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FTC Defends Ethernet From Patent Troll

Posted by Zonk on Thu Jan 24, 2008 11:42 AM
from the much-appreciated-folks dept.
I Don't Believe in Imaginary Property writes "The FTC has put a stop to Negotiated Data Solutions, a patent troll that bought a patent on an important part of the Ethernet networking standard and tried to jack up the royalties for licensing it. In a consent decree (pdf), N-Data agreed to continue licensing the patent at the formerly promised rates. 'Whatever the merits of the decision, it shows that the FTC sees the value of standards and will be on the lookout for any behavior that could undermine these standards-setting process. That alone could keep companies honest when they enter the standards process. Standards-setting bodies have also become more sophisticated over the years (after being burned in several high-profile cases), and now do a better job at forcing involved companies to disclose and license patents.' The IEEE voted back in 2002 to make patent letters irrevocable, which could have prevented this, but neglected to make that clause retroactive."
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  • But wait (Score:5, Funny)

    by moogied (1175879) on Thursday January 24 2008, @11:47AM (#22167784)
    I already have a patent pending on using eletrical signals for any kind of communication!! How dare he steal my thunder!
    • But I have a patent pending on using electrical signals for any kind of communication...in bed. I don't cross license with strangers, though...
  • A small victory (Score:4, Insightful)

    by dk90406 (797452) on Thursday January 24 2008, @11:49AM (#22167818)
    Nice to see the FTC moving in a sensible direction. Of course the only reason they did it, was because we are talking Ethernet. If it was some less known standard that a troll way trying to attack, they would let it slide.
  • by arivanov (12034) on Thursday January 24 2008, @11:51AM (#22167864) Homepage
    Sorry, this was a no contest situation.

    With 100M worth of capital you do not go against an industry with turnover in excess of 100s of Billions per year. Most networking gear all the way to 10G is Ethernet now and that industry as the chairman of FTC noted can fend for itself. In fact, based on the FTC decision it surely did.
  • by dpilot (134227) on Thursday January 24 2008, @12:10PM (#22168178) Homepage Journal
    Why not limit the number of times patent rights can be reassigned?

    As set forth in the US Constitution, the purpose of patents is twofold:
    1: The temporary monopoly on the invention gives the inventor recompense for the investment made in the invention. In other words, it keeps him/her inventing instead of waiting tables.
    2: The limited term of the patent brings the invention into the public domain, to be used as fodder for future inventions.

    The whole idea of assignment of your invention rights is simply another way of getting recompense. It's a good idea, because it means you don't have to be a manufacturer and marketer, as well as an inventor. Assignment of rights lets you focus on inventing and not on those other things, if that's your bent.

    And maybe reassignment by the first assignee might make sense, too. But by the time patent rights have been sold multiple times, the link back to one of the original functions - to keep the inventors inventing - is so diffuse that it has been lost, IMHO.

    The Constitution never intended the patent as a revenue source beyond spurring invention. (Same with copyrights)
    • by s20451 (410424) on Thursday January 24 2008, @12:24PM (#22168412) Journal
      I think that would feed rather than quash the patent trolls. What if a patent can only be transferred n times, and you are the nth guy in the chain? Then your only way to make money from that patent is to license and litigate. So, when the (n-1)th guy gets tired of owning the patent, off to the patent troll it goes, who gets the patent at a nice discount since nobody else is interested in buying it.
    • Anything that lowers the value of the patent (ie. limiting the buyers' rights) will mean less money for the inventor on the original sale.

      A higher standard for obviousness, use of science fiction as prior art (as in the geostationary satellite), and a better pre-granting discussion process (which is already being experimented with) is really all the system needs.
          • Re: (Score:3, Interesting)

            My example of a geostationary satellite is one example where someone tried to patent an idea and the patent was rejected on the grounds that Arthur C. Clarke had fully described the invention in a previous story.

            What exactly was this geostationary satellite patent trying to claim? For anything I've ever read about in science fiction, using the description provided by the author would make very poor prior art material. Generally the disclosure necessary to support useful claims requires a level of detail t

    • It doesn't matter how many times the patent has been assigned - because assignment doesn't change the duration of the patent. What you have here is a solution in search of a problem and a potential enforcement nightmare.
       
      Am I the only one that notices Slashdot's propensity to propose/applaud the limitations of others rights, while screaming loudly at any percieved limitation of their own?
      • Am I the only one that notices Slashdot's propensity to propose/applaud the limitations of others rights, while screaming loudly at any percieved limitation of their own?

        Nope, we're here. It's just that there is a current Scientology thread so we're busy pounding Xenu to shreds. Be back momentarily. Until then, keep up the good fight.

      • Re: (Score:3, Interesting)

        Am I the only one that notices Slashdot's propensity to propose/applaud the limitations of others rights, while screaming loudly at any percieved limitation of their own?

        I already posted in this thread, so I can't use my mod points on your post, so I'll just say, you are not the only one.

      • Re: (Score:3, Informative)

        Last I checked, I held 19 patents, so I'm not simply an uninterested party foisting problems off on someone else. The system is currently broken, though as others have suggested, there are new improvements in the prior art process that may help. I was just coming up with another idea, aimed at the trolls.
  • Neglect? (Score:5, Insightful)

    by Eunuchswear (210685) on Thursday January 24 2008, @12:22PM (#22168362) Journal

    The IEEE voted back in 2002 to make patent letters irrevocable, which could have prevented this, but neglected to make that clause retroactive.
    I doubt they "neglected" to make the cause retroactive, I suspect that not being brain dead they knew that they had no such power.

  • This isn't a submarine patent. [wikipedia.org] In that case, the patent holder sneaks into the marketplace with a hidden patent and then springs it full-fledged upon businesses using the patented technology.

    This case is a bit different. The patent was licensed to the current users of the patented technology--the "bad guy" ship wasn't a submarine sneaking into the middle of a convoy, it was one of the ships already part of the convoy. But then the ship is taken over by another entity... say, a crew of pirates... and they to

    • Re:GPL? (Score:4, Informative)

      by IndustrialComplex (975015) on Thursday January 24 2008, @11:58AM (#22167966)
      The patent was written so that it would be a one time fee of $1000. In terms of business costs and licensing fees, that's peanuts.
    • Re:GPL? (Score:5, Informative)

      by kellyb9 (954229) on Thursday January 24 2008, @12:05PM (#22168070)
      I think it's about 20 years and then it goes into the public domain, but that isn't the case here. The patent is on one particular part of Ethernet, particularly it's use of autonegotiation of speed and capabilities between different devices. It was adopted in 1994 into the Ethernet standard. Initially the patent deal was set up in such a way that every manufacteurer of Ethernet products had to pay a one time royality fee of 1,000 dollars which is pretty weak.
      • Re: (Score:2, Interesting)

        "every manufacteurer of Ethernet products had to pay a one time royality fee of 1,000 dollars which is pretty weak." Expanding on this, why shouldn't they at least be allowed to increase the original cost of the patent inline with inflation? Measuringworth.com estimates the current value of $1,000 1994 dollars at between $1,290 to $1,865. They have the patent, what value is it if they can't they can't set the royalty fee to whatever they want (within reason)?
        • It wasn't a part of the original agreement.

          The patent like any other property comes along with it's
          own baggage. If they didn't want the baggage, they shouldn't
          have bought the property. Attempting to have it both ways
          is a problem in terms of just basic business that is far
          more fundemental than patent trolling.
        • Re: (Score:3, Informative)

          Expanding on this, why shouldn't they at least be allowed to increase the original cost of the patent inline with inflation?


          Because their predecessor in interest, National Semiconductor, agreed to a $1000 license, with no consideration for inflation. Which Negotiated Data Solutions should have known when they bought the parent.

          (Geez, "Negotiated Data Solutions" even sounds like the name of a shakedown organization)

    • This is done with other things such as prescription drugs,
      It is, but shortly expiring a drug company will often release a new very minor improvement and do everything it can to discredit it's older product while pumping up the new one. Witness the advent of Nexium after the patents on Prilosec expired.
      • Re:GPL? (Score:5, Informative)

        by timbck2 (233967) <<moc.liamg> <ta> <2kcbmit>> on Thursday January 24 2008, @12:27PM (#22168470) Homepage

        It is, but shortly expiring a drug company will often release a new very minor improvement and do everything it can to discredit it's older product while pumping up the new one.


        Many times it isn't even a true "improvement", just a minor tweak; like dextro-rotating (or levo-rotating) the molecule, or producing a racemic mixture (e.g. Adderal vs. Dexadrine, the aforementioned Prilosec vs. Nexium), or making an extended-release version.
      • From what I understand, they do not even have to make any changes, just re purpose the drug, this will allow them to extend the patent. Think heart allergy medication (Allegra or whatever) that is found to also reduce cholesterol (this is a pure fictional example). I could be wrong, IANAL, but that is how someone once explained it to me.
    • by LWATCDR (28044) on Thursday January 24 2008, @12:22PM (#22168368) Homepage Journal
      "Why wasnt this patent written so that in X number of years in became extinct and the contents of it went out under the GPL? "
      All I can say Wow...
      1 A patent is not a software license or a copyright. A patent does have a limited life span.
      2. When a patent expires then it becomes totally free. Not free as beer, speech, or the GPL. Free as in public domain free. You can do anything you want with it after it expires.
      So all I can say is WOW.....
      • So all I can say is WOW.....


        A /. post displays an ignorance of property law and/or confuses patents, copyright, and trademarks, and you're surprised?


        You must be new here.

      • by mcmonkey (96054) on Thursday January 24 2008, @01:41PM (#22169682) Homepage
        Not necessarily a good thing

        First, the GP is only a troll is the poster doesn't believe the content of the post, but rather posts just to go against the prevailing sentiment and arouse a reaction.

        Second, a phrase like "exploiting the flaws of the system" is quite loaded. Like if someone you like is charged with a crime but not convicted, you might say that person is not guilty. If someone you don't like is in the same situation, you might say, they only got off on a technicality.

        I'm not guilty of murder, but only on a technicality. Of course, that technicality is the fact that I haven't killed anyone, or caused the death of anyone, or done anything else covered by the laws that define murder. But that's only a technicality.

        If you think the right of a patent holder to charge licensing fees is a "flaw of the system" then yes, in this case the company was trying to exploit that flaw. Of course I could say the requirement to release source code is a flaw of the GPL, and anyone trying to get me to release the source of an application based on GPL code I am selling is just a troll exploiting the flaws of the system.

        I may hear replies that the requirement to release source code is not a flaw of the GPL, but rather is an intentional aspect of how the GPL works. On the same tip, some might say the right of a patent holder to charge licensing fees for use of works covered by the patent, and the right to increase those fees should the patented works prove to be popular, is not a flaw in the system, but part of how patents are intended to work.