FTC bars company from higher royalties (AP)

WASHINGTON - The Federal Trade Commission said Wednesday that it has blocked a company from seeking higher royalties on a patented technology that is included in a widely used computer networking standard.

The commission accused Negotiated Data Solutions LLC, based in Chicago, of engaging in unfair competitive practices when it sought the higher royalties on technology used in ethernet networking equipment.

Ethernet enables computers and other devices to connect over networks and is used in "nearly every computer sold" in the United States, the FTC said in a release. N-Data's efforts could have led to higher prices for consumers, the FTC said, though it didn't specify the amount at stake.

The technology, known as Nway, was originally developed by National Semiconductor Corp. and was accepted as part of the ethernet standard in the 1990s by a technology standards group. Technology standards allow different high-tech equipment makers to develop compatible products.

After N-Data obtained the patents in late 2003, it sought to charge much higher royalties than National Semiconductor had, the FTC said.

"Because N-Data began demanding royalties after it became expensive and difficult for the industry to switch to another standard, N-Data was able to demand higher royalties than the industry otherwise would have paid," the commission said in a release.

Such actions, "if not stopped, could be enormously harmful" to standard-setting organizations, the commission said.

Under a settlement the FTC reached with N-Data, the company is barred from enforcing its patents unless it first offers license terms similar to those offered by National Semiconductor. The company did not admit to violating the law as part of the settlement.

Alan Loudermilk, founding partner of N-Data, said he was "disappointed" by the FTC's actions, which he said were "unnecessary and unprecedented."

The case brought about a rare 3-2 split among the five FTC commissioners, with chairwoman Deborah Platt Majoras among the two dissenters.

Majoras said there is no allegation that the patent holder engaged in deceptive or improper conduct before the standard-setting organization.

As a result, "the majority has not identified a meaningful limiting principle that indicates when an action ... will be considered an 'unfair method of competition,'" she said.