# Amicus Curiae Brief — Infineon Technologies AG v. Rambus, Inc.

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1789%3A06

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 540 U.S. 874

## Text

¢

INFINEON TECHNOLOGIES AG,
INFINEON TECHNOLOGIES NORTH AMERICA CORP.,
AND INFINEON TECHNOLOGIES HOLDING
NORTH AMERICA INC.,

Petitioners,

RAMBUS, INC.,
Respondent.

&
i

On Petition For Writ Of Certiorari To United States
Court Of Appeals For The Federal Circuit

&
—

BRIEF OF THE COMMONWEALTH OF VIRGINIA
THE STATES OF ALABAMA, CALIFORNIA,
CONNECTICUT, IDAHO, ILLINOIS, IOWA,

MARYLAND, MASSACHUSETTS, MISSOURI,
NEW HAMPSHIRE, OREGON, OKLAHOMA, UTAH,
WEST VIRGINIA AND THE COMMONWEALTH
OF PUERTO RICO AS AMICI CURIAE
IN SUPPORT OF PETITIONERS

¢

JERRY W. KILGORE
Attorney General of Virginia

WILLIAM H. HURD
State Solicitor

MAUREEN RILEY MATSEN
Counsel of Record
Deputy State Solicitor

WILLIAM E. THRO
Deputy State Solicitor

SARAH OXENHAM ALLEN
Assistant Attorney General

900 East Main Street
Richmond, Virginia 23219
(804) 786-2436 (voice)
(804) 371-0200 (facsimile)

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964 e”
OR CALL COLLECT (402) 342-2831 nl Pi?

WILLIAM H. PRYOR JR.,
Attorney General
of Alabama
11 South Union Street
Montgomery, Alabama
36130
Phone: (334) 242-7300

BILL LOCKYER

Attorney General

State of California

1301 I Street

Sacramento, California
94244

Phone: (916) 324-5433

RICHARD BLUMENTHAL

Attorney General

State of Connecticut

55 Elm Street

Hartford, Connecticut
06106

Phone: (860) 808-5040

LAWRENCE G. WASDEN
Idaho Attorney General
P. O. Box 83720

Boise, Idaho 83720
Phone: (208) 334-2400

LISA MADIGAN

Attorney General of Illinois
100 West Randolph Street
12th Floor

Chicago, Illinois 60601
Phone: (312) 814-3698

THOMAS J. MILLER

Attorney General of Iowa

Hoover State Office
Building

Des Moines, Iowa 50319

Phone: (515) 281-8373

J. JOSEPH CURRAN, JR.
Attorney General

of Maryland
200 St. Paul Place
Baltimore, Maryland 21202
Phone: (410) 576-6300

THOMAS F. REILLY
Attorney General
of Massachusetts
One Ashburton Place
Boston, Massachusetts
02108
Phone: (617) 727-2200

JEREMIAH W. (JAY) NIXON
Attorney General
of Missouri
Supreme Court Building
207 West High Street
Jefferson City, Missouri
65101
Phone: (573) 751-3321

PETER W. HEED
Attorney General
of New Hampshire
33 Capitol Street
Concord, New Hampshire
03301
Phone: (603) 271-3658

W. A. DREW EDMONDSON

Attorney General
of Oklahoma

2300 N. Lincoln Boulevard,
Suite 112

Oklahoma City, Oklahoma
73105

Phone: (405) 521-3921

HARDY MYERS
Attorney General

State of Oregon

1162 Court Street, N.E.
Salem, Oregon 97301
Phone: (503) 378-6002

ANABELLE RODRIGUEZ

Secretary of Justice

Commonwealth of
Puerto Rico

P. O. Box 9020192

San Juan, Puerto Rico
00902

Phone: (787) 723-2555

MARK L. SHURTLEFF

Utah Attorney General

236 State Capitol

Salt Lake City, Utah 84114
Phone: (801) 538-9600

DARRELL V. MCGRAW, JR.
Attorney General
of West Virginia
P. O. Box 1789
Charleston, West Virginia
25326
Phone: (304) 558-8986

as

QUESTION PRESENTED

Will this Court allow a decision of the Federal Circuit
— a federal appellate court of national jurisdiction — to
stand, where the court rejected a jury's factual determina-
tion in favor of its own view of the facts, on a question of
state law which is outside the scope of its specialized
jurisdiction, and where the decision is likely to cause
substantial harm to the operation of open markets and,
thus, to the public interest?

ii

TABLE OF CONTENTS
Page
SU EEG FOES EBRD «sss cevnevecercsosssesecenseosseseceoses i
I a Cre a viicdesinnensseritenceciosioasanresieses li
pv oR fe PF Ning. 6) i yy! - SR eeenrrererennnre iv
INTEREST OF THE AMICI STATES ..................0000 1
DFU TNG Es escsccishvcnsnsyececiinineninsanctctsennstlpaavioniotin 3

I. THE RESULT IN THIS CASE WILL FRUS-
TRATE THE GROWTH AND DEVELOPMENT
OF AN IMPORTANT AND EVOLVING MAR-
KET AND THUS RISKS SUBSTANTIAL HARM
TO CONSUMERS’ INTEREST IN THE READY
AVAILABILITY OF INNOVATIVE AND AF-
FORDABLE TECHNOLOGY. ...........ccccceceeeeeeees 3

A. Voluntary Industry Standard-Setting
Organizations Facilitate Industry
Growth and Support Competitive Mar-
kets, Especially in the Advanced Infor-
mation Technology Industry. .................+ 3

B. The Federal Circuit’s Decision Interferes
With the Work of Voluntary Industry
Standard-Setting Organizations by Fa-
cilitating the Capture of Industry Stan-
dards by Participants in the Standard-
I ID ccseccscenssiisnrnomincinincorenenins 6

C. The Federal Circuit’s Analysis Supports
Anticompetitive Conduct to the Detri-
ment of Consumers and the Industry. ..... 8

ili

TABLE OF CONTENTS -— Continued
Page

II. THE FEDERAL CIRCUITS INTERFERENCE
WITH A JURYS VERDICT ON A STATE
COMMON LAW CLAIM UNDERMINES THE
RATIONAL AND PREDICTABLE ADMINI-
STRATION OF THE LAW THAT IS NECES-
SARY TO SUPPORT THE REASONABLE
BUSINESS EXPECTATIONS OF THE STATES’

COINGLATIIIIN saveccescrcsossoverssssnnesescssenaasucsheabbenwebonesene 18

a

iv
TABLE OF AUTHORITIES
Page

CASES
Allied Tube & Conduit Corp. v. Indian Head, Inc.,

ABG U.S. 492 (1988)........cccsesseserreecessesssnereeeesennennanees 10, 11
American Soc. Of Mechanical Engs. ». Hydrolevel Corp.,

ABG U.S. 556 (1982)........sccssseeereceereesserseesesseeenenessensees 10
Atl. Richfield Co. v. Union Oil Co. of Cal.,

531 U.S. 1183 (2001) ........sccceessrrceesessrrresenenseeesenenees 11, 12
Boeing Co. v. Shipman,

411 F.2d 365 (Sth Cir. 1969).........cceeececeerreessreeeseereeseeees 15
Braun v. Abbott Laboratories,

124 F.3d 1419 (Fed. Cir. 1997)........sssscesrseesreeseresereeeeens 11

City Nat. Bank v. American C’wealth Financial Corp.,
801 F2d 714 (4th Cir. 1986), cert. denied, 479
U.S. 1091 (1987).......cesscccsssssssssseernseessesenerseeesessnnssseneesnss 14

In the Matter of Rambus, Inc.,
Federal Trade Commission Docket No. 9302

(June 18, 2002) (complaint) ...........essseseeeererrerrerrsererenes i
In re Dell Computer Corp.,
121 FTC. 616 (1996).......:.cccssscceeessreeseerreseessesestesssnenneeees 4
Lytle v. Household Mfg., Inc.,
ADA U.S. 545 (1990)......ccssssccccesreesseereeseeressersesnsrensnseees 14
Potter Instrument Co., Inc. v. Storage Technology Corp.,
207 U.S.P.Q. 763 (E.D. Va. 1980)......:-sssesserenreerereereesens 11
Rambus, Inc., v. Infineon Technologies AG, 318 F.3d
1081 (Fed. Cir. 2008)...........sscsscesseessssrsesrennesnenensnnsnnsseneees 1
Riles v. Shell Exploration & Production Co., -
295 F.3d 1302 (Fed. Cir. 2002)...........sseceseresreressererereees 15 |
Ultradent Products, Inc. v. Life-Like Cosmetics, Inc.,
127 F.3d 1065 (Fed. Cir. 1997).......:cssersseeereesseresseeneees 15

EE eee

v

TABLE OF AUTHORITIES - Continued

Page

In the Matter of Union Oil of Cal.,

Federal Trade Commission Docket No. 9305

(March 4, 2003) (complaint)..........s-ssssssereenereenersnerereees 11
Wratchford v. S.J. Groves & Sons Co., .

A405 F.2d 1061 (4th Cir. 1969).........ccecserreessreeeerenees sone 17
Weisgram v. Marley Co.,

528 U.S. 440 (2000)...........ssccssescessresseeesenseeessneasennsnsseees 15
STATUTES
Fred. R. Civ. P. 50 ........csccsssssssccsseeesresnssesecnssscnssensessnensrsonsenss 14
Sup. Ct. R. 10(a)......secssssseseseressssenenenensenensnsnnssnensncanensnsenens 16
OTHER
13 Philliy; Areeda & Herbert Hovenkamp, Antitrust

Law, ‘| 2202b (1999).........cerserreeresreeersersnreenesrennenne -ceeeees 13

James B. Gambrell, The Evolving Interplay of
Patent Rights and Antitrust Restraints in the
Federal Circuit, 9 Tex. Intell. Prop. LJ. 137
(2001).....cecsccerceceesersssccscssserersnssccecssensncnsessassessnnerenenssnenees 12

Thomas M. Jorde and David J. Teece, The Bounda-
ries of Horizontal Restraints: Communication
and Cooperation Among Competitors, 61 Anti-
trust Ld. 579 (1993).......sccsssccesreesserseenseersestessnnesserenensens 4

Mark A. Lemley, Antitrust and the Internet Stan-
dardization Problem, 28 Conn. L. Rev. 1041
(1996)..........cce-eccsssscsssssscssccerssssssesscererensessnsssnsnsnensnssnseeer® 5

Janice M. Mueller, Patent Misuse Through the
Capture of Industry Standards, 17 Berkeley Tech.
Lid. 623 (2OO2)........ccercccsssssssreceerscencrssnrssseecsnessnereenes 5,13

vi
TABLE OF AUTHORITIES -— Continued

National Institute of Standards and Technology
Special Pub. 806, Standards Activities of Organi-

zations in the United States, 2 (Sept. 1996)..............

Robert Pitofsky, Antitrust and Intellectual Property:
Unresolved Issues at the Heart of the New Econ-

omy, 16 Berkeley Tech. L.J. 535 (2001)........-.+-s+0+++

Carl Shapiro, Navigating the Patent Thicket: Cross
Licenses, Patent Pools, and Standard-Setting,
http://faculty.haas. berkeley.edw/shapiro/thicket. pdf

(March 2001)...........cccsssccsssssscssscsssssnscenssensonssscssensensnes

C. Wright and A. Miller, Federal Practice and

Procedure § 2521 (2d Ed. 1995) .........sscesesssesereeeesees

1

INTEREST OF THE AMICI STATES

The Commonwealth of Virginia and the States of
Alabama, California, Connecticut, Idaho, Illinois, Iowa,
Maryland, Massachusetts, Missouri, New Hampshire,
Oregon, Oklahoma, Utah and West Virginia (collectively
“the States”) have an important stake in preserving open
and competitive markets and the orderly and proper
administration of justice. The States’ Attorneys General
serve as representatives of the public interest, defending
the interests of consumers in a variety of contexts, and are
responsible to the public for the enforcement of antitrust
law. Their position of public trust imposes upon them a
unique duty to represent the public interest in cases where
the resolution of a legal dispute between private parties
will substantially affect the marketplace and threaten
serious harm to open competition and the benefits it
provides to consumers. Thus, the States have a vital role
in protecting the integrity of an efficient and competitive
marketplace for consumer goods and services.

This case arises out of the standard-setting work
of the Joint Electron Devices Engineering Council
(“JEDEC”), a voluntary association of companies that sets
technical standards for electronic products. The parties, a
technology development and licensing company (Rambus)
and a manufacturer of computer memory devices (In-
fineon), both participated - as members — in JEDEC’s
development and adoption of standards for certain com-
puter memory products. Members of JEDEC were ex-
pected to disclose to the group patents and patent
applications “related to” the standardization work of its
committees. Rambus, Inc., v. Infineon Technologies AG,
318 F.3d 1081, 1085 (Fed. Cir. 2003).

—_—_—s+

Approximately a year after JEDEC adopted a stan-
dard for certain computer chips, and Infineon had begun

2

manufacturing to that standard, Rambus accused Infineon
(and other similarly situated manufacturers) of patent
infringement and sought licensing fees. Infineon refused,
Rambus sued, and Infineon counterclaimed for, inter alia,
common law fraud, based on Rambus’ alleged failure to
disclose certain pending patent applications during the
JEDEC standard-setting process. In the District Court,
the jury found Rambus liable on two counts of fraud. Upon
Rambus’ motion ‘or judgment as a matter of law, the trial
court reversed the jury’s finding on one count of fraud and
allowed the jury verdict to stand as to the other. On
appeal, the Federal Circuit reviewed the record for facts
that would support a narrower duty than the duty relied
upon by the jury, and rever-2d the remaining fraud verdict
when it was able to isolate such facts from the record. It
then went on to enter judgment for Rambus, rather than
returning the case to the trial court for reconsideration in
light of the new duty articulated on appeal. The broad
consequences — for consumers, for business, and for the
law — likely to flow from the Federal Circuit’s clear error,
argue strenuously for review and reversal by this Court.

The work of voluntary industry standard-setting
organizations enhances the operation of the marketplace.
The decision of the Federal Circuit, however, delivers a
near fatal blow to that work by permitting industry
participants to enforce patents on the technology adopted
as the industry standard, in a manner contrary to the
express mutual goals of the organization and its members.
Voluntary industry efforts to adopt standards free of
patent monopoly encourage competition and are, therefore,
good for consumers, reducing the price and encouraging
the broad manufacture of products, increasing the supply
of products, and supporting additional investment in

ee

3

innovation. The Federal Circuit’s decision will discourage
industry participation in standard-setting organizations,
thereby harming consumers as well as the many small
companies able to participate in the market only when
costs remain low.

The Amici States also protest the Federal Circuit’s
substitution of its own view of the facts for that of a jury,
thereby reversing the jury’ determination of a state
common law fraud claim. The Federal Circuit’s interfer-
ence with the province of the jury on a pendant state law
claim undermines the rational and predictable admini-
stration of the law voutinely relied upon by the individual
and corporate citizens of the Amici States.

,%
v

ARGUMENT

I. THE RESULT IN THIS CASE WILL FRUS-
TRATE THE GROWTH AND DEVELOPMENT
OF AN IMPORTANT AND EVOLVING MAR-
KET AND THUS RISKS SUBSTANTIAL HARM
TO CONSUMERS’ INTEREST IN THE READY
AVAILABILITY OF INNOVATIVE AND AF-
FORDABLE TECHNOLOGY.

A. Voluntary Industry Standard-Setting Or-
ganizations Facilitate Industry Growth
and Support Competitive Markets, Espe-
cially in the Advanced Information Tech-
nology Industry.

Countless products used by consumers today are
touched by standards that govern some aspect of their
construction or use. A common example is the ordinary
light bulb. Whether a consumer buys a light bulb from GE,

4

Sylvania, Westinghouse or another manufacturer, he can
take for granted that the bulb will fit into the light socket
in his ceiling. He does not have to worry about whether
the sizes will be slightly different or whether the screw
threads will match up. Some bulbs may burn brighter.
Some may burn longer. Some may be cheaper. But they all
will fit. As a result, the consumer has choices about which
bulb to buy. He is not the captive of whichever company’s
light socket is installed in his home. This sort of uniformity
— and the resulting benefits to consumers — are not acciden- ,
tal. They are the result of an industry standard, voluntarily
adopted through a standard-setting organization. |

Today, telecommunications infrastructures crucial to
our day to day lives — including those that support the
internet — literally could not exist without agreed-upon
industry standards. Hundreds of private voluntary indus-
try associations function as standard-setting organizations
and are responsible for almost 50,000 different sets of
standards. National Institute of Standards and Technology
Special Pub. 806, Standards Activities of Organizations in
the United States, 2, 4 (Sept. 1996).

In high technology markets, entry into and competi-
tive participation in the marketplace is increasingly
dependent on the discovery, development, improvement,
and adoption of new processes, new products, and new
organizational structures and procedures. Thomas M.
Jorde and David J. Teece, The Boundaries of Horizontal
Restraints: Communication and Cooperation Among |
Competitors, 61 Antitrust L.J. 579, 581 (1993). The pace of
the innovation that drives technology markets depends, in
turn, on adoption of industry standards. In re Dell Com-
puter Corp., 121 E.T.C. 616 (1996). See also Carl Shapiro,
Navigating the Patent Thicket: Cross Licenses, Patent

oS

5

Pools, and Standard-Setting, at 19, http://faculty.
haas.berkeley.edu/shapiro/thicket.pdf (March 2001). Only
where there are agreed-upon industry standards for new
technologies, not subject to the prohibitive costs of exorbi-
tant licensing fees, will those new technologies enter the
marketplace at competitive prices from numerous manu-
facturers in ways that maximize their availability to
consumers regardless of prior purchases. Compatibiuty —
or “interoperability” — is key.

As other industries before it, high technology markets
strive to adopt voluntary, industry-wide standards because
without product interoperability, markets for new technol-
ogy will contract and support fewer companies. Mark A.
Lemley, Antitrust and the Internet Standardization Prob-
lem, 28 Conn. L. Rev. 1041, 1047 (1996). Just as there is a
need for a standard light socket, so that light bulbs from
various manufacturers all fit, so too must there be some
standardization in the realm of high technology. Commu-
nication tools such as notebook computers, personal digital
assistants, cellular telephones, and pagers must be able to
communicate with each other, even across manufacturers,
in order to be useful. Likewise, consumers demand new
software programs that will operate on all of these devices,
no matter who makes them. Janice M. Mueller, Patent
Misuse Through the Capture of Industry Standards, 17
Berkeley Tech. L.J. 623, 633 (2002). Interoperability
standards, therefore, are critical to meeting consumer
demand in these markets, and meeting consumer demand
is what enables the industry to continue investing in the
development of new innovation. Thus, the efficient growth

6

of the high technology industry depends in a significant
way on the effectiveness of voluntary industry standard-
setting organizations.’ The ability of standard-setting
bodies to develop effective industry standards is placed at
substantial risk by the Federal Circuit’s complete failure
to conduct its review in context and by its insistence on
reexamining and redetermining the facts of this case.

B. The Federal Circuit’s Decision Interferes
With the Work of Voluntary Industry
Standard-Setting Organizations by Facili-
tating the Capture of Industry Standards
by Participants in the Standard-Setting
Process.

In order to function as intended to expand markets
and competition, and to lower costs — all of which inure to
the benefit of consumers — it is important that either:

' For instance, interoperability is vital for the silicon chips that
comprise the components of a computer. They must be able to commu-
nicate with each other in order to make the computer run. Where the
performance of one type of chip is significantly enhanced by innovation,
other chips that interact with the improved chip must keep pace in
order to realize the full potential of the improved chip. If this does not
happen, the benefit of that innovation will not be realized. Such an
impediment — a “memory bottleneck” — existed as the result of computer
memory chips that operated at a relatively slow speed when communi-
cating with a relatively faster central processing unit. The slow speed
chips hindered technological progress in the computer industry. In the
Matter of Rambus, Inc., Federal Trade Commission Docket No. 9302
q 11 (June 18, 2002) (complaint). A faster method of communication was
developed between these two types of chips, but the success of the
innovation depended on the development and adoption of industry
standards for the design and implementation of the innovation. Id. at
7 12, 13.

7

(i) adopted standards not be subject to patents; or (ii) if
they are the subject of a participant’s patent, the stan-
dard-setting body’s participants know about it, before the
standard is adopted, so that alternatives can be considered
and informed choices made. A standard-setting organiza-
tion can only avoid standardizing patented technology if
industry participants disclose relevant and necessary
information concerning their patent portfolios as the
standard is developed. The duty of participants to the
organization — and reliable enforcement of that duty — are
at the crux of effective standard-setting efforts.

In order to achieve the goal of adopting open stan-
dards that members of the industry can use or apply
without the costs associated with technology licensing, and
to manage the concomitant risk that an industry partici-
pant will pursue adoption of a standard on which it holds
the patent, the standard-setting body must be able to
require disclosure of information even among horizontal
competitors or, in the alternative, impose licensing terms
on participants’ patents not disclosed. Competitors will not
be willing to participate, or to share information as neces-
sary to avoid adopting a standard that utilizes patented
technology, unless they have a reasonable expectation that -
the law will protect them from a participant who would
take advantage of the process to “capture” the standard —
that is, to have the body unknowingly adopt a standard
that includes patented technology owned by the partici-
pant. Lemley, 28 Conn. L. Rev. at 1086. Therefore, stan-
dard-setting organizations and their individual partici-
pants must be able to rely on the law to enforce the duty of
each participant to share openly relevant information

8

concerning its development of the technology at issue.
Such disclosure is inherent in the standard-setting effort.

The Federal Circuit’s analysis of the JEDEC members’
duty to disclose relevant patent information ignores all of
this. Instead, the Court below engaged in a strained
parsing of the language of two documents to conclude that
the disclosure duty imposed on participants in JEDEC’s
standard-setting efforts was a very narrow one. The court
reached this conclusion in spite of substantial evidence to
the contrary and even though the duty it articulated is
hostile and counterproductive to the goal of adopting open
standards.

The clear message in the Federal Circuit’s decision is
that the interests of potential patent holders are superior
to the public interest in open standards and to the reason-
able expectations of participants in standard-setting
efforts. That message is profoundly anticompetitive and
adverse to the public interest. Nothing in the law requires
such a result. To leave the court’s ruling undisturbed
would be to undermine and inhibit the valuable and
necessary work of voluntary standard-setting organiza-
tions.

C. The Federal Circuit’s Analysis Supports
Anticompetitive Conduct to the Detri-
ment of Consumers and the Industry.

The minimal duty described by the Federal Circuit
would allow industry participants in standard-setting
organizations to circumvent entirely the procompetitive
goals of the organization. It would permit participants to
withhold information about pending patent applications
that might then be inadvertently incorporated into the
standard. Such conduct, permitted unchecked by the

9

courts, would transform standard-setting organizations
and trade associations into safe havens for members
seeking to monopolize the industry by anticompetitive
conduct. Absent an effective duty of disclosure in the
standard-setting context, the shield that protects intellec-
tual property rights — and thus provides an incentive for
investment in the development of new technology — be-
comes a sword with which to exclude the competition.
Participants in standard-setting organizations ought not
be permitted to wield that sword to subvert the innova-
tion-enhancing and market-support purposes of the
organization.”

Just as a system of law that under-protects intellec-
tual property rights can harm an industry's incentives to
innovate, a system of law that over-protects those same
rights harms consumers. Over-protecting intellectual
property rights reduces competition, which eventually also
reduces incentives to innovate, Pitofsky, 16 Berkeley Tech.
L.J. at 542-43, and it disadvantages consumers by leaving
them with fewer choices at higher prices. The Federal
Circuit’s decision tips the balance so far in favor of intel-
lectual property rights that it invites anticompetitive
overreaching by patent holders to flourish unimpeded by

2 As the former Chairman of the Federal Trade Commission has

explained:

Intellectual property rights subsidize investments in inno-

vation by granting substantial, but time-limited, market

power. Antitrust ensures that firms compete, and by com-

peting, seek new roads to innovation. It also prevents domi-

nant firms from harming and retarding innovation.
Robert Pitofsky, Antitrust and Intellectual Property: Unresolved Issues
at the Heart of the New Economy, 16 Berkeley Tech. L.J. 535, 542
(2001).

Ce

10

the countervailing legal protections offered by state
statutory and common law and relied upon by the other -
participants in standard-setting organizations.

The magnitude of this problem has become increas-
ingly clear since this Court decided American Soc. Of
Mechanical Engs. v. Hydrolevel Corp., 456 U.S. 556 (1982).
In that case, the Court held that an industry association
violated antitrust law by allowing a participant to unduly
influence the association’s officers to issue an informal
statement about a competitor’s non-compliance with its
standards. The result reflects the understanding that the
association’s standards could “affect the destinies of
businesses and thus [gave] them the power to frustrate
competition in the marketplace.” Id. at 570-71.

This Court next considered the potential for subver-
sion of a trade association’s standards for an anticompeti-
tive purpose in Allied Tube & Conduit Corp. v. Indian
Head, Inc., 486 U.S. 492 (1988). There, this Court upheld a
jury verdict against an industry participant, finding that
the organization’s consensual standard-making process
was corrupted by a member who had an economic interest
in stifling competition for its product. Id. at 497-98, 499,
511. This Court agreed with the Second Circuit that hi-
jacking the purposes of the standard-setting organization
created an unreasonable restraint of trade by preventing
competition by all manufacturers of products that did not
meet the restrictive code passed. Id. at 498, 499."

* This Court originally granted cert. on the issue of whether the
subversion of the standard-setting process also violated the Sherman
Act, but vacated that grant as “improvident.” Allied Tube, 486 U.S. at

(Continued on following page)

11

Lower courts also have held that patents obtained
through manipulation of the disclosure rules of standard-
setting bodies are unenforceable because of the anticom-
petitive effect that such an unwarranted extension of a
member’s patent rights would have on the relevant mar- -
ket. In Potter Instrument Co., Inc. v. Storage Technology
Corp., the patent holder was estopped from asserting its
patent rights because it intentionally concealed its intel-
lectual property rights despite the standard committee’s
policy to the contrary, thus allowing the patent holder to
gain “a monopoly on the ... industry standard without
any obligation to make its use available on reasonable
terms to competitors in the industry.” 207 U.S.P.Q. 763,
769 (E.D. Va. 1980). In Braun v. Abbott Laboratories, the
Federal Circuit itself noted that the patent misuse doc-
trine limits abuse of patent rights separately from the
anti?:ust laws by estopping the assertion of patent rights
where the patentee has achieved an anticompetitive effect
by improperly broadening the scope of the patent grant.
124 F.3d 1419, 1426 (Fed. Cir. 1997)." .

499 n.3. The Court later noted, however, that the purpose behind the
manipulation of the standard-setting body was anticompetitive. Id. at
511.

‘In Atl. Richfield Co. v. Union Oil Co. of Cal., 581 U.S. 1183
(2001), several major oil refiners failed to obtain declaratory judgment
to invalidate the patents Unocal claimed were infringed by the new
clean-burning regulations issued by the California Air Resources Board
(“CARB”). Expressing great deference to the jury, the Federal Circuit
refused to overturn the verdict in that case and this Court denied cert.
The Federal Trade Commission, however, has since issued an antitrust
complaint against Unocal for illegally monopolizing the market for
clean-burning gasoline under the CARB standards because of its
manipulation of the CARB standard-setting process. See In the Matter

(Continued on following page)

12

Unfortunately, the Federal Circuit in this case ignored
the principles that underlie this line of cases and instead
overturned a jury’s factual findings in order to protect the
interests of the patent holder in a manner altogether
inconsistent with the purposes of all standard-setting
organizations. The Federal Circuit, by analyzing these
non-patent issues with a patent enforcement approach,
undermines the principles of equity embodied in state
fraud and antitrust law. See James B. Gambrell, The
Evolving Interplay of Patent Rights and Antitrust Re-
straints in the Federal Circuit, 9 Tex. Intell. Prop. L.J. 137,
138 (2001). Instead of permitting patent rights to be
circumscribed by basic fraud and antitrust principles, the
Federal Circuit has weakened the influence of these two
areas of law in the patent context. Id., at 139.

The Federal Circuit’s narrow and grudging reading of
the disclosure duty created by JEDEC’s written rules gives
inordinate weight to patent protection in the balancing
process between the intellectual property rights of the
respondent and the antitrust principles that govern the
memory chip industry. In addition, the Federal Circuit’s
endorsement of Rambus’ acquisition of market power over
the industry standard and subsequent effort to establish
its own ex post royalty rate invites a host of anticompeti-
tive outcomes: monopolization of the market by the patent
holder; discriminatory licensing among competitors;
conditioning of a license on extortionate terms, such as
cross-licensing or exorbitant royalty rates; and generally

of Union Oil Co. of Cal., Federal Trade Commission Docket No. 9305
(March 4, 2003) (complaint).

13

allowing the patent holder to extend its market power
beyond the scope of the patent grant itself, adding to it the
leverage of the adopted standard. See generally, Pitofsky,
16 Berkeley Tech. L.J. at 546; Mueller, 17 Berkeley Tech.
L.J. at 669. All these effects sacrifice and subvert competi-
tion, and thus reduce industry output and raise prices to
consumers, to a degree far in excess of what is necessary
to generate incentives to innovate.

Allowing a single participant in a standard-setting
organization to capture an industry standard not only
causes anticompetitive disruptions in the marketplace, but
also discourages industry members from voluntary par-
ticipation in such organizations. This is so whether the
industry standard is captured by fraudulent means or by a
Federal Circuit decision construing the disclosure duty so
narrowly as to be meaningless. In turn, this inhibits the
vital work of standard-setting bodies and, thus, inhibits
innovation, all of which is often more valuable to consum-
ers than competitive pricing among products. See 13
Phillip Areeda & Herbert Hovenkamp, Antitrust Law,
q 2202b, at 218 (1999).

Il. THE FEDERAL CIRCUITS INTERFERENCE
WITH A JURY’S VERDICT ON A STATE COM-
MON LAW CLAIM UNDERMINES THE RaA-
TIONAL AND PREDICTABLE ADMINISTRATION
OF THE LAW THAT IS! NECESSARY TO SUPPORT
THE REASONABLE BUSINESS EXPECTATIONS
OF THE STATES’ CITIZENS.

The Federal Circuit’s decision turns upside down the
rules governing appellate review of jury verdicts. Instead
of focusing on whether there was substantial evidence to
support the jury’s verdict in favor of Infineon, the Court of

OO

14

Appeals substituted its own view of the facts for that of
the jury. Such a marked departure from the rules merits
certiorari for several reasons, especially in this case. First,
the ill-conceived precedent thus created, by a court of
nationwide jurisdiction, tends to undermine fidelity to the
pertinent rules throughout the federal court system.
Second, by disdaining the jury’s role in a claim involving
business expectations, the decision tends to undermine the
confidence on which business depends, a result all the
more disturbing because standard-setting activity cannot
succeed absent confidence in the process. Third, by dis-
daining the jury’s role in a claim arising under state law,
the decision tends to undermine principles of federalism.

The decision of the Federal Circuit in this case
breaches the most fundamental principles of appellate
review. Where a jury verdict survives a motion for judg-
ment as a matter of law, the trial court’s decision on
appeal is subject to the same Rule 50 standard that
applied to the motion itself. See e.g., City Nat. Bank v.
Amerivan C’wealth Financial Corp., 801 F.2d 714, 718 (4th
Cir. 1986), cert. denied, 479 U.S. 1091 (1987). Thus, a
jury’ verdict should be overturned only if “there is no
legally sufficient evidentiary basis for a reasonable jury to
find” as it did. Fed. R. Civ. P. 50. The appellate court is not
free to reweigh the evidence, but must view the evidence
in a light most favorable to the party that won the jury
verdict. Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55
(1990). An appellate court must resist the temptation to
substitute its own view of the facts for that of the jury,

15

except where the law demands it.* Weisgram v. Marley Co.,
528 U.S. 440, 447-48 (2000); C. Wright and A. Miller,
Federal Practice and Procedure § 2521 (2d Ed. 1995). But
the Federal Circuit in this case could not resist: substitut-
ing its own view of the facts for that of the jury is precisely
what it did.

Reading the panel opinion together with the dissent
establishes that this case epitomizes a situation in which
the jury’s conclusions of fact are entitled to traditional
appellate deference. The dissent discusses the facts sup-
porting the jury verdict and explains why they are legally
sufficient. The majority, on the other hand, does not
attempt to discuss those facts, or to negate their legal
sufficiency, so much as it discusses other facts that would
have entitled the jury to decide the other way. In other
words, each opinion recites evidence legally sufficient to
support different conclusions of fact. It is in precisely this
posture that proper application of the rules of appellate
review demands that the jury’s verdict be sustained on
appeal. Where reasonable minds can reach different
conclusions based on the evidence, the verdict of the jury
ought not be disturbed. See, e.g., Boeing Co. v. Shipman,
411 F.2d 365, 374-75 (5th Cir. 1969).

* The Federal Circuit itself has acknowledged this rule in other
cases. See, e.g., Riles v. Shell Exploration & Production Co., 295 F.3d
1302, 1308 (Fed. Cir. 2002) (affirming JMOL by trial court on one claim
and jury’s verdict on another); Ultradent Products, Inc. v. Life-Like
Cosmetics, Inc., 127 F.3d 1065, 1070 (Fed. Cir. 1997) (examining the
evidence that supported the jury’s verdict and affirming the district
court’s denial of JMOL). However, in this case, it ignored the rule
altogether.

16

Nonetheless, the panel majority granted no deference
at all to the facts implicitly relied upon by the jury, or to
the determination of the trial judge, though both enjoyed
the benefit of the entire trial, hearing first hand and in
person the testimony of the witnesses. Instead, even after
acknowledging that both the existence and scope of a duty
to disclose were questions of fact, the Federal Circuit
reevaluated the record on its own. In so doing, the court
answered the wrong question. Instead of reviewing the
record to confirm that it contained sufficient facts to
support the jury’s verdict, it looked for, and found, evi-
dence that could have supported a contrary conclusion.
Although it recited the words, the Federal Circuit did not
explain why there was no legally sufficient evidence to
support the jury’s verdict. Nor did it explain why the law
required a result contrary to that reached by a jury. The
review was improper and wholly inadequate to support the
reversal of a jury verdict on appeal.

Under the rules of this Court, certiorari is appropriate
where “a United States court of appeals ... has so far
departed from the accepted and usual course of judicial
proceedings ... as to call for an exercise of this Court's
supervisory power.” Sup. Ct. R. 10(a). The exercise of the
Court’s supervisory authority is especially important here
because of the particular nature of this case. The decision
at issue was not rendered by a regional court of appeals,
but by a court having nationwide, albeit specialized,
jurisdiction. Thus, the need for supervision is more urgent,
both to ensure adherence to the rules by that tribunal and
to avoid the nationwide precedent that an uncorrected
departure would establish.

Moreover, the decision of the Federal Circuit has the
effect of disrupting the settled expectations of citizens,

17

both corporate and individual, who rely upon an orderly
system of laws in their daily commerce. The Court’s
decision interferes with recourse to, and discourages
reliance on, state common law principles to protect busi-
ness interests and expectations in the face of the substan-
tial market power bestowed on the developers of
intellectual property by federal patent law. In effect, the
decision below stands for the proposition that a business
may — in the name of intellectual property rights — engage
in conduct that a jury has branded as fraud, and that it
may do so even in the standard-setting arena, where
honest disclosure and cooperation are essential to competi-
tion, progress and the public good.

Finally, concerns for the Federal Circuit’s misguided
decision are exacerbated by the fact that the claim at issue
is a state law claim, heard by the federal district court in
the exercise of its pendent jurisdiction. As a matter of
comity between sovereigns, federal appellate courts,
particularly the Federal Circuit, should be especially
scrupulous not to thwart the application of state law by
disrupting jury verdicts on such claims.

The States depend on their citizens’ respect for and
trust in the fair and reasonable application of the States’
laws. That trust depends, in turn, on a system of justice
that is credible and reasonably predictable. “Faith in the
ability of a jury, selected from a cross-section of the com-
munity, to choose wisely among competing rational infer-
ences in the resolution of factual questions lies at the
heart of the federal judicial system.” Wratchford v. S.J.
Groves & Sons Co., 405 F.2d 1061, 1065-66 (4th Cir. 1969).
When a court acts outside the rules that ordinarily govern
the system, that trust and respect are at risk. Moreover,
by its decision in this case, the Federal Circuit has so

18

elevated the rights of patent holders that they eclipse the
duty to comply with generally applicable state law of fraud
— the law that serves to vindicate the reasonable reliance
and expectations of businesses and individuals on a
common standard of forthrightness. This court must not
countenance such a result.

e
_

CONCLUSION
The petition for writ of certiorari should be granted.
Respectfully submitted,

JERRY W. KILGORE
Attorney General of Virginia

WILLIAM H. HuRD
State Solicitor

MAUREEN RILEY MATSEN
Counsel of Record
Deputy State Solicitor

WILLIAM E. THRO
Deputy State Solicitor

SARAH OXENHAM ALLEN
Assistant Attorney General

900 East Main Street
Richmond, Virginia 23219
(804) 786-2436 (voice)
(804) 371-0200 (facsimile)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1789%3A06. Public record. Not legal advice.