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Shoulda, Woulda, Coulda: JEDEC's Poorly Worded Patent Policy Mandates Reversal of Fraud Verdicts Against JEDEC Member

San Francisco Daily Journal
April 7, 2003

Article

In this case there is a staggering lack of defining details in the EIA/JEDEC patent policy. A policy that does not define clearly what, when, how and to whom the members must disclose does not provide a firm basis for the disclosure duty necessary for a fraud verdict . . . JEDEC could have drafted a patent policy with a broader disclosure duty. It could have drafted a policy broad enough to capture a member's failed attempts to mine a disclosed specification for broader undisclosed claims. It could have. It simply did not.

With those words, the Federal Circuit pointed a finger at JEDEC when it reversed jury verdicts finding that Rambus had acted fraudulently when participating on a JEDEC standards committee.

Standard-setting committees often include a wide variety of interested industry members, often direct competitors, who propose and discuss the available technologies on which to base specifications or standard to accomplish a desired product or process. Such a de jure standard, once adopted and published by an organization like IEEE, can then become an industry-wide de facto standard and provide a large and potentially captive market. There is, therefore, great incentive to have one's technology incorporated into that standard. If market suppliers need a patent license to produce a standard-compliant product, then the market for those products is controlled by the patent owner. 

Standard-setting organizations, however, typically discourage adoption of a standard requiring patented technology, taking certain steps to minimize the chance of that occurring. While the organizations may not perform patent searches, they usually have policies that require their members to identify the patents or pending applications related to the proposed standard and to agree to license those patents under reasonable and nondiscriminatory terms. If a standard being developed would require that complying products infringe patented subject matter and if, for example, the member patent owner fails to provide assurances that it either will not assert its patents or will license them under favorable terms, the standards organization will thus have the option of basing the standard on other technology.

In Rambus Inc. v. Infineon Technologies AG, 318 F.3d 1081 (Fed. Cir. 2003), the U.S. Court of Appeals for the Federal Circuit considered whether and to what extent a company's participation on a JEDEC (Joint Electron Devices Engineering Council) standards committee gave rise to a duty to disclose its patents and pending patent applications relating to the standard being developed by that committee. While this duty has, in the past, often been considered in the context of patent unenforceability, Infineon claimed that Rambus committed fraud under Virginia state law in failing to make an appropriate disclosure to JEDEC.

Rambus makes its revenue by licensing its patent portfolio to companies that manufacture semiconductor memory devices.  JEDEC is a standards-setting body associated with the Electronic Industries Association (EIA). Rambus officially joined JEDEC in early 1992 and remained a member until June 1996, when it officially withdrew. During that time, Rambus was a member of committee JC-42.3, which developed industry standards for synchronous dynamic random access memory (“SDRAM”) and double data rate SDRAM ("DDR-SDRAM") chips. JEDEC adopted the initial version of the SDRAM standard in early 1993 and released several revised versions thereafter. It began work on the DDR-SDRAM standard in December 1996 and adopted that standard sometime in 2000.

Rambus disclosed one patent—its first issued RDRAM patent—to JEDEC in September 1993. Although it had other applications pending while it was a JEDEC member that it believed covered the SDRAM standard, Rambus never disclosed them to JEDEC.

Rambus sued Infineon in late 2000, alleging infringement of four U.S. patents. These patents issued from applications Rambus filed after withdrawing from JEDEC. Infineon counterclaimed, alleging fraud for Rambus's failure to disclose patents and patent applications having claims related to the SDRAM and DDR-SDRAM standards.

A jury heard the fraud case and found that Rambus committed fraud for failing to disclose its patents and patent applications during the SDRAM and DDR-SDRAM standardization process. Ruling on Rambus's post-trial motions, the district court let stand the jury's fraud verdict with respect to the SDRAM standard but reversed the jury as to the DDR-SDRAM standard. On appeal, the Federal Circuit (in a split opinion) exonerated Rambus. The court affirmed the grant of JMOL on the DDR-SDRAM fraud verdict and concluded that the district court should have also reversed the jury's SDRAM fraud verdict as unsupported by substantial evidence. 

The most interesting and important aspect of the case is the court's analysis of Rambus's duty of disclosure. The court began by briefly addressing the history of the EIA/JEDEC patent-disclosure policy. While initially the EIA/JEDEC policy referred only to "patented" technology, in late 1993, EIA/JEDEC revised the policy to also refer to "pending patents." The evidence showed that JEDEC members were informed of the patent policy at committee meetings only through the language of the "EIA/JEDEC PATENT POLICY SUMMARY," which recited:

Standards that call for the use of a patented item or process may not be considered by a JEDEC committee unless all of the relevant technical information covered by the patent or pending patent is known to the committee, subcommittee, or working group. 

Although the Federal Circuit concluded that this language of JEDEC's policy imposed no disclosure duty on its members, the court nevertheless treated the policy as imposing a duty because JEDEC members did so. A JEDEC manual also directed committee chairmen to "call attention to the obligation of all participants" to divulge its relevant patents or patent applications, but there was no evidence that that directive was ever shown to JEDEC members.  

With respect to the scope of the duty, the court focused on the language of the patent policy referring to information "covered by" the patent or patent application, concluding that the scope of the disclosure duty was not "unbounded," but depended on the subject matter claimed in the patent. In the court's words, "the disclosure duty operates when a reasonable competitor would not expect to practice the standard without a license under the undisclosed claims." The court further ruled, relying on testimony from relevant witnesses, that the duty was not so broad as to require disclosure of a member's intentions to file or modify patent applications.

The Federal Circuit then turned to the "when" part of the disclosure duty to determine if Rambus participated in JEDEC proceedings at a time when it had a duty to disclose. The court rejected Infineon's argument that discussions before formal consideration of a standard triggered the duty, concluding instead that "the most a reasonable jury could conclude is that the disclosure duty is triggered when work formally begins on a proposed standard."

The Federal Circuit concluded by determining whether there was substantial evidence supporting the jury's fraud verdicts. With respect to the SDRAM standard, the court's reversal of the fraud verdict turned on its conclusion that Rambus's patent claims did not in fact cover the SDRAM standard. That Rambus might have believed otherwise was irrelevant, providing no basis for upholding the verdict because the majority refused to expand the duty to include a "subjective belief" component. The majority did, however, openly call Rambus's "business ethics”"into question for trying to cover the SDRAM standard while a member of the committee and concluded that while Rambus's conduct "might constitute fraud under a different patent policy," it was not fraud under EIA/JEDEC's policy.

As for the DDR-SDRAM standard, Rambus formally withdrew from JEDEC in June 1996, about six months before formal work on that standard even began. There was thus no evidence supporting the jury's implicit finding that Rambus had patents or patent applications that should have been disclosed before the standard came under formal consideration. Plainly and simply, there was no duty for Rambus to breach.

Judge Prost dissented, believing that the jury's SDRAM fraud verdict should have been sustained. Judge Prost found a broader disclosure duty based on the statement in the JEDEC manual referring to an obligation of members to identify patents/patent applications "that might be involved in the work they are undertaking" on the committee. The "might be involved in" language, she wrote, requires more than just disclosure of claims covering the final standard. This language also takes into account the possibility that the committee "considers, debates, rejects, and amends various proposals" during its work.

Applying this broader duty to the evidence, Judge Prost would have sustained the jury's SDRAM fraud verdict on the evidence of Rambus's conduct. The evidence indicated that, while it was a member, Rambus actively amended pending patent claims using information it obtained at JEDEC meetings and decided that "it was better to remain silent" than disclose.

In sum, the Rambus case marks a departure in the jurisprudence of standards-setting disclosure duty. Unlike earlier cases penalizing the patentee for failing to adequately disclose patents, Rambus excuses a patentee's nondisclosure (even an apparently intentional one) where the disclosure duty is vague, penalizing instead the organization for failing to clearly explain the duty it seeks to impose on its members. JEDEC and like organizations just received their wake-up call—look for them to review their patent-disclosure policies and where necessary rewrite them to close the hole created by Rambus.

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