On 23 January 2008, the Federal Trade Commission (FTC) announced a
complaint and a proposed consent order with a patent licensing company,
Negotiated Data Solutions LLC (N-Data), regarding patents related to the
ubiquitous Ethernet computer networking standard. With this decision,
the FTC enforced licensing commitments made by a patentee to a
standard-setting organization without requiring proof that the patentee
has market power.
In this article, published in Metropolitan Corporate Counsel,
NERA Senior Vice President Dr. Lauren Stiroh and her co-authors examine
the N-Data decision and its implications for the FTC’s ongoing efforts
to regulate the exploitation of intellectual property rights that cover
industry standards, and the implications of the decision for companies
participating in standard setting activities. The authors assess market
conditions that contribute to the likelihood that standard setting will
confer market power for a standardized technology, and conclude that the
majority’s decision may have benefited had there been further
assessment of these market conditions prior to reaching a conclusion.
The authors conclude that companies that participate in standard-setting
activities should give careful consideration before making open-ended
commitments to offer set license terms to encourage adoption of their
technology.