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FTC Sues N-Data for Violating Standards Commitment to IEEE
March/April 2008 (vol. 28 no. 2)
pp. 66-69
The Federal Trade Commission announced that it simultaneously filed suit against N-Data and settled the case by entering into a consent order with N-Data. The FTC charged N-Data with violating section 5 of the FTC Act by violating a commitment to the IEEE to license NWay Ethernet patents on previously agreed upon royalty terms; the higher royalties demanded by N-Data caused higher prices to be passed on to consumers. Micro's legal columnist, Richard Stern, explicates the case.

1. The assurance letter is available at http://www.negotiateddata.com/filesGrant_Letter_060794.pdf . It states: "In the event that the IEEE adopts an autodetection standard based upon National's NWay technology, National will offer to license its NWay technology to any requesting party for the purpose of making and selling products which implement the IEEE standard. Such a license will be made available on a nondiscriminatory basis and will be paid-up and royalty-free after payment of a one-time fee of one thousand dollars ($1,000)."
2. Vertical acknowledged at the time it acquired the patents that it had been informed "that several of the patents may be 'encumbered' by whatever actions [NSC] may have taken in the past with respect to the IEEE standards." The final agreement between Vertical and NSC stated that the assignment is "subject to any existing licenses and other encumbrances that [NSC] may have granted." It further provided, "Existing licenses shall include ... [p]atents that may be encumbered under standards such as an IEEE standard." National stated that the assignment is "subject to any existing licenses and other encumbrances that [National] may have granted." It further provided, "Existing licenses shall include ... [p]atents that may be encumbered under standards such as an IEEE standard." N-Data was also familiar with the assurance letter.
3. Current IEEE policy makes this explicit: Any transfer of intellectual property covered by a letter of assurance to the IEEE must include language either explicitly binding the transferee to the terms of the letter of assurance or providing notice of the existence of the letter of assurance. The transferee must agree to do the same for each further transfer. Current IEEE policy also explicitly makes letters of assurance irrevocable. Since 2002, the by-laws include this statement: "This assurance shall apply, at a minimum, from the date of the standard's approval to the date of the standard's withdrawal and is irrevocable during that period."

Index Terms:
law, standardization, skullduggery, N-Data, royalties, autonegotiation, Fast Ethernet, NWay
Citation:
Richard Stern, "FTC Sues N-Data for Violating Standards Commitment to IEEE," IEEE Micro, vol. 28, no. 2, pp. 66-69, March-April 2008, doi:10.1109/MM.2008.24
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