Intel Corp., the world's largest semiconductor maker, sued Negotiated Data Solutions LLC to protect customers including Dell Inc. from royalty demands on computer technology.

Intel said Negotiated Data, more commonly known as N-Data, sued Dell, and Intel has pledged to cover any liability Dell incurs. It wants a court to rule that the N-Data patents are invalid or that they were already paid for under an agreement with National Semiconductor Corp., the original patent owner.

N-Data earlier this year settled a U.S. Federal Trade Commission complaint that it was trying to hold up the computer industry by demanding high royalties for the Ethernet standard that allows computers to work together within a local network. Intel contends the patents were part of that case, while N-Data said they cover inventions not related to the Ethernet.

``Absent a declaration and order as sought by Intel, N-Data will continue to wrongfully assert the patents-in-suit against Dell and threaten Intel and its customers, thereby causing Intel irreparable injury and damage,'' Intel said in the complaint, filed Aug. 15 in federal court in Marshall, Texas.

N-Data agreed to limits on how much it can collect on its patents for the Ethernet. Intel contends that N-Data shouldn't be allowed to collect anything from Intel customers on any of the patents that once belonged to National Semiconductor.

N-Data founder Alan Loudermilk said the patents in the Dell case involve USB and high-definition audio, not the Ethernet. Intel and Dell, he said, are trying to extend the agreement too far. He accused Intel of refusing to negotiate in good faith.

``Intel has refused to discuss this dispute or otherwise attempt to reach a compromise that would resolve this dispute, evidently preferring instead to use its financial strengths to advantage in the costly forum of patent litigation,'' N-Data said in a statement. ``This has inevitably led to issues for Intel's customers, including Dell, over whether their use of Intel components is covered by the 1976 license agreement.''

One-Time Fee

The Ethernet inventions were included in the standard because National Semiconductor, maker of chips for Apple Inc.'s iPhone, pledged to license the technology to anyone for a one- time fee of $1,000, according to the FTC. The agency accused Chicago-based N-Data of trying to go around that agreement so it could demand cash ``far in excess'' of the $1,000 fees.

National Semiconductor transferred ownership of the patents in 1998 to Vertical Networks, a company started by former National Semiconductor employees. Vertical developed a list of ``target'' companies to extract the higher fees, Intel said, citing the FTC investigation. N-Data, formed by Loudermilk, Vertical's outside patent lawyer, took over the patents in 2003.

Vertical sold the rest of its assets and is no longer in business, according to the FTC.

As part of the settlement, closely held N-Data must first offer the patent license under the terms of National Semiconductor's 1994 agreement with the standard-setting board. Loudermilk said N-Data had agreed to abide by that in 2005, even before the FTC agreement was reached.

The case is Intel Corp. v. Negotiated Data Solutions LLC, 08cv319, U.S. District Court, Eastern District of Texas (Marshall).

The Dell case is Negotiated Data Solutions LLC v. Dell Inc., 06cv528, U.S. District Court, Eastern District of Texas (Marshall).

Source:Bloomberg