FTC Invokes Novel Theories in Standard-Setting Case

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On January 23, 2008, the Federal Trade Commission announced it had entered into a consent decree with Negotiated Data Solutions LLC (“N-Data”) to settle a complaint against the company for repudiating a prior commitment to license users of its computer communications technology. The

commitment had been made to induce a standard-setting organization to adopt the technology in its standard. Issues involving intellectual property in the standard-setting process are an area the agency has monitored very carefully; this action is another example of that scrutiny.

The FTC’s complaint alleges two separate violations of Section 5 of the FTC Act: (1) that N-Data engaged in unfair methods of competition and (2) that N-Data engaged in unfair acts and practices The complaint, which the FTC approved by a 3-2 vote with Chairman Deborah Platt Majoras and Commissioner William Kovacic dissenting, is a rare use of the FTC’s Section 5 authority to challenge conduct that does not rise to the level of an antitrust violation. Further, the complaint is a novel use of the FTC’s consumer protection authority in what is otherwise a competition case, and where the “consumers” protected are technology firms. Simultaneously with the complaint, the FTC entered

into a consent decree with N-Data under which N-Data must offer prospective future licensees of the patents terms substantially identical to those of the original commitment. If the consent decree is ultimately approved following a 30-day public comment period, it may represent a substantial expansion of the FTC’s use of its statutory power.

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Published In: Antitrust & Trade Regulation Updates, Intellectual Property Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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