On Wednesday, the Federal Trade Commission (FTC) announced the most important resolution of a standards-related enforcement action since Rambus, and possibly since its landmark settlement with Dell Computer in 1995. At issue was whether a licensing promise made by a patent-owning participant in a standards development process is binding upon someone that later owns the same patent. In a split 3 – 2 decision, the FTC has ruled that it does, when the later owner exploits the “lock in” of the marketplace by dramatically increasing the cost to license the patent in question.
The decision is significant for a number of reasons. First, the marketplace has long worried over whether such promises can be relied upon in the long term. Second, the sole business of the defendant in the action, Negotiated Data Solutions (N-Data), is licensing patents – in other words, a “troll,” in market parlance. Trolls are viewed by vendors and end users alike as a pernicious and increasing threat.