FTC Requires Patentee To Fulfill Licensing Commitments To A Standard-Setting Organization To Prevent Consumer Harm

01 July 2008
By Dr. Lauren Stiroh, with Eugene L. Chang, William H. Rooney, and Heather M. Schneider of Willkie Farr & Gallagher LLP

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.