FTC Smacks Down Company That Tried To Exploit Ethernet Patents

from the good-for-the-FTC dept

Thu, Jan 24th 2008 1:28am — Mike Masnick

Over the last few years, it's been well documented that there's plenty of money to be made in using patents to shakedown companies who actually make products. Apparently, this is a bit of a problem for companies that hold onto patents that were actually licensed at more reasonable rates in the past. Take, for example, a company named N-Data, that had bought some patents pertaining to Ethernet back in 2003, from a spin-off from National Semiconductor. National Semiconductor had negotiated a deal with the IEEE that allowed anyone to license these patents for $1,000, in order to make sure its technology was included in the standard. However, N-Data, who was well aware of this deal, felt that now that it owned the patents, it could ignore that agreement and try to force companies using selling Ethernet products (now a widely accepted standard, of course) to pay a lot more than $1,000. Luckily, the FTC has stepped in and told N-Data to knock it off, pointing out that it needed to live up to the agreement between NatSemi and the IEEE, noting that if N-Data were allowed to ignore the agreement, it would throw into doubt an awful lot of technology standards that include similar patent licensing terms. It's interesting to note, however, that the decision by the FTC wasn't unanimous -- and FTC chair Deborah Platt Majoras voted against the decision, suggesting that forcing N-Data to actually agree to an agreement with the patents it bought would somehow unfairly be protecting large corporate interests. Who knew that actually living up to what was agreed to as part of a standards setting process was actually big company welfare?

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Filed Under: ethernet, ftc, patents
Companies: n-data, national semiconductor

14 Comments

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Haywood, 24 Jan 2008 @ 5:18am

The opposite would have been a bad precedent.
If suddenly it cost a gazillion dollars to license say RJ45, the standard would go out the window. Folks would be coming up with new designs & buying a NIC would be a major research project. On the + side adapters would become a growth industry.
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Alfred E. Neuman, 24 Jan 2008 @ 6:17am

Apparently FTC chair Deborah Platt Majoras is unfit for the position she holds.

I wonder if she owns stock in ... nah that would never happen.

Do the companies that already paid get a refund?
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Anonymous Coward, 24 Jan 2008 @ 6:31am

Yet farmers shouldn't have to live up to their agreement when they buy Monsanto corn? Consumers shouldn't live up to their agreement when they buy music or movies?

Pot, meet the kettle.
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Alfred E. Neuman, 24 Jan 2008 @ 6:36am

Re: The opposite would have been a bad precedent.
If this had been allowed, auto negotiate would become very expensive and therefore no longer an option. It would be cheaper to upgrade all the NICs to the same speed.
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Mike (profile), 24 Jan 2008 @ 7:56am

Re:
Yet farmers shouldn't have to live up to their agreement when they buy Monsanto corn? Consumers shouldn't live up to their agreement when they buy music or movies?

A click wrap agreement where the buyer has no say in the decision, cannot negotiate and often is given no alternatives is QUITE different than an agreement formed between two parties where both parties negotiate in good faith and come to an agreement both agree to.

Calling the two situations the same is simply incorrect.
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Not even close, 24 Jan 2008 @ 9:21am

Re:
Your pot is filled with apples and your kettle is filled with oranges. The Monsanto case and this case are completely different.
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Joe Smith, 24 Jan 2008 @ 9:36am

lawyers
It looks like the lawyers for IEEE should have been a little more careful or the case would not even have made it this far. Seems to me that IEEE and similar organizations need to take an encumbrance on or partial assignment of the patent in these circumstances otherwise they might have a problem enforcing the deal if the patent holder goes bankrupt and the creditors sell the patent to a troll.
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ScaredOfTheMan, 24 Jan 2008 @ 9:37am

Google her
Just Google the FTC Chair's name and read her bio (wikipedia has a good one), i.e. who she is married to etc, and you will understand why she votes the way she does.
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lozeerose, 24 Jan 2008 @ 10:08am

Googler Her (I second that)
As an insider, I say check her out. And for that matter look at all the peeps the current Prez has placed in various positions. It's a pattern from top to bottom.
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Killer_Tofu (profile), 24 Jan 2008 @ 10:45am

Re 8 & 9
Regarding the pattern, top to bottom:
CNN just had an article yesterday about how many times just the very few high people in the administration lied to us right after the WTC incident.
http://www.cnn.com/2008/POLITICS/01/23/bush.iraq/index.html

Quite a few.
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niftyswell, 24 Jan 2008 @ 1:19pm

Re: Re 8 & 9
Anyone who trusts the government...any government, either party, to tell the truth and take care of you is a fool. They will say whatever you want to hear to get into a position to make money...whether it is as chairman of the FTC or as a county delegate. Very few people who arent self infatuated, self-important, and ambitious to advance their own careers seek these positions. It takes a big hearted person to run for government out of selfless commitment to just help their fellow citizens and these people crumble at the first hint of criticism. That is why liberals are young and conservatives are old...it takes a while before you start to question people's motives and the purer the motive sounds the more likely it is that you are being lied to. Behind every decision a court, panel, or committee makes are conflicts of interest involving lunch with the plaintiffs and defendants, trips, and contributions to 'favorite organizations'.
Probably not at the supreme court level which is why they overturn so many lower court rulings.
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Anonymous Coward, 24 Jan 2008 @ 1:47pm

A click wrap agreement where the buyer has no say in the decision, cannot negotiate and often is given no alternatives is QUITE different than an agreement formed between two parties where both parties negotiate in good faith and come to an agreement both agree to.

Ahhh, so the poor consumer has to buy the music. Wow. Thats a new one. I didn't know that it was forced on them. Oh, and the "buyer" (and that is as a joke, since so many don't actually buy)does have an alternative. Don't listen to the music by not downloading it.
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Mike (profile), 24 Jan 2008 @ 3:29pm

Re:
Ahhh, so the poor consumer has to buy the music. Wow. Thats a new one. I didn't know that it was forced on them.

That's not what I said, no matter how much you wish it was.

But you have to admit that a *purchase* generally conveys a different set of rights than a *negotiated contract*.

Btw, why have you stopped identifying yourself by your nom de plume?
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Overcast, 25 Jan 2008 @ 8:45am

You know what - it's official - I'm putting a disclaimer on my credit card now - a 'EULA' if you will. If they take the money from the card, they are - by taking the money, agreeing to the terms of the 'EULA'. Why not? I never sign anything when buying a CD - at least anything that goes to the recording company.

Basically, I need to word it that any purchase made with this card, entitles the purchaser to FULL and UNABRIDGED rights to whatever goods are being purchased. The former seller agrees to not hold liable, nor make any claims of ownership or rights to the goods purchased using this card.

Now... why couldn't I do that?
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