may be appealed by either side to the full Commission, and the Commission's decision can then be appealed to federal court.

Rambus's RDRAM is mainly used for high-performance, computing-intensive applications, while most PC vendors use the less expensive DDR SDRAM in systems. RDRAM has won more acceptance among gamers, and is used in the extremely popular Sony Playstation 2.