Danforth: FTC Patent Reform Is Needed

Last month, John Danforth, former general counsel of Rambus and legal adviser published an article in the Legal Times that was highly critical of the FTC's "much ballyhooed but misguided antitrust case against Rambus Inc." that was recently overturned by the DC Circuit (see earlier 271 coverage here).

Last week, the FTC filed a Petition for Rehearing En Banc seeking reversal of the DC Circuit opinion that rejected antitrust sanctions against Rambus for its alleged non-disclosures in a standard setting organization (“SSO”) called ‘JEDEC.’ This move by the FTC set off another response from Danforth who states that the petition "clearly and inherently evidences the need for reform," citing four ways in which the FTC is overstepping its bounds against Rambus in the petition:

(1) The FTC continues to “aggressively” overstate its case,
(2) The FTC takes an aggressive approach to other parts of the record in the case,
(3) The FTC’s en banc petition is merely the latest example of the FTC’s inability to acknowledge that its theory against Rambus did not hold up -- and has been overwhelmed by new developments and more recently discovered facts, and
(4) The FTC has added the potential for yet further delay in its six year old, now-very-stale case.

Notes Danforth:

Litigators litigate. Zealotry is often regarded as a virtue. But when, as with the FTC, the prosecutor and the judge are one and the same, restraint and reassessment should be built into the process. This is even more true when, as in the Rambus matter, the FTC has interests in a case relating to its budget and the scope of its own agency mission. There needs to be accountability and some level of detachment. There cannot be reliance on the donated legal work of self-interested third parties. There need to be occasional checks and balances on cases as they progress through discovery. In the end, there ought to be a policy – or perhaps a new law passed by Congress -- that important FTC antitrust cases be litigated in Federal courts, just as important DOJ antitrust cases already are.

Read Danforth's draft paper here.

Read the FTC's petition here.

See HP, Cisco & Sun Microsystems Motion for Leave and Invitation to file Amicus Curiae Brief In Support of the FTC (link).

See also S.M. Oliva's recently-filed Amicus brief opposing Rehearing En Banc (link). From the brief:

The FTC is not protecting the competitive process, but rather forcing the market to reach particular outcomes, namely the avoidance of patented technologies by SSOs or, alternatively, licensing of patents on terms that the Commission deems “reasonable.” The “but for” analysis that the Commission relies upon for its remedy is nothing more than an attempt to re-write market outcomes to satisfy the personal preferences of the commissioners. This far exceeds the constitutionally permissible scope of Commission conduct.