The news sent Rambus’ stock down more 25% to close at $12.65 on the Nasdaq.

The FTC found Rambus created a monopoly by securing memory patents earlier last decade while it was involved for four years in setting standards for the synchronous DRAM, or SDRAM, as part of the Joint Electron Device Engineering Council.

The FTC said Rambus withheld this information from JEDEC, despite JEDEC’s code of practice that members disclose any patents that may later be enforced against proposed standards. What’s more, Rambus implied it would not seek patents that could be used against the standard at some future point, said the FTC.

Rambus even went a step further: through its participation in JEDEC, the company gained information about the pending standard and then amended its patent application to include all the technology covered in the standard, ruled the FTC.

JEDEC adopted the standards, which resulted in the rest of the memory industry either illegally infringing on Rambus’ patents or having to pay licenses to the company to use the technology.

Through its successful strategy, Rambus was able to conceal its patents and patent application until after the standards were adopted and the market was locked in, said FTC commissioner Pamela Jones Harbour, in the agency’s opinion, published on the FTC web site.

Only then did Rambus reveal its patents through patent infringement lawsuits against JEDEC members who practiced the standard.

For several years, Rambus had said it disclosed its patents to rivals Hitachi and Micron before the JEDEC discussions on the standards. Rambus has also said that JEDEC’s disclosure policies did not specifically state that member’s patents had to be disclosed.

Rambus has argued JEDEC chose its technology as the industry-wide standard because it was the best.

Rambus senior legal adviser John Danforth said, on a conference call, it was highly likely Rambus would appeal the FTC’s ruling.

He pointed to the decision by an FTC administrative law judge in 2004 that ruled Rambus did not influence JEDEC to unknowingly adopt the standard. The FTC’s latest ruling overturns that decision, following requests by FTC workers later in 2004 that the five commissioners at the agency revisit the judge’s ruling.

Danforth said the company could not predict when it would likely file its appeal. But, he noted, The ALJ’s opinion remains part of the record and his findings will part of what the appellant court evaluation in deciding whether or not there’s an appropriate basis for this [latest] decision.

The FTC is seeking to bar Rambus for collecting any further royalties from its existing licensing agreements and patents pertaining to the JEDEC standard in question. The agency has requested more briefings from both sides to decide the appropriate remedy.

The FCT said briefs on the remedy must be filed by September 15 and that replies were due September 29. We expect there will be a further hearing thereafter, Danforth said.

Los Altos, California-based Rambus relies on its intellectual property royalties for revenue.

Rambus chief executive Harold Hughes pointed out on the conference call that Rambus has varied intellectual property, not just those pertaining to standards set by JEDEC, at which Rambus ended its membership in 1996. Indeed, approximately 80% of our patents have priority dates subsequent to JEDEC, Hughes said.

However, Wall Street analyst Daniel Amir at WR Hambrecht said, We believe the unanimous ruling by the FTC is a substantial set-back to Rambus, in a research note.

Amir said the ruling could negatively influence Rambus lawsuits against other DRAM makers, notably Korea’s Hynix Semiconductor.

Rambus is suing Hynix for allegedly infringing on its patents with products Hynix has shipped this year. The next hearing in the case is scheduled for later in August. Rambus recently agreed to accept $134m in damages from Hynix, or less than half of what a jury had ordered Hynix to pay for previously infringing Rambus’ patents.

Analyst Amir said the FTC’s ruling puts Rambus in a defensive mode with its pending patent cases against the DRAM manufacturers rather than in an offensive mode and likely opens up the possibility for Hynix to appeal the recent decision against the company for patent infringement.

Rambus also is suing Boise, Idaho-based Micron Technology Inc for also allegedly infringing its patents. Micron has issued a statement applauding the FTC’s ruling.

Rambus’ Danforth said Rambus understood that the FTC’s ruling was not intended to interfere with our ongoing litigation including trials set against Hynix in August and Micron in October.

But Amir said Rambus might have this wrong. We believe this could give [the DRAM makers] further ammunition to delay any potential settlement with Rambus anytime soon.

Indeed, Micron’s statement alluded to just that: Micron believes that Rambus has engaged in a pattern of deception, destruction of evidence, false testimony and other improper activities designed to mislead courts and Micron to extract unjust patent licensing fees or damages, said Micron general counsel Rod Lewis.

We will continue to vigorously advance those arguments, and the thoughtful ruling today by the FTC supports Micron’s views.