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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

NVIDIA CORPORATION, )
)
Plaintiff, )
) Civil Action No. 1:08-cv-473
v. )
RAMBUS, INC., )
)
Defendant. )
)
)

NVIDIA CORPORATION’S OPPOSITION TO RAMBUS’S


MOTION TO DISMISS

OHS West:260522266.13

Case 1:08-cv-00473-UA-WWD Document 17 Filed 09/29/2008 Page 1 of 28


TABLE OF CONTENTS

Page

I. INTRODUCTION ................................................................................................... 1
II. FACTS..................................................................................................................... 3
III. ARGUMENT .......................................................................................................... 6
A. Standard of Review ...................................................................................... 6
B. Nvidia’s Antitrust Claims Are Adequately Pled .......................................... 7
1. Rambus’s characterization of Nvidia’s Antitrust claim is
wrong................................................................................................. 7
a. Rambus’s continuation application practice is
anticompetitive ....................................................................... 9
b. Rambus's appropriation of standards information is
anticompetitive ..................................................................... 11
c. Rambus's package licensing scheme is anticompetitive. ..... 13
2. Rambus Confuses Exclusionary Conduct With Damage
Caused by Such Conduct................................................................. 14
3. Previous Rambus Cases Are Not Controlling................................. 16
C. Nvidia Has Pled A Claim Under N.C. Gen. Stat. § 75-1.1 ........................ 17
D. Nvidia Has Pled A Claim Under N.C. Gen. Stat. § 75-2.1 ........................ 19
IV. RAMBUS'S MOTION FOR A MORE DEFINITE STATEMENT
SHOULD BE DENIED......................................................................................... 20
V. CONCLUSION ..................................................................................................... 20

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TABLE OF AUTHORITIES

Page
FEDERAL CASES

Allied Tube and Conduit Corp. v. Indian Head, Inc.,


486 U.S. 492 (1988)....................................................................................................... 8

American Rockwood, Inc. v. Owens-Corning Fiberglass,


640 F. Supp. 1411 (E.D.N.C. 1986)............................................................................. 17

Anderson v. Sara Lee Corp.,


508 F.3d 181 (4th Cir. 2007) ......................................................................................... 6

Angelico, M.D. v. Lehigh Valley Hosp. Inc.,


184 F.3d 268 (3d Cir. 1999)......................................................................................... 14

Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,


472 U.S. 585 (1985)....................................................................................................... 7

Atari Games Corp. v. Nintendo of Am., Inc.,


897 F.2d 1572 (Fed. Cir. 1990).............................................................................. 13, 15

Bell Atl. Corp. v. Twombly,


127 S. Ct. 1955 (2007) ................................................................................................... 6

Broadcom Corp. v. Qualcomm Inc.,


501 F.3d 297 (3rd. Cir. 2007) ...................................................................................... 13

Broussard v. Meineke Discount Muffler Shops,


945 F. Supp. 901, 917-18 (W.D.N.C. 1996) ............................................................... 17

Capital One Bank (USA) N.A. v. Hess Kennedy Chtd., LLC,


2008 U.S. Dist. LEXIS 51252 (E.D. VA. July 3, 2008) ................................................ 6

Continental Ore Co., v. Union Carbide & Carbon Corp.,


370 U.S. 690 (1962)................................................................................................... 7, 8

Dickson v. Microsoft Corp.,


309 F.3d 193 (4th Cir. 2002) ......................................................................................... 7

DiscoVision Associates v. Disc Manufacturing, Inc.,


1997 U.S. Dist. LEXIS 7507 (D. Del. April 3, 1997)........................ 1, 2, 3, 6, 7, 10, 16

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TABLE OF AUTHORITIES
(continued)
Page

Dixie Yarns, Inc. v. Plantation Knits, Inc.,


1994 U.S. Dist. LEXIS 21725 (W.D.N.C. July 24, 1994)........................................... 19

Dow Chemical, Inc. v. Exxon Corp.,


139 F.3d 1470 (Fed. Cir. 1998).................................................................................... 19

Edwards v. City of Goldsboro,


178 F.3d 231 (4th Cir. 1999) ......................................................................................... 6

Erickson v. Pardus,
127 S. Ct. 2197 (2007) ................................................................................................... 6

Fayetteville Investors v. Commercial Builders, Inc.,


936 F.2d 1462 (4th Cir. 1991) ....................................................................................... 6

Hardee's Food Systems, Inc. v. Beardmore,


1997 U.S. Dist. LEXIS 9671 (E.D.N.C. June 6, 1997) ......................................... 17, 18

Hynix Semiconductor, Inc. v. Rambus,


527 F. Supp. 2d 1084 (N.D. Cal. 2007) ............................................... 1, 2, 4, 7, 8, 9, 15

Hynix Semiconductor Inc. v. Rambus Inc.,


2008 U.S. Dist. LEXIS 60838 (N.D. Cal. July 24, 2008)........................................ 9, 16

Kobe v. Demprsey Pump Co.,


198 F.2d 416 (10th Cir. 1952), cert. denied 344 U.S. 837 (1952)............................... 15

Meijer, Inc. v. Abbott Laboratories, Inc.,


544 F. Supp. 2d 995 (N.D. Cal. 2008) ......................................................................... 20

Monster Daddy, LLC v. Monster Cable Prods.,


2007 U.S. Dist. LEXIS 5549 (D.S.C. Jan. 24, 2007)................................................... 20

Oksanen v. Page Memorial Hosp.,


945 F.2d 696 (4th Cir. 1991) ......................................................................................... 7

Prof. Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,


508 U.S. 49 (1993)............................................................................................... 7, 8, 14

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TABLE OF AUTHORITIES
(continued)
Page

Qualcomm v. Broadcom,
501 F.3d (3d Cir. 2007)................................................................................................. 7

Rambus, Inc. v. Infineon Tech. AG,


164 F. Supp. 2d 743 (E.D. Va. 2001) ................................................ 4, 5, 10, 11, 12, 17

SCM Corp. v. Xerox Corp.,


463 F. Supp. 983 (D. Conn. 1978), remanded, 599 F.2d 32 (2d Cir.), on
remand, 474 F. Supp. 589 (D. Conn. 1979), affirmed and remanded, 645 F.2d
1195 (2d Cir. 1981)........................................................................................................ 9

Samsung Electronics Co., Ltd v. Rambus, Inc.,


439 F. Supp. 2d 524 (E.D. Va. 2006) ............................................................................ 5

Samsung Electronics. Co. v. Rambus, Inc.,


523 F.3d 1374 (Fed. Cir. 2008)...................................................................................... 5

Simaan, Inc. v. BP Prods. N. Am., Inc.,


395 F. Supp. 2d 271 (M.D.N.C. 2005) ........................................................................ 20

The In'Porters, S.A. v. Hanes Printables, Inc.,


663 F. Supp. 494 (M.D.N.C. 1987) ............................................................................. 19

U.S. v. Paramount Pictures, Inc.,


334 U.S. 131 (1948)..................................................................................................... 13

United States v. Associated Press,


52 F. Supp. 362 (S.D.N.Y. 1943)................................................................................. 13

United States v. New Winkle, Inc.,


342 U.S. 371 (1952)..................................................................................................... 13

Zenith Radio v. Hazeltine Research, Inc.,


395 U.S. 100 (1969)..................................................................................................... 13

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TABLE OF AUTHORITIES
(continued)
Page

DOCKETED CASES

Hynix v. Rambus,
N.D. Cal. Case No. 06-cv-00244 ............................................................................... 2, 4

Micron v. Rambus,
Case No. 00-792-JJF ...................................................................................................... 5

Rambus, Inc. v. Samsung Electronics Co., Ltd.,


Case No. 4:05-cv-2298 (N.D. Cal.) ............................................................................... 5

Rambus v. Nvidia,
Case No, C-08-03343-SI................................................................................................ 7

Sun Belt Rentals, Inc. v. Head & Engquist Equipment, L.L.C.,


2003 NCBC LEXIS 9, at 17-19 ................................................................................... 11

STATE STATUTES

N.C. Gen Stat. § 75-1.1 ......................................................................................... 17, 18, 19

N. C. Gen Stat. § 75-2.1 .............................................................................................. 19, 20

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I. INTRODUCTION

Rambus, Inc.’s (“Rambus”) motion to dismiss should be denied. Rambus’s

motion to dismiss rests on three faulty premises: (1) that Nvidia Corporation’s (“Nvidia”)

“entire claim rests on its contention that Rambus asserted” objectively baseless patent

claims, (2) that other courts have considered and rejected Nvidia’s claims, and (3) that

Nvidia has not pled sufficient North Carolina connections with respect to its state law

claims.

First, Rambus’s characterization of Nvidia’s Federal and State antitrust claims is

wrong. Rambus confuses Nvidia’s allegations of exclusionary conduct with its

allegations of damages that resulted from the conduct. Contrary to Rambus’s argument,

Nvidia’s conduct allegations are not based on the initiation of patent litigation. Rather,

the anticompetitive conduct underlying the antitrust claims is made clear in paragraph 1

of the First Amended Complaint (“FAC”):

Rambus’s scheme includes misuse of continuation patent applications to


cover current and developing industry standards.1 By concealing patent
claims until the industry is locked-in to standards that Rambus contends are
covered by its patents, industry members are stripped of viable alternatives
to Rambus’s technology and are either forced to license a package of
Rambus patents based upon worldwide sales or to incur millions of dollars
defending themselves against Rambus’s patent infringement claims.

1
“A continuation application is a patent application that is entitled to the filing date of an
earlier ‘parent’ application. See 35 U.S.C. section 120. See, generally, Schwartz, “Patent
Law and Practice,” Federal Judicial Center (2d ed. 1995) at 19-21. A patent issued from
a continuation application benefits from the earlier filing date for the purpose of
determining its validity in view of prior art. ‘A continuation application is an application
whose specification is the same as that of the parent application, but whose claims may
be the same or different from those of the parent application.’” DiscoVision Associates v.
Disc Manufacturing, Inc., 1997 U.S. Dist. LEXIS 7507, *21, n. 6 (D. Del. April 3, 1997).

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Accordingly, Rambus’s abuse of the patent system and its simultaneous
deployment of a coercive licensing approach violates the antitrust and
unfair competition laws of the United States and North Carolina.

FAC at ¶ 1. See also Id. at ¶¶ 109-144. By forcing Nvidia to address Rambus’s

anticompetitive and exclusionary activities, Nvidia has suffered damages. See Hynix

Semiconductor, Inc. v. Rambus, 527 F. Supp. 2d 1084 (N.D. Cal. 2007).

Second, Rambus’s assertion that Nvidia’s FAC duplicates claims from previous

litigations is incorrect. Rambus’s previous “conduct” disputes have consistently dealt

with two issues: (1) Rambus’s violations of the patent disclosure rules of a standards

setting body called JEDEC by participating in the standards body and simultaneously not

disclosing its patents to JEDEC and (2) Rambus’s spoliation of evidence of its wrongful

acts in anticipation of litigation. None of these prior cases considered the entire scope of

Rambus’s anticompetitive business model. Nor has any court determined the merits of an

antitrust claim against Rambus at the motion to dismiss stage. This case, unlike others,

seeks to address the legal consequences of Rambus’s exclusionary practices of

surreptitiously appropriating information that its competitors had revealed to JEDEC for

the purpose of expanding competition, using continuation patent applications to draft

claims to cover current and emerging JEDEC standards, and coercing users of those

standards to license packages of Rambus patents at supracompetitive royalties.

Third, Rambus’s challenge to Nvidia’s North Carolina claims fails. Rather than

focusing on the pleadings, Rambus seeks to challenge the factual underpinnings of the

FAC; something inappropriate in a motion to dismiss. The FAC describes numerous

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facts identifying the injury that Rambus’s monopolistic scheme has caused on North

Carolina commerce, businesses and consumers. The pleadings establish that Nvidia: (1)

maintains an office at 2700 Meridian Pkwy, Suite 100, Durham, North Carolina, 27713;

(2) engages in numerous activities in its North Carolina office, including research and

development of its graphics processing units (“GPUs”); (3) maintains substantial business

relationships with game development companies based in North Carolina such as

Epic/Unreal (who develop games that run on NVIDIA’s GPUs), and personal computer

system companies with substantial operations in North Carolina, such as Lenovo and

IBM, who use NVIDIA GPUs and technology in their systems; and (4) makes GPUs that

are used in computers manufactured at Dell’s Winston-Salem facility and Lenovo’s

Research Triangle Park facility. FAC at ¶ 9. Nvidia has also pled that Rambus’s actions

caused substantial injury to North Carolina business and consumers. FAC at ¶¶ 1, 4, 11,

and 12.

II. FACTS

Rambus’s anticompetitive conduct at issue in this case began long before Rambus

filed its patent infringement lawsuit against Nvidia. The FAC sets forth a detailed history

of the birth of Rambus’s anticompetitive business strategy.

The story began while Rambus was a member of JEDEC. While a member of

JEDEC, Rambus adopted a secret submarine-style patent scheme in which Rambus

altered its patent applications based on information learned at JEDEC meetings (but that

it did not invent itself). Rambus then secretly filed “piggy-back” patent applications and

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continuation patent applications to misappropriate the JEDEC standard. Id. at ¶¶ 69-71,

¶¶ 78-80, 86-87. Once the industry was locked in to the then emerging JEDEC standard,

Rambus approached the companies adhering to the JEDEC standards and sought

supracompetitive royalties. Id. at ¶¶ 139-141. This strategy was recognized in the Hynix

case, Hynix v. Rambus, N.D. Cal. Case No. 06-cv-00244, Dkt. 386 at 7, attached hereto

as Exhibit A. It was through this discovery, i.e. that patents could be drafted to cover an

industry standard through continuation patent applications and be used to obtain

supracompetitive package licenses, that the anticompetitive Rambus business model was

born. Id. at ¶¶ 139-144.

Rambus’s anticompetitive conduct continued after it left JEDEC membership. Id.

at ¶¶ 88-100. Rambus continued to hide the scope of its blocking patents from JEDEC

and abused the patent continuation application process to try and cover then-current and

developing JEDEC standards. Id. at ¶ 80. The FAC alleges that “Rambus’s continuation

patent applications have spawned dozens (if not hundreds) of patents and thousands of

claims.” Id. at ¶ 3. These continuation patents did not have a legitimate business

justification. Id. Indeed, Rambus has expanded a single patent application that it had

filed in 1990 into hundreds of claims in over 45 patents. Id. at ¶ 129. The purpose of this

patent continuation application strategy was to attack and misappropriate then-current

and evolving industry standards. Id. at ¶¶ 130-131.

When scrutinized for some of this behavior, Rambus has not always fared well but

has strategically avoided accountability. For example, Rambus filed its first lawsuit on

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patents related to the ones asserted in California against Infineon in the “rocket-docket”

of the Eastern District of Virginia against Infineon.2 See Rambus, Inc. v. Infineon Tech.

AG, 164 F. Supp. 2d 743 (E.D. Va. 2001). The Court stated from the bench that

Rambus’s patents were unenforceable and indicated that it would reduce such an order to

writing. In response, Rambus settled the case almost immediately for next to nothing for

the sole reason of saving its portfolio. FAC at ¶18. Later, Samsung would file a

declaratory judgment action against Rambus in the Eastern District of Virginia. See

Samsung, 439 F. Supp. 2d 524, 527 (E.D. Va. 2006). Rambus filed a motion to transfer

venue, arguing that Virginia was no longer a convenient forum to litigate its patent

claims. Rambus’s motion was denied in part, because, Rambus’s motion to transfer was

a part of Rambus’s “forum manipulation scheme in which Rambus engaged to avoid

litigation against Samsung” in the Eastern District of Virginia. Id. at 532, n. 3. After

losing the motion to transfer, Rambus offered Samsung a covenant not to sue on the

patents at issue in the Eastern District of Virginia to avoid having that Court exercise

jurisdiction. Samsung Electronics. Co. v. Rambus, Inc., 523 F.3d 1374 (Fed. Cir. 2008).

Despite giving the covenant not to sue, Rambus sued Samsung on other patents in the

same families in the Northern District of California. See Rambus, Inc. v. Samsung

Electronics Co., Ltd. Case No. 4:05-cv-2298 (N.D. Cal.).3

2
If Rambus's arguments related to venue in its currently pending motion to transfer are
accurate, it had little reason to file there.
3
In addition to these venues, Rambus has litigated in other fora, as set forth in paragraph
17 of the FAC Rambus has also had extensive activity before the FTC and the European
Union. The FTC originally found that Rambus violated section 5 of the FTC Act because

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Nvidia is a target of Rambus’s anticompetitive strategy. FAC at ¶¶ 105-107.

Before filing its patent infringement action, Rambus demanded a package license for all

Rambus patents with royalties based upon worldwide sales. Id. at ¶ 106. Alternatively,

Rambus demanded that Nvidia abandon standards compliance and adopt the failed

Rambus technology. Id. Either option would have eliminated Nvidia’s ability to

compete. Id. Nvidia refused to capitulate, and as a result Rambus sued it for patent

infringement. Id. at ¶¶ 106-107. Because of Rambus’s exclusionary actions, Nvidia has

been damaged. Id. at ¶¶ 147-149.

III. ARGUMENT

A. Standard of Review

Dismissal of a complaint for failure to state a claim is generally disfavored.

Capital One Bank (USA) N.A. v. Hess Kennedy Chtd., LLC, 2008 U.S. Dist. LEXIS

51252 (E.D. VA. July 3, 2008) (citing Fayetteville Investors v. Commercial Builders,

Inc., 936 F.2d 1462, 1471 (4th Cir. 1991)). On a motion to dismiss, the court must accept

the allegations in the complaint as true, and is bound to give a plaintiff the benefit of

every reasonable inference that can be drawn from the complaint. Anderson v. Sara Lee

Corp., 508 F.3d 181, 188 (4th Cir. 2007) (citing Erickson v. Pardus, 127 S. Ct. 2197,

2200 (2007) (citing Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1965 (2007)); Edwards

v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999); see also DiscoVision Associates,

of its acts before JEDEC. The FTC opinion was later overturned. In addition, one case,
Micron v. Rambus, Case No. 00-792-JJF, remains pending in the District of Delaware.
Nvidia is informed and believes other pending cases involving Rambus may exist in other
fora as well.

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1997 U.S. Dist. LEXIS 7507, at *8 (reading plaintiff’s complaint through the lens of its

arguments as raised in its opposition to a motion to dismiss).

Complex antitrust cases such as this are particularly ill-suited for summary

dismissal because they are fact intensive. See Dickson v. Microsoft Corp., 309 F.3d 193,

212 (4th Cir. 2002). Where, as here, facts are pled in detail and set forth a showing of

anticompetitive conduct when taken as a whole, summary dismissal is inappropriate.

Continental Ore Co., v. Union Carbide & Carbon Corp., 370 U.S. 690, 698-99 (1962).

B. Nvidia’s Antitrust Claims Are Adequately Pled.

1. Rambus’s characterization of Nvidia’s Antitrust claim is wrong.

Relying upon Prof. Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,

508 U.S. 49, 60 (1993) (“PRE”), Rambus incorrectly asserts that Nvidia’s antitrust

allegations “rest on its contention that Rambus’s patent infringement suit in California is

‘objectively baseless.’” Rambus’s Mem. at 12. In presenting its argument, Rambus

misunderstands and mischaracterizes the FAC.

The elements of a Sherman Act section 2 violation are (i) either monopoly power

or a dangerous probability of acquiring monopoly power and (ii) exclusionary conduct

with a specific intent to monopolize. Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,

472 U.S. 585, 595-96 (1985); see also Oksanen v. Page Memorial Hosp., 945 F.2d 696,

710 (4th Cir. 1991); see also DiscoVision, 1997 U.S. Dist. LEXIS 7507, at *22 (quoting

Spectrum Sports, Inc. vs. McQuillan, 506 U.S. 447, 459 (1993)). Exclusionary conduct is

conduct other than competition on the merits. Qualcomm v. Broadcom, 501 F.3d 297,

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308 (3d Cir. 2007). Significantly, it can include conduct that is lawful when engaged in

by a firm without monopoly power. Allied Tube and Conduit Corp. v. Indian Head, Inc.,

486 U.S. 492 (1988); Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S.

690, 707-708 (“it is well settled that acts which are themselves legal lose that character

when they become constituent elements of an unlawful scheme.”).

The exclusionary conduct in this case is not premised on the assertion of patent

claims in a lawsuit, making PRE irrelevant. See Hynix 527 F. Supp. 2d at 1090. PRE

dealt only with a situation in which the lawsuit standing alone was alleged to have

created an unlawful monopoly. PRE, 508 U.S. at 72-73 (Stevens, concurring). Contrary

to Rambus’s argument, the FAC alleges the following exclusionary conduct distinct from

Rambus’s patent infringement lawsuit:

 Failing to disclose relevant patents and patent applications and deceiving JEDEC,
its members and others about the scope of Rambus’s purported patents. FAC at ¶¶
66-93, 114-125.

 Misusing the continuing patent application process to conceal its patent


applications until the industry had become locked-in to JEDEC standards. FAC at
¶¶ 2, 16.

 Appropriating JEDEC information and using it to modify continuing patent


applications to cover technology that Rambus did not invent, and then extorting
royalties from users of the JEDEC standard after they were locked-in to the
standard. Id. at ¶¶ 70, 72, 77.

 Demanding that users of the JEDEC-standard license packages of Rambus’s


patents and pay royalties on worldwide sales. Id. at ¶¶ 139-141.

See also FAC at ¶ 113-144 (outlining Rambus’s anticompetitive conduct). These

allegations – combined with the allegation that Rambus has monopoly power in the

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relevant market are more than sufficient to allege a Sherman Act § 2 violation. Rambus’s

motion ignores nearly all of these allegations. While these allegations read together can

properly be considered an antitrust violation, they also are independently exclusionary

practices as discussed below.

a. Rambus’s continuation application practice is


anticompetitive.

In its motion to dismiss, Rambus ignores Nvidia’s allegation that Rambus used

continuation patent applications to conceal pending patent claims from the industry and

to delay issuance until the industry had become locked-in to JEDEC standards. FAC at ¶

130. This strategy has already been recognized, in a different context, by the Hynix

Court. Hynix v. Rambus, N.D. Cal. Case No. 06-cv-00244, Dkt. 386 at 7 (“Evidence also

suggests that Rambus repeatedly delayed issuing its patents or informing others about

them until the DRAM industry committed to making infringing products” and “Internal

Rambus documents also strongly suggest that Rambus was drafting its claims to cover

technologies as they developed”), attached hereto as Exhibit A. Abusive continuation

application practice is actionable under the antitrust laws. See DiscoVision, 1997 U.S.

Dist. LEXIS 7507 at *26 (finding that plaintiff’s allegations of abusive patent

continuation applications and coercive package licensing properly stated causes of action

under federal and state competition laws); see also SCM Corp. v. Xerox Corp., 463 F.

Supp. 983, 1007 (D. Conn. 1978), remanded, 599 F.2d 32 (2d Cir.), on remand, 474 F.

Supp. 589 (D. Conn. 1979), affirmed and remanded, 645 F.2d 1195 (2d Cir. 1981)

(noting that “once a company had acquired monopoly power, it could not thereafter

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acquire lawful patent power if it obtained new patents on its own inventions primarily for

the purpose of blocking the development and marketing of competitive products . . .”).

In DiscoVision, the court sustained a complaint very similar to the complaint at

issue here. The plaintiff alleged that the defendant had monopolized the relevant market

by, among other things, filing numerous continuation applications. The Court noted that,

although the patent laws do not limit the number of continuation applications that can be

filed, and thus there was no Patent Act violation, the filing of multiple continuation

applications can constitute an anticompetitive delaying tactic that can violate Sherman

Act § 2. DiscoVision, 1997 U.S. Dist. LEXIS 7507, at *24.

Such conduct has also been condemned by intellectual property commentators.

For example, Mark Lemley (the William Neukom Professor of Law at Stanford

University) and The Honorable Kimberly Moore (United States Judge for the Federal

Circuit) have noted as follows:

. . . [C]ontinuation practice can be—and has been—used strategically to


gain advantages over competitors by waiting to see what product the
competitor will make, and then drafting patent claims specifically designed
to cover that product. Finally, some patentees have used continuation
practice to delay the issuance of their patent precisely in order to surprise a
mature industry, a process known as “submarine patenting.”

Lemley and Moore, Ending Abuse of Patent Continuations, 84 Bost. U. L. Rev. 63, 65

(2004) (footnotes omitted). The article continues:

Permitting patentees to change claims to track competitor’s products invites


abuse of the system. This practice seems fundamentally unfair, since a
competitor who was legitimately first to invent a particular device or
process may be held to have infringed on a patent claim written after (and
indeed because of) that invention. It also seems inconsistent with the

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fundamental economic justification for the patent system, which is to
encourage new inventions. As commentators have noted, the patent system
must balance encouraging pioneering inventions and encouraging
improvements. Strategic claim damages may hold-up legitimate improvers
or independent inventors, reducing this ability and incentive to innovate.

Id. at 78 (footnotes omitted), citing Michael J. Meurer, Controlling Opportunistic and

Anticompetitive Intellectual Property Litigation, 44 B. C. L. Rev. 509 (2003); see also

Hovenkamp, Janis, and Lemley, An Analysis Of Antitrust Principles Applied To

Intellectual Property Law § 14.3a. Accord U.S. Department of Justice, Antitrust

Guidelines for the Licensing of Intellectual Property, 4 Trade Reg. Rep. (CCH) ¶¶ 13,

132 (1995); Areeda ¶¶ 704b and 707a (discussing anticompetitive nature of patent

accumulation).

b. Rambus's appropriation of standards information is


anticompetitive.

While abusive patent application continuation practice in and of itself can violate

the antitrust laws, Nvidia’s case presents particularly compelling facts because of

Rambus’s improper effort to misappropriate information from procompetitive, open

JEDEC meetings to use in its patent prosecution strategy. Rambus’s conduct was

equivalent to stealing the information necessary for its continuation patent strategy.

In Infineon, a case cited and relied upon by Rambus, the Court recognized that

Rambus could violate the antitrust laws by expanding a patent’s claims based on

information taken from a standard-setting organization activities:

[If] Rambus joined an SSO dedicated to open standards, learned of the


standards and proposed standards through that membership, and then
prosecuted its patents with the PTO to cover the standards, a jury could find

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that Rambus acted in a profoundly anticompetitive manner. In particular, a
jury could find that, by guiding its patent applications to cover the JEDEC
standards, Rambus was able to exert a tremendous amount of influence
over the unaware DRAM industry; an industry comprised of manufacturers
who had developed JEDEC-compliant products in the belief that such
products would not be royalty bearing and who, if they wished to remain
JEDEC compliant and manufacture the goods they had developed, thus
needed to obtain Rambus licenses or suffer prosecution. In other words, a
jury could find, on the record evidence if given credence, that Rambus’s
conduct allowed it to obtain its market power, not through superior
products, historical accident, or business acumen, but through unlawful
behavior.”

Infineon, 330 F. Supp. 2d at 698.

Rambus’s conduct is much more egregious than a monopolist’s purchase of

related patents – conduct which is presumptively unlawful as conduct intended to further

entrench a monopolist’s market power. See Areeda & Hovenkamp, Antitrust Law ¶ 707a

(“acquisition by a monopolist of exclusive rights in related patents should presumptively

be a § 2 ‘exclusionary practice.’”). See also Areeda ¶ 704b (“[w]e would treat improper

procurement of a valid patent in the same way we would treat the acquisition of a patent

from another.”). Here, Rambus improperly procured its patents because its patents were

based on information that it had expropriated from JEDEC and used for purposes at odds

with JEDEC’s mission, not on information it had developed itself. See FAC at ¶ 70

(“Rambus began to alter its patent applications based on information it had learned at

JEDEC meetings, but that it did not invent itself”), ¶ 39 (JEDEC maintains “a

commitment to avoid the unknowing incorporation of patented technologies into its

published standards”).

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c. Rambus's package licensing scheme is anticompetitive.

Patent licensing contracts are subject to the Sherman Act. United States v. New

Winkle, Inc., 342 U.S. 371 (1952). An entity that “attempt[s] indirectly to extend the

scope of a lawful monopoly . . . beyond the terms of the grant” violates the antitrust

laws.” United States v. Associated Press, 52 F. Supp. 362, 369 (S.D.N.Y. 1943); see also

Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990).

The FAC alleges that Rambus unlawfully seeks to collect double royalties for the

use of the same patent, seeks to tie patents related to the JEDEC standard to patents that

are unrelated, and claims royalties on Nvidia products that could not, under any

conceivable theory, be covered under any of Rambus’s patents. Such attempts to

indirectly extend the scope of a patent monopoly can violate the antitrust laws. See

Zenith Radio v. Hazeltine Research, Inc., 395 U.S. 100 (1969); U.S. v. Paramount

Pictures, Inc., 334 U.S. 131, 159 (1948) (holding that conditioning licensing of desired

intellectual property upon licensing of unwanted intellectual property is a violation of

Sherman Act); United States v. Associated Press, 52 F.Supp. 362, 369 (S.D.N.Y. 1943);

see also Atari Games Corp. v. Nintendo of Am., 897 F.2d 1572, 1576 (Fed. Cir. 1990).

Indeed, Sherman Act claims that a monopolist coerced others to pay supracompetitive

royalties based upon threats related to patents alleged to cover industry standards have

withstood Rule 12(b)(6) challenges. See Broadcom Corp. v. Qualcomm Inc., 501 F.3d

297 (3rd. Cir. 2007); see also Gideon Parchomovsky v. R. Polk Wagner, Patent

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Portfolios, 154 U. Pa. L. Rev. 1 (2005) (describing anticompetitive effects of package

licensing of patents).

2. Rambus Confuses Exclusionary Conduct With Damage Caused


by Such Conduct.

Rambus’s motion to dismiss misses the important distinction between

exclusionary conduct. Contrary to Rambus’s argument, the FAC does not allege that

Rambus’s California patent infringement action constitutes the exclusionary conduct

underlying the violation of Section 2 of the Sherman Act. Rather, Nvidia alleges that the

expenses that Nvidia has incurred in addressing Rambus’s exclusionary practices are part

of the damages Nvidia can recover from Rambus.

Citing to PRE, Rambus’s motion confuses exclusionary conduct with damages.

Unlike the situation in PRE, Rambus’s patent infringement lawsuit is not the cause of the

antitrust violation but rather part of the damage resulting from the violation.4 Rambus

ignores the authority emphasizing the importance of the well recognized difference

between exclusionary conduct and damage. See, e.g., Angelico, M.D. v. Lehigh Valley

Hosp. Inc., 184 F.3d 268, 275 n.2 (3d Cir. 1999) (holding that the district court had

“erred by…confusing antitrust injury with an element of a claim under section one of the

Sherman Act, 15 U.S.C. § 1.”); see also 2 Areeda, ANTITRUST LAW at ¶ 335f.

4
Notably, many of the patents asserted against Nvidia have not been at issue in other
cases. See Rambus v. Nvidia, Case No, C-08-03343-SI, Dkt. 31, attached hereto as
Exhibit B. Application of the “objectively baseless” standard, even if it were a correct
statement of law, would not be applicable here as the Hynix case dealt with some similar
and some different patents.

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Even if Rambus’s California patent action were considered to contribute to the

exclusionary conduct and not just constitute damages, Nvidia would still have a proper

Sherman Act § 2 claim. When, as here, the monopoly power is created by other

exclusionary conduct, a non-baseless patent infringement claim does not preclude

recovery of damages, including the cost of defending litigation, caused by the other

exclusionary conduct. See, e.g., Atari, 897 F.2d at 1576-77; Kobe v. Dempsey Pump Co.,

198 F.2d 416 (10th Cir. 1952), cert. denied 344 U.S. 837 (1952).

In fact, in Hynix – the case that Rambus argues controls the outcome of this case –

the Court held that where patent litigation is used to further an overall scheme of

anticompetitive conduct, the patent litigation can be properly included as an element of

the anticompetitive scheme. See Hynix Semiconductor, Inc. v. Rambus, Inc., 527 F.

Supp. 2d 1084, 1096-98 (N.D. Calif. 2007). The court explained:

Because Rambus’s alleged conduct at JEDEC can independently qualify as


an anticompetitive harm under section 2, the court finds that Rambus’s
current patent litigation is “causally connected” to that behavior and
therefore properly included in an “anticompetitive scheme” allegation. To
be clear, the causal connection is that a patent “ambush” or “hold-up” is
ineffective without the threat of litigation.

Id. at 1098.

Similarly in this case, Rambus’s alleged misconduct before JEDEC, its abusive

patent continuation applications, and its coercive patent licensing practices independently

qualify as anticompetitive harm under Section 2. Rambus’s patent litigation against

Nvidia can be considered to be causally connected to this overall scheme because “a

patent ‘ambush’ or ‘hold-up’ is ineffective without the threat of litigation.” Therefore,

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Rambus’s litigation is properly included as an element of Rambus’s overall

anticompetitive scheme to monopolize the relevant technology market.5

3. Previous Rambus Cases Are Not Controlling.

Rambus also incorrectly suggests that Nvidia’s claims should be dismissed merely

because the jury found in favor of Rambus in Hynix Semiconductor Inc. v. Rambus Inc.,

2008 U.S. Dist. LEXIS 60838 at *11-12 (N.D. Cal. July 24, 2008). The fact that the

plaintiffs in Hynix did not present enough evidence at trial to convince the jury to rule in

their favor does not mean that Nvidia should be denied the opportunity to prove its own

case against Rambus – particularly when the court issued a carefully reasoned decision

permitting the case to go to the jury. Hynix, 527 F. Supp. 2d at 1084 (N.D. Cal. 2007).

Moreover, Nvidia’s complaint includes additional allegations of anticompetitive conduct

that were not raised in Hynix, such as the following: (i) Rambus abused the patent

application process (even after it left JEDEC) to cover technology it did not invent; (ii)

Rambus delayed the issuance of the patents to try and cover current and future JEDEC

standards; and (iii) Rambus engaged in a scheme of coercive package licensing. That

conduct is exclusionary whether or not Rambus had a duty to disclose its pending patent

applications to JEDEC. See DiscoVision, 1997 U.S. Dist. LEXIS 7507 at *26-28. Thus,

the jury’s finding in Hynix that “JEDEC members did not share a clearly defined

5
Rambus does not raise the Noerr-Pennington defense – nor could it – since Nvidia's
antitrust claims are not focused on Rambus's filing of a patent infringement action as set
forth herein.

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expectation that members would disclose relevant information they had about patent

applications” has little applicability to this case.6

C. Nvidia Has Pled A Claim Under N.C. Gen. Stat. § 75-1.1

N.C. Gen. Stat. § 75-1.1 forbids “unfair or deceptive acts or practices in or

affecting [North Carolina] commerce.” Rambus contends that Nvidia has no standing to

allege a violation under N.C. Gen. Stat. § 75-1.1 because Nvidia has not demonstrated

that its operations within the state of North Carolina have been injured. Rambus’ Mem.

at 7-8. Rambus is wrong under the law and the facts are pled.

Contrary to Rambus’s assertions, “[n]othing in the language of §75-1.1 supports

making the Act available only to plaintiffs whose in-state business operations have been

injured.” Hardee’s Food Systems, Inc. v. Beardmore, 1997 U.S. Dist. LEXIS 9671, *9

(E.D.N.C. June 6, 1997). In fact, in 1977 the North Carolina General Assembly amended

§ 75-1.1 by deleting the words “within this state” from the statutory language, which has

been interpreted to expand the scope to the fullest extent permissible under conflicts of

law principles and the Constitution. American Rockwood, Inc. v. Owens-Corning

Fiberglass, 640 F. Supp. 1411, 1427 (E.D.N.C. 1986). Indeed, North Carolina courts

have sustained claims with significantly fewer ties to North Carolina than are alleged

here. See Hardee’s, 1997 U.S. Dist. LEXIS 9671 at *8 (citing Broussard v. Meineke

Discount Muffler Shops, 945 F. Supp. 901, 917-18 (W.D.N.C. 1996).

6
Notably, the Infineon court and the FTC (prior to reversal by the D.C. Circuit) both
found that Rambus had engaged in improper behavior with respect to its activities before
JEDEC.

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In Hardee’s, the plaintiff’s sole market and business operation was a Nebraska

franchise operating under a license agreement with the North Carolina defendant. The

Court held that the defendant’s alleged conduct “might also be said to affect North

Carolina commerce inasmuch as defendant’s substantial in-state business operations may

have profited by them.” Id. Taking the allegations in the complaint as true, Hardee’s

held that there was a sufficient legal basis to sustain plaintiff’s claim under §75-1.1. Id.

The same is true here.

In Sun Belt Rentals, Inc. v. Head & Engquist Equipment, L.L.C., 2003 NCBC

LEXIS 9, at *17-19 (N.C. Super. July 31, 2003), the Court held that a multistate scheme

impacting a number of states was within the reach of § 75-1.1 because the contacts were

not incidental. Here, as in Sun Belt Rentals, Inc., both Rambus and Nvidia have much

more than an incidental effect on North Carolina commerce. Id. at *25. As set forth in

the FAC, both Rambus and Nvidia maintain offices in North Carolina (¶¶ 9, 12), Nvidia

has significant customers in North Carolina for products that comply with JEDEC

standards (¶¶ 9, 12), and Rambus’s conduct has impeded innovation in North Carolina (¶

1). Moreover, contrary to Rambus’s assertion, Nvidia has alleged in-state injury both

because its relationship with its customers in North Carolina who use its JEDEC-

conforming technology are endangered and because Rambus’s conduct has chilled

innovation in North Carolina which otherwise could benefit Rambus. FAC at ¶¶ 1, and

12. Further, Nvidia has alleged that Rambus’s monopoly power extends to North

Carolina. Id.

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Rambus improperly relies upon In Porters and Dixie Yarns in its attempt to

narrow the scope of §75-1.1. See Rambus’s Mem. at 8-10 (citing The ‘In’Porters, S.A. v.

Hanes Printables, Inc., 663 F. Supp. 494, 502 (M.D.N.C. 1987) and Dixie Yarns, Inc. v.

Plantation Knits, Inc., 1994 U.S. Dist. LEXIS 21725, at *8 (W.D.N.C. July 24, 1994)).

However, In Porters is distinguishable from this case for the same reasons that it was

distinguished in Sunbelt Rentals. The Sunbelt Rentals Court held that the facts were

“clearly and plainly” distinguishable from In Porters, where the sales of a French

plaintiff were limited to France and abroad, and completely devoid of any operations in

North Carolina or the Unites States. Id. at 24-25.

Rambus argues that the federal patent laws preempt Nvidia’s North Carolina

claims. However, preemption does not apply here because the patent laws do not

immunize the anticompetitive conduct alleged in Nvidia’s complaint, and proscribed

under N.C. Gen Stat. §75-1.1. Dow Chemical, Inc. v. Exxon Corp., 139 F.3d 1470, 1474

(Fed. Cir. 1998). Moreover, Nvidia’s complaint is not a response or defense to the

validity or enforceability of Rambus’s patents, but affirmative claims based on Rambus’s

anticompetitive conduct.

D. Nvidia Has Pled A Claim Under N.C. Gen. Stat. § 75-2.1

As acknowledged in footnote 3 of Rambus’s opening brief, Rambus is fully aware

that Nvidia is asserting a claim under N. C. Gen. Stat. §75-2.1, as opposed to N.C. Gen.

Statute §75-2. The reference in the Amended Complaint is a typographical error. Nvidia

has stated a claim under N.C. Gen. Stat. §75-2.1 for the same reasons as Nvidia’s claim

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under section 2 of the Sherman Act. Indeed, N.C. Gen. Stat. §75-2.1 is modeled after

Sherman Act §2 and is guided by Sherman Act §2 precedents. See Meijer, Inc. v. Abbott

Laboratories, Inc., 544 F. Supp. 2d 995, fn. 13 (N.D. Cal. 2008). Nvidia respectfully

requests that the Court administratively correct Nvidia’s FAC to correct the obvious

typographical error or permit an errata.

IV. RAMBUS'S MOTION FOR A MORE DEFINITE STATEMENT SHOULD


BE DENIED.

A motion for a more definite statement of allegations should be denied when, as

here, the allegations are sufficiently clear that it can be answered. Simaan, Inc. v. BP

Prods. N. Am., Inc., 395 F. Supp. 2d 271, 280 (M.D.N.C. 2005); see also Monster Daddy,

LLC v. Monster Cable Prods., 2007 U.S. Dist. LEXIS 5549 (D.S.C. Jan. 24, 2007)

(denying motion for more definite statement where plaintiff adequately pled claim for

relief). Here, Nvidia’s allegations are set forth in great detail and great specificity. Thus,

there is no need for a more definite statement of facts.

V. CONCLUSION

For the foregoing reasons, Rambus’s motion to dismiss should be denied.

Dated: September 29, 2008. __/s/ Robert D. Mason, Jr.


Mark N. Poovey (NC Bar No. 9416)
John F. Morrow, Jr. (NC Bar No. 23382)
Robert D. Mason, Jr. (NC Bar No. 29337)
Attorneys for Plaintiff Nvidia Corporation
WOMBLE CARLYLE SANDRIDGE &
RICE, PLLC
One West Fourth Street
Winston-Salem, North Carolina 27101
Telephone: (336) 721-3600

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Case 1:08-cv-00473-UA-WWD Document 17 Filed 09/29/2008 Page 26 of 28


Telephone: (336) 721-3660
mpoovely@wcsr.com
jmorrow@wcsr.com
rmason@wcsr.com

-and-

J. Peter Coll, Esq.


Karen D. Thompson, Esq.
ORRICK, HERRINGTON & SUTCLIFFE,
LLP
666 Fifth Avenue
New York, New York 10103
Telephone: (212) 506-5000
Facsimile: (212) 506-5151

I. Neel Chatterjee, Esq.


Sean Lincoln, Esq.
Na’il Benjamin, Esq.
ORRICK, HERRINGTON & SUTCLIFFE,
LLP
1000 Marsh Road
Menlo Park, CA 94025-1015
Telephone: (650) 614-7400
Facsimile: (650) 614-7401

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Case 1:08-cv-00473-UA-WWD Document 17 Filed 09/29/2008 Page 27 of 28


CERTIFICATE OF SERVICE

The undersigned hereby certifies that he is an attorney at law licensed to practice


in the State of North Carolina, and is a person of such age and discretion as to be
competent to serve process.

That on September 29, 2008, he caused to be served a copy of the foregoing


NVIDIA CORPORATION’S OPPOSITION TO RAMBUS’S MOTION TO
DISMISS in the manner indicated below and addressed as follows:

VIA ECF:

DANIEL ALAN M. RULEY


BELL DAVIS & PITT, P.A.
POB 21029
WINSTON-SALEM, NC 27120-1029
336-714-4147
Fax: 336-722-8153
Email: aruley@belldavispitt.com

/s/ Robert D. Mason, Jr.


Robert D. Mason, Jr. (NC Bar No. 29337)
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
One West Fourth Street
Winston-Salem, NC 27101
rmason@wcsr.com
(336) 721-3761
rmason@wcsr.com

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