“Unfairness” in Standard-Setting: Has the FTC Set a New Standard?

February 12, 2008
The Federal Trade Commission recently issued a complaint and consent agreement with a patent-holder regarding conduct before a standard-setting organization (“SSO”). The complaint charged that Negotiated Data Solutions LLC (“N-Data”) unlawfully reneged on a promise made to an SSO by the prior owner of N-Data’s patented technology in order to persuade the SSO to adopt that technology into an industry standard in violation of both the antitrust and consumer protection provisions of Section 5 of the FTC Act. While the FTC pointed out that breaching a licensing commitment would ordinarily not rise to the level of an unfair method of competition or an unfair act or practice, it stated that “the established public policy of supporting efficient standard-setting activities” is critical in justifying “broad” Section 5 application. This article discusses this FTC action, its potential industry implications, and key questions that patent owners participating in standards development should consider.