FTC Announces Landmark Settlement in “Patent Hold Up” Action

“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…”

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