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A rare Federal Trade Commission ruling that a company’s patent enforcement actions were anti-competitive without the typical agency ruling that the company violated the Sherman Act has patent lawyers wondering if the FTC is expanding its enforcement reach. In the Jan. 23 decision, the commission said Chicago-based patent licensing company Negotiated Data Solutions LLC (or N-Data) engaged in unfair methods of competition and an unfair act or practice. N-Data enforced patents against companies that made equipment that used the computer networking industry standard known as Ethernet, which is used in most computers sold in the United States. The FTC sought to curtail the company from collecting higher royalties from the technology � a breach of a licensing commitment it made to a standard-setting body that adopted the technology. The 3-2 ruling, the FTC said in a statement, would ensure competition by preventing the company from charging higher royalties for the technologies used in the standard and protect consumers from higher prices. The “FTC’s authority to stop anticompetitive conduct that does not rise to the level of a Sherman Act violation is unique among federal agencies � and the cost of ignoring this particularly pernicious problem is too high,” the FTC said in its statement. In the Matter of Negotiated Data Solutions, FTC File No. 051-0094. A new ’tilt’? The impact is unclear, but the case “may herald a significant tilt against the rights of patent owners,” said Morgan Chu, an intellectual property litigator and partner at Los Angeles-based Irell & Manella. “The rights of patent owners have been colliding with companies that use industry standards in the last decade.” The commission also issued a proposed consent order, which it will decide whether to make final on Feb. 22, after a 30-day public comment period. The proposed agreement would require N-Data to offer a royalty-free license for a one-time $1,000 fee before enforcing its patent, or the same terms a licensee could have received before the patent became part of the Ethernet standard in 1994. After 120 days, N-Data can file suit against prospective licensees that fail to respond, but it must also offer the option for a $35,000 license. In a statement, N-Data said it is “disappointed” by the FTC’s “unnecessary and unprecedented” decision, which depicts “an inaccurate impression of what actually occurred.”

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