Kensington Antitrust Advisors Group

DOJ and EC Approve Google Acquisition of Motorola, Other Technology Patent Transactions

March 2, 2012 – 3:45 pm

Both the U.S. Department of Justice’s Antitrust Division and the European Commission have approved Google Inc.’s $12.5 billion purchase of Motorola Mobility Holdings Inc. after intense scrutiny of how Google’s acquisition of Motorola’s intellectual property would give its Android operating system leverage in the wireless market.

The DOJ said the licensing of vital “standard essential” patents like those among the 17,000 patents Motorola controls, will continue to be scrutinized, particularly in the smartphone and computer tablet markets.

The DOJ also closed its investigations of the purchase of certain Nortel Networks Corp. patents by Apple Inc., Microsoft Corp. and Research in Motion Ltd., and Apple’s acquisition of certain Novell Inc. patents, concluding that all three transactions are unlikely to substantially lessen competition.

The European Commission, according to EC vice president Joaquin Almunia, “approved the acquisition of Motorola Mobility by Google because, upon careful examination, this transaction does not itself raise competition issues.” “[T]he commission will continue to keep a close eye on the behavior of all market players in the sector, particularly the increasingly strategic use of patents,” Almunia said.

The EC believes that Google’s acquisition of the Motorola’s to wireless telecommunications standards-related patents, such as 3G and 4G/Long Term Evolution, would not (1) impede competitors’ access to the SEPs, (2) give Google the ability to exploit the patents to unfairly draw customers to its search and advertising services, or (3) prevent Motorola’s competitors from using Android in their own wireless devices. “Android helps to drive the spread of Google’s other services,” the EC said. “Consequently, given that Google’s core business model is to push its online and mobile services and software to the widest possible audience, it is unlikely that Google would restrict the use of Android solely to Motorola.”

Posted in Antitrust Division Action, EU News, Merger Review, Patent Litigation | Comments (0)

Second Circuit Again Rejects Enforceability of American Express Merchant Arbitration Agreement Class Action Waiver

March 2, 2012 – 3:44 pm

The Second Circuit Court of Appeal has held, for the third time, that American Express Co. cannot enforce an arbitration agreement containing a class action waiver against a group of merchants pursuing antitrust claims despite the U.S. Supreme Court’s recent ruling in AT&T Mobility v. Concepcion.

The appeals court found that Concepcion — in which the Supreme Court concluded that the Federal Arbitration Act preempted state laws barring the enforcement of class action waivers — did not require it to overturn its finding that the arbitration clause in AmEx’s contract with merchants was unenforceable because compelling individual arbitration would preclude the plaintiffs’ ability to bring their Sherman Act claims by making it financially impossible for them to do so. The court therefore remanded the case to the district court with instructions to deny AmEx’s motion to compel arbitration.

“It is tempting,” the court explained, “to give both Concepcion and Stolt-Nielsen such a facile reading, and find that the cases render class action arbitration waivers per se enforceable.” “But a careful reading of the cases demonstrates that neither one addresses the issue presented here: whether a class-action arbitration waiver clause is enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude their ability to vindicate their federal statutory rights.”

In 2003, the plaintiff merchants filed the proposed antitrust class action alleging that when AmEx decided to get into the standard commodity credit card business, it illegally forced merchants to pay excessive rates equal to those that AmEx charged for its more attractive business and personal charge cards. It did this by tying the acceptance of the credit and charge cards together. In January 2009, the appeals court ruled against AmEx, prompting AmEx to turn to the Supreme Court. That decision was vacated and remanded in light of Stolt-Nielsen SA v. Animalfeeds International Corp., in which the Supreme Court ruled that imposing class arbitration on parties that haven’t agreed to class arbitration conflicts with the FAA. The Second Circuit then found that its original analysis was unaffected by Stolt-Nielsen, but put a hold on its mandate in order to allow AmEx to again petition the Supreme Court. There, AmEx argued that the subsequent Concepcion decision required reversal.

The Second Circuit, however, held that because the evidence presented by plaintiffs established that the cost of individually arbitrating their dispute with AmEx would be prohibitive, effectively depriving plaintiffs of the statutory protections of the antitrust laws, the waiver was unenforceable, even under Concepcion. The appeals court also noted that its decision did not mean that class action waivers are per se unenforceable in the context of antitrust actions but instead that each waiver must be considered on its own merits.

Posted in Arbitration Issues, Tying Claims, US Federal Courts | Comments (0)

Motion to Dismiss Denied in Credit Card Arbitration Conspiracy Case

March 2, 2012 – 3:43 pm

Southern District of New York federal judge U.S. District Judge Willam H. Pauley denied Discover Bank and Citigroup Inc.’s motion to dismiss claims in multidistrict litigation claiming that credit card issuers conspired to insert anti-competitive arbitration clauses in their customer agreements.

Citigroup and Discover are the only remaining defendants in a case alleging that the defendants’ compulsory arbitration clauses prevented cardholders from seeking proper legal recourse for the companies’ anti-competitive and corporate misconduct. The cardholders have argued the arbitration clauses would shield the defendants’ misconduct from public view, as arbitration proceedings are often held privately and the outcomes are often confidential, adding that arbitration administrators are sometimes partial to credit card companies.

The plaintiffs’ conspiracy claim also relies heavily on the defendants’ representatives attending numerous meetings where arbitration was discussed. While the executives at both companies who made the final decisions to add arbitration clauses to the agreements claim they had no knowledge of such meetings, the judge pointed out that the in-house counsel who attended the meetings were not “‘low-level employees’ engaged in mere ‘shop talk.'”

Citigroup and Discover argued that certain evidence relating to a settlement in a similar MDL should not be permitted, but the court determined that because the settlement agreement in the Currency Conversion Fee Antitrust Litigation “expressly preserved [the] plaintiffs’ arbitration-related claims, it makes little sense to read the agreement to preclude [the] plaintiffs from relying on the evidence needed to prove those claims.”

Posted in Arbitration Issues, Cartel Activity, Class Certification, US Federal Courts | Comments (0)

Pleading Standards Do Not Require Identification of Lost Profits or Injured Competitors, Ohio Court Rules

March 2, 2012 – 3:42 pm

Northern District of Ohio federal judge John Adams denied Checkpoint Systems Inc. motion to dismiss Universal Surveillance Systems’ complaint because the allegations adequately alleged that the defendant’s anti-competitive behavior drove up prices for security tags. Checkpoint, a leading supplier of security labels, argued that the Twombly pleading standards require plaintiffs to specifically identify the lost profits suffered because of alleged antitrust activity. Judge Adams rejected that position, holding that USS does not need to individually name the other competitors that have been injured.

The lawsuit alleges that Checkpoint controls 80 percent of the market for electronic article surveillance tags and has suppressed competition through unfair, long-term and exclusive distribution agreements and bundling of its security labels and tags with its EAS monitoring towers. USS rejected the agreement that Checkpoint offered it, which would allow Checkpoint to distribute USS products but would prohibit USS from selling any competing goods to Checkpoint customers.

Checkpoint argued that the complaint did not plead customer names, the durations of the exclusive distribution contracts, and other details needed to state viable antitrust claims. The court, however, ruled that even without those details, the suit goes “well beyond” the heightened standards under Twombly because it specifically describes the type of contracts and their effect in the market.

Posted in Standard for Alleging Conspiracy, US Federal Courts | Comments (0)

Court Lifts Motorola’s Infringement Injunction Against Apple’s iPad and iPhone Sales in Germany

March 2, 2012 – 3:41 pm

A temporary injunction against the sale of iPhones and iPads have been lifted on the ground that Motorola Mobility Holdings Inc.’s continued insistence on the ban could run afoul of antitrust law.

In December 2011, Motorola successful convinced a German court to enjoin Apple’s sales of the products on the ground that they infringed a Motorola patent related to data packet transfer technology. Apple then sought to suspend the injunction, lodging a “compulsory licensing antitrust objection,” claiming Motorola had to grant a license for the patent at issue and that barring the use of the “standard essential” patent would stifle competition. The lower court rejected Apple’s proposed licensing terms, but Apple later amended its proposal to include a provision allowing Motorola to terminate the deal if Apple were to challenge the patent’s validity. With that change, the court concluded, Motorola could violate antitrust law if it were to continue to prevent Apple from selling iPads and iPhones.

In a related dispute, Apple is seeking a declaratory judgment against Motorola in California federal court concerning its use of Qualcomm components in the iPhone 4S, which Motorola claims

infringe its patent. Apple claims that it, as a Qualcomm customer, is a third-party beneficiary of a licensing agreement between Motorola and Qualcomm. In addition, Apple asserts that it “is entitled to a permanent anti-suit injunction enjoining Motorola from continuing to prosecute litigation in Germany alleging that Apple infringes its patents by virtue of incorporating Qualcomm chips into its products.”

Posted in EU News, Patent Litigation | Comments (0)

Class Action Against Pharmacy Chain Dismissed

March 2, 2012 – 3:40 pm

The Ninth Circuit Court of Appeals has affirmed the dismissal of a proposed class action against several pharmacy chains — including CVS Caremark Corp., Rite Aid Corp. and Walgreen Co. — over the companies’ alleged participation in a scheme to artificially inflate drug prices. The court affirmed California U.S. District Judge Susan Illston ruling that lead plaintiff Skilstaf Inc., an Alabama payroll service company, was not permitted to bring the suit because a previous settlement in Massachusetts federal court against McKesson barred it from bringing claims against that defendant “or any other person.”

Prior to filing a proposed class action against retail pharmacies in June 2009 in California federal court, Skilstaf was part of a class action in Massachusetts federal court alleging that drug price publisher First Data-Bank Inc. had conspired with leading distributor McKesson Corp. to artificially boost average wholesale prices for hundreds of drugs. McKesson agreed to pay $350 million to settle the case. In January 2009, a judge preliminarily approved the settlement, which included a stipulation that the settling plaintiffs would be prevented from suing McKesson or “any other person” over the claims laid out in that suit. Skilstaf lodged a limited objection to the settlement terms, but during an August 2009 fairness hearing, the Massachusetts court denied the company’s motion to strike the words “or any other person.” The judge did provide Skilstaf a second opportunity to opt out of the class, but Skilstaf declined and later collected its share of the settlement funds.

After the fairness hearing, retail pharmacies in the California suit — CVS, Walgreens, Longs Drugs Stores Corp., The Kroger Co., New Albertson’s Inc., Safeway Inc., Supervalu Inc. and Wal-Mart Stores Inc. — moved to dismiss.

In January 2010, Judge Illston granted the motions, finding Skilstaf’s claims were precluded by the Massachusetts settlement terms under which Skilstaf agreed not to sue.

Skilstaf appealed, arguing that court erred in dismissing the case without allowing for discovery. Skilstaf also contended that the agreement not to sue violated the Alabama company’s due process rights.

The Ninth Circuit held that California law did not require discovery and the retail pharmacies properly asserted that the settlement agreement in Massachusetts protected them from Skilstaf’s claims in California. Skilstaf voluntarily remained in the suit and took its share of the proceeds, preventing it from collaterally attacking the enforceability of the settlement provisions in California. “Skilstaf,” the court explained, “does ‘not get a second bite at the apple.’”

The Ninth Circuit also shot down Skilstaf’s due process claims on the ground that the company’s rights were satisfied when the Massachusetts judge provided an opportunity to opt out.

Posted in Class Certification, Res Judicata | Comments (0)

FTC Challenges Lundbeck Drug Acquisition in Eighth Circuit

August 31, 2011 – 10:27 am

Update August 2011: The Eighth Circuit affirmed, holding that the FTC failed to show that the lower court’s findings of fact were clearly erroneous. In particular, the court held that the FTC failed to show that the hospitals actually paying for the drugs in question directly influenced the doctors’ choice of which drug to prescribe.

The FTC has appealed to the Eighth Circuit a decision to dismiss antitrust claims against Lundbeck, Inc. – a pharmaceutical company. District of Minnesota Judge Joan N. Ericksen held that Lundbeck could retain two drugs that it had acquired becauyse .they were not in the same product market. Although both drugs treated the same condition, the court found that different doctors preferred each drug and were unlikely to switch if Lundbeck raised its prices.

In its appeal, the FTC argued that Judge Ericksen failed to consider “marginal customers,” who would switch if prices were increased. The FTC further argued that there were numerous inconsistencies in the judge’s ruling, pointing out that Judge Ericksen acknowledged that both drugs were equally effective at treating the same heart condition; while at the same time, holding the drugs in separate product markets.

Posted in Federal Trade Commission, market definition, US Federal Courts | Comments (2)

Catheter Class Action Dismissal Affirmed on Appeal

August 5, 2011 – 11:49 am

Update August 2011: The Eighth Circuit has denied rehearing en banc.

Update June 2011: In a divided decision, the Eighth Circuit on rehearing affirmed its decision upholding summary judgment for CR Bard on the ground that the plaintiff failed to allege sufficiently a relevant sub-market.

Update October 2010: The Eighth Circuit panel has agreed to re-hear the issue.

Update Aug. 2010: The Eighth Circuit has affirmed the decision dismissing the complaint on the ground that the plaintiff hospital suffered no antitrust injury because it was always free to purchase from other suppliers without giving up the ability to obtain discounts from the defendant.

Update Oct. 2009:The court dismissed the antitrust claims on the ground that the hospital plaintiff suffered no injury as a result of the defendant’s conduct and in any event the challenged conduct was not anticompetitive.

Update: November 2008: The Eighth Circuit has affirmed the trial court’s class certification decision. Trial is set for April 2009.

St. Frances Medical Center’s case against urological catheter manufacturer CR Bard will proceed as a class action. The case alleges that the defendant anticompetitively increased the price of catheter’s through volume requirements and the disparagement of competitors. The specifics of the class definition and the claims that will go forward are still unsettled.

Posted in Section 2 Standards, Uncategorized, US Federal Courts | Comments (0)

Antitrust Claims Challenging TV Program Bundling Fail

July 20, 2011 – 2:32 pm

The Ninth Circuit Court of Appeal has affirmed the dismissal of antitrust claims against television programmers and pay–TV providers who market bundled cable and satellite TV programming. The proposed class action accused the defendants, who include NBC, Comcast, DirecTV and others, of harming consumers by bundling popular programs with less desirable content, forcing consumers to pay more for the programs that they want. The three-judge panel, in an opinion authored by Judge Sandra S. Ikuta, found that although the plaintiffs alleged that the programmers imposed a vertical restraint on the distributors that resulted in higher prices and reduced consumer choice, the claims failed to allege a specific injury to competition as required, such that the case was “a consumer protection class action masquerading as an antitrust suit.” Antitrust law, said the court, did not apply because it “recognizes the ability of businesses to choose the manner in which they do business absent an injury to competition.” The plaintiffs had previously alleged that the practice foreclosed entry into the programming market, but had dropped that claim after initial discovery.

Posted in Bundled Discounts, Section 2 Standards, Tying Claims, US Federal Courts | Comments (0)

DOJ Antitrust Concerns Alter Novell Patent Deal

July 20, 2011 – 2:30 pm

In response to DOJ, Antitrust Division, concerns, a Microsoft-led joint venture has agreed to change its deal to purchase over 800 patents from Novell as part of its sale to Attachmate. Under the revised sale agreement, Microsoft and EMC will not be allowed to hold certain patents, and all of the patents will be covered by both a key license for the Linux system and a broadly used open source licensing agreement. In approving the deal, U.S. Department of Justice antitrust officials said they would continue to investigate the competitive effects of the distribution of patents.

The joint venture, CPTN Holdings LLC, was created by Microsoft Corp., Apple Inc., Oracle Corp. and EMC Corp. to buy 882 patents and patent applications from Novell as a key part of the company’s $2.2 billion sale to Attachmate Corp. Antitrust regulators, however, concluded that the proposal could undermine the competitiveness of open source software operating systems such as those based on Novell’s Linux.

As a result, Microsoft has agreed to sell all of the Novell patents it would have acquired through the joint venture back to Attachmate. The company will, however, still receive a license to use all of those patents, as well as the patents sold to its fellow joint venture members and to any patents that Novell ends up keeping.

EMC will also not acquire 33 Novell patents and applications that deal with virtualization software, according to the regulator.

All of the patents covered by the deal will be sold subject to the Open Invention Network License, which is designed to share rights to patents used in the Linux system, and the joint venture will not be allowed to limit which patents are available under that license. Neither CPTN nor its owners will try to encourage Novell or Attachmate to change which patents they include in the OIN license.

According to the DOJ, the patents are also being sold subject to the second version of the GNU General Public License. While the regulator agreed to let the transaction go forward with the modifications, it said it would continue to investigate the distribution of Novell’s patents to the four technology companies.

“The parties’ actions address the immediate competitive concerns resulting from the transfer of Novell’s patents,” said Sharis A. Pozen, deputy assistant attorney general for the Antitrust Division. “Although we recognize that the various changes to the agreement recently made by the parties are helpful, the department will continue to investigate the distribution of patents to ensure continued competition.”

The joint venture — which will dissolve after three months and grant all four companies licenses to all the patents — also received antitrust clearance from Germany’s Federal Cartel Office on Wednesday.

Posted in Antitrust Division Action, Merger Review, Patent Litigation | Comments (0)