Wednesday, February 06, 2008

Patent Abuse by N-Data Stopped by FTC : Another Example of Rampant Landgrabbing in the Patent Industry : FTC Chairwoman Majoras Drops the Ball Again

Three cheers for the US Federal Trade Commission but ONLY three - for 3 out of 5 FTC members in this 3-2 decision.

As written at ars technica:

"What happens when a company that doesn't make any products gets hold of some older patents that are part of the Ethernet standard and tries to jack up the royalty rate for their use? Today, we found out as the Federal Trade Commission finalized a consent decree (PDF) with Negotiated Data Solutions, a Chicago company that did just that." [see ars technica for that PDF link]

Austin Modine at The Register reports on the fact that:

"The US Federal Trade Commission is barring a patent-squatting firm from raising its royalty rates for a now-standard Ethernet technology.... N-Data had originally acquired the technology from National Semiconductor Corp. According to the FTC, N-Data purchased the patent knowing the technology had been made a standard for Ethernet gear because of the small licensing price tag."

FTC Chairman Deborah Majoras opposed this FTC decision. In our opinion, Majoras has no business heading this important agency and she is one of Bush's greatly flawed back-door appointments, a questionable appointment that was strongly - and rightly - opposed by Senator Wyden of Oregon because of a history of inaction by Majoras "against anti-competitive practices in the oil industry and in oil and gasoline markets."

The FTC is also responsible for countering spam and online fraud and during Majoras tenure in office almost nothing visibly sensible has been done by the FTC about these Internet evils. Our mail box is still full of all kinds of spam and fraudulent schemes.

Moreover, the FTC is responsible for countering deceptive and unfair practices in e.g. real estate selling - you can tell how miserably the FTC has failed if you look at the subprime mortgage scandal. The problem of abuse in this sector was known to the FTC already in 1998, but no effective measures of any kind have been implemented, except for the issuance of brochures. For that, we need no FTC and need not pay these people their overinflated salaries.

Read the interview with Majoras at the San Francisco Chronicle for numerous examples of her wishy-washy answers, showing why the FTC is not working as it should. Organizations such as the FTC must be headed by people of action and not by well-meaning do-nothing bureaucrats. Who knows, perhaps that is why she was appointed.

People who head the FTC and similar government commissions should be out doing their jobs and protecting consumers and citizens rather than playing Hollywood-like VIP and giving newspaper interviews of no consequence. Here is a typical comment by Majoras:

"I'm most worried about the unintended consequences, because there are always unintended consequences when you pass new laws and new regulations in trying to tamp down certain business practices."

Right. If you do NOTHING, there can of course be no unintended consequences. As long as people like this head the FTC, expect nothing of consequence to be done.

Read the story here at The Register for a typical account of the kind of landgrabbing that is rampant in the patent industry.

Also posting on this topic:

Matt Asay of the The Open Road at CNET writes "The US patent system is a morass of ill-begotten gains and poor oversight." As regards the FTC decision, Asay writes: "Sanity has come home to the United States, if only briefly."

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