Recently, a federal district court in California granted partial summary judgment for the US Federal Trade Commission (FTC) in an important intellectual property and antitrust case involving standard essential patents (SEP). The court’s decision requires an SEP holder to license its SEPs for cellular communication standards to all applicants willing to pay a fair, reasonable and non-discriminatory (FRAND) rate, regardless of whether the applicant supplies components or end-devices. The decision represents a significant victory for the FTC in enforcing its views of an SEP holder’s commitments to license patents on FRAND terms.
Stefan M. Meisner provides legal services to clients in connection with antitrust matters and electronic discovery issues. Stefan focuses his antitrust practice on complex, multidistrict class action litigation alleging Sherman Act violations, US Department of Justice (DOJ) investigations, merger investigations and intellectual property issues. He counsels clients on the antitrust implications of patent licensing and settlements of infringement litigation. In addition, he counsels clients on global strategies for addressing cartel prosecutions and defenses, from the inception of government investigations, to the initiation of civil class action litigation in a variety of jurisdictions. Read Stefan M. Meisner's full bio.
Antitrust laws protect competition and consumers. Antitrust enforcement is prevalent in actions concerning manufacturing and consumer goods, among other things. However, recent enforcement activity by the Federal Trade Commission (FTC) and Department of Justice’s Antitrust Division (DOJ) serves as a reminder that the services industry, particularly healthcare services, is not immune to antitrust scrutiny as well.
Antitrust enforcement and healthcare policy were two priorities under President Obama. So, too, was antitrust enforcement within healthcare markets. The current administration prompted speculation on whether it would change its emphasis in any of these respects. We examine in this article whether the Trump Administration, now a year and a half into its term, has shifted focus or instead has stayed in the hunt for antitrust violations in the healthcare industry. As discussed below, the record of healthcare antitrust enforcement actions over the last five years, spanning both administrations, demonstrates that healthcare has been and remains a priority for civil and criminal antitrust enforcement by the US antitrust agencies and state Attorneys General. Continue Reading Healthcare and Antitrust Enforcement: Continuity through the Administrations
Alert: The Supreme Court clarified the principles of international comity this week in a ruling pertaining to the long-running vitamin C antitrust class action litigation. International comity is the recognition a nation shows to the legislative, executive or judicial acts of another nation. Principles of comity state that US courts should defer to the laws of other nations when actions are taken pursuant to those laws. In this week’s ruling, Justice Ginsberg wrote that federal courts should accord respectful consideration to foreign government submissions when analyzing comity issues, but are not bound by them. This ruling vacates the Second Circuit’s decision in the case overturning the jury verdict for the class, and is a win for the class of US purchasers of vitamin C. Continue Reading Supreme Court Clarifies Principles of International Comity in Vitamin C Ruling
Manufacturers of optical disk drives defeated electronics companies’, retailers’ and indirect purchaser plaintiffs’ conspiracy claims after seven years of litigation. On December 18, 2017, the US District Court for the Northern District of California issued simultaneous orders that granted summary judgment in favor of defendants after finding that the electronics companies, retailers and indirect purchasers failed to demonstrate evidence of injury and causation.
- Wading into the merging streams of antitrust and patents, the US Court of Appeals for the Ninth Circuit upheld dismissal of an antitrust suit where a jury verdict in a parallel case found no patent infringement. Cascades Computer Innovation, LLC v. RPX Corp. and Samsung Electronics Co. Ltd., Case No. 16-15782 (9th Cir., December 11, 2017).
- Cascades Computer Innovation is a non-practicing entity that owns a series of 38 patents (collectively known as the Elbrus portfolio) allegedly used to optimize Android devices. Cascades intended to license these patents for use by companies including Motorola, HTC, Samsung, LG Electronics, Dell and RPX (a defensive patent aggregator that purchases patents on behalf of subscriber organizations using membership fees). An agreement couldn’t be reached. Cascades alleged this lack of agreement was due to a conspiracy between the defendants, using RPX, to not seek licenses for use of these patents—an agreement in violation of antitrust law.
- Cascades filed two related lawsuits against Samsung, Motorola, HTC and others in separate district courts with separate causes of action. In Illinois, Cascades’ claim rested on patent infringement. Although the entire Elbrus portfolio was referenced in the complaint, the court determined only one patent, referred to by the court as “the ‘750 patent,” was truly at issue. Cascades asserted that merely installing the Android mobile device operating system resulted in an infringement of this patent. In California, Cascades relied on antitrust law arguing the agreement between defendants not to purchase licenses amounted to a violation. Again, the ‘750 patent was primarily at issue. Thus, Cascades simultaneously argued that a group of companies infringed on their patent and also that those companies illegally conspired to refuse to obtain licenses for use of that patent.
- A jury in Illinois determined there was no patent infringement, which undercut Cascades’ argument in California. Without any infringement, the court in California noted “[o]nly those who possess antitrust standing by virtue of having suffered antitrust injury may bring a private action for damages for violation of the antitrust laws” before ruling for the defendants on a motion for judgment on the pleadings. The California court reasoned that in order to show antitrust injury, there must be harm to competition, not any particular competitor. The court reasoned that a “failure to license a non-infringed patent typically cannot serve as the basis for a cognizable antitrust injury.” Because Cascades’ entire theory of injury was based upon ongoing infringement of the ‘750 patent, and not on any potential, unalleged future infringement, there was no antitrust injury in the case.
- On appeal, the 9th Circuit determined the district court “properly recognized the preclusive effect of [the Illinois decision] and correctly reasoned that because the defendants did not infringe the ‘750 patent, Cascades’ failure to license the patent was not a cognizable antitrust injury.” In a footnote, the panel explained, “[h]ere, the defendants were not infringing the valid patent; therefore, they were not using the invention. Thus, the failure to license had no effect on price or quantity of any consumer goods.”
- In sum, the district court held and the 9th Circuit affirmed that without any infringement there can be no antitrust injury, and thus no antitrust claim.
WHAT THIS MEANS:
- While seeking an antitrust remedy where no patent infringement is found represents a relatively novel tactic, alleging an injury without an infringement doesn’t appear to be a winning strategy in private causes of action.
On November 29, 2017, a Japanese auto parts manufacturer and its US subsidiary defeated the US Department of Justice’s claims that the companies conspired with others to fix prices and rig bids for automotive body sealing products. The case involved a rare trial involving criminal antitrust charges. After 13 days of trial, a jury returned a not-guilty verdict for Tokai Kogyo Co. Ltd. and its subsidiary, Green Tokai Co. Ltd. Continue Reading.
- On Friday, October 13, acting FTC chairman Maureen Ohlhausen delivered a speech at the Hillsdale College Free Market Forum titled, “Markets, Government, and the Common Good,” highlighting her view on the intersection between IP and antitrust domestically and abroad.
- Chairman Ohlhausen’s position, that IP rights must be vigorously protected, is in line with her long-held belief that some enforcement of antitrust laws, especially abroad, has been overzealous when it comes to intellectual property.
- In 2012, Ohlhausen objected to the FTC’s decision to require Robert Bosch GmbH to refrain from pursuing injunctions on certain SEPs (standard essential patents), and she wrote a dissenting opinion on the commission’s consent agreement with Google Inc. and Motorola Mobility Inc. requiring Google to withdraw claims for injunctive relief on SEPs.
- In Friday’s speech, she argued that though “foreign [governments] take or allow the taking of American proprietary technologies without due payment,” the US should continue to protect patent rights and avoid punishing a company for “a unilateral refusal to assist its competitors.”
- Ohlhausen also addressed what she termed the current “age of IP skepticism” as it relates to patent-assertion entities (PAEs).
- She concluded that while some minor changes may be appropriate to promote innovation in the face of “Litigation PAEs” employing nuisance litigation techniques, these changes should be “narrowly tailored to address observed behavior.”
- She voiced support for case management practices that could mitigate litigation cost asymmetries between PAE plaintiffs and defendants, increased transparency, and rules encouraging courts to stay litigation by PAEs when parallel proceedings are already underway, but eschewed more drastic measures such as the creation of “new, specialized guidelines to address particular types of IP disputes,” which, she argued, are unsupported by the available evidence.
- In her view, “the key to addressing the US patent system lies in incremental adjustment where necessary based on a firm empirical foundation.”
WHAT THIS MEANS
- Ohlhausen’s concern that certain antitrust enforcement “inappropriately morphs antitrust law into a tool for price regulation” is a notable policy direction that could make the FTC less inclined to pursue cases involving alleged violations of SEPs.
- Under her direction, any changes forthcoming at the FTC are likely to be minor adjustments reflecting the belief that protecting patent rights is “fundamental to advanc[ing] innovation.”
The US Department of Justice (DOJ) Antitrust Division’s criminal case against an heir location service provider collapsed when the US District Court for the District of Utah ruled that the government’s Sherman Act § 1 case was barred by the statute of limitations. The court held that the alleged conspiracy ceased when the alleged conspirators terminated their market division guidelines, and that continued receipt of proceeds tied to the alleged conspiracy did not extend the limitations period. The court further rejected DOJ’s argument that the case should be subject to the per se standard, instead finding the alleged anti-competitive agreement amongst competitors to be unique and subject to the rule of reason.
This ruling opens a crack in the line of Sherman Act per se cases, creating an opportunity for defendants to argue for rule of reason treatment where there are novel factual issues.
Reversing long-standing Federal Circuit precedent, the United States Supreme Court has now held that a patentee extinguishes its patent rights on a product upon its sale of that product, regardless of (1) whether the patentee placed a restriction on the sale (prohibiting reuse or resale), or (2) whether the sale occurred within the United States.
For publicly traded companies, earnings calls are routine business events, as are press releases, speeches, investor conferences and trade association meetings. However, in the world of antitrust law, words uttered in these situations can provide fodder for plaintiffs to claim that instead of providing information for investors and the public, the communication’s purpose was to invite competitors to unlawfully collude. In the past several years, allegations that competitors used public statements to carry out a price-fixing agreement have been a common thread in antitrust class actions and multidistrict litigations.
Recently, a federal district court granted summary judgment in an antitrust case based on earnings calls in the airline industry. While the defendants ultimately prevailed, the case stands as a reminder to publicly traded companies to be mindful of antitrust considerations in earnings calls and other public communications.
Originally published in Law360.com, April 11, 2017.