Will a federal court of appeals send modern antitrust analysis diving into the deep end of a patent pool case to determine whether a jointly-developed standard should be considered patent misuse?

On March 3, the U.S. Court of Appeals for the Federal Circuit sat en banc to consider how to apply the patent misuse doctrine to patent pooling arrangements for standardized technologies, including the significance of evidence of anticompetitive effects such as the blocking the development of new technologies.

At issue in Princo v. U.S. International Trade Commission is whether it was patent misuse for a patent pool established by Philips, Sony and others to both include a potentially blocking patent that was not actually used in the standard and preclude that patent from being licensed outside the pool. 

Philips and Sony agreed to jointly develop a standard for recordable and rewritable compact discs (known as the “Orange Book”).  In developing the standard, they did not jointly develop any technology.  Rather, they used technologies each independently had developed.  In one instance, they chose one of two competing methods.  The Sony patent not chosen was, by some accounts, not commercially feasible.  However, an independent patent analyst believed one claim of the Sony patent could read more generally on the standard and, thus, block Orange Book adopters from practicing the standard.  Therefore, Philips determined to include the Sony patent in the pool, and subjected Sony to the pool’s requirement not to license the patent for use outside the Orange Book standard. click here for more »

The U.S. Department of Justice is pulling hard on the reins to slow down a proposed merger between Churchill Downs, the famous racetrack home to the Kentucky Derby, and Youbet.com, an online horseracing gambling website.

The DOJ has issued the companies a “second request” under the Hart-Scott-Rodino Act for additional information on the proposed merger. 

Second requests are rare, and dramatically increase the transaction costs associated with a merger.  Some merger agreements even contain provisions that terminate the merger in the event of a second request.

That doesn’t appear to be the case in the Churchill Downs-Youbet.com merger, however.  Churchill Downs’s CEO recently stated he expects the deal to finish the second quarter of 2010.  Youbet.com has scheduled a special meeting of stockholders on April 6 to vote on the planned merger.

Procrastination may be the thief not only of all time, but also of $3.5 billion from the pockets of health care consumers, according to the FTC.

Citing a cost of billions of dollars to consumers, the FTC is challenging “pay-for-delay” reverse settlements in which pharmaceutical companies pay generic drug companies to not make a generic version of a drug.

There are two fronts in this effort.  The FTC is attempting to convince Congress to ban the practice outright, and in the meantime it is litigating two lawsuits opposing the practice on antitrust grounds. 

One lawsuit was filed in February 2008 in the Eastern District of Pennsylvania against Cephalon, Inc., which paid four generic drug companies to stay out of the market of the drug Provigil.  Another case was filed in January 2009 against AndroGel in the U.S. District Court for the Northern District of Georgia.  The AndroGel case has the added element of joint promotional efforts between the defendants and backup supply deals, in addition to a pay-for-delay reverse settlement.

The FTC has already been unsuccessful once in a case involving reverse payments against Schering-Plough Corporation in the Eleventh Circuit, but it hopes that additional factors in the two new cases will bring success.  The Cephalon case has an added claim of attempted monopolization of the market, while the AndroGel case involves co-promotion agreements between competitors.  Neither element was present in the Schering-Plough case. click here for more »

The U.S. Department of Transportation (“DOT”) has issued a show-cause order that tentatively approves the antitrust immunity application for the joint venture between members of the oneworld airline alliance, including American Airlines, British Airways, and Iberia.  The tentative approval applies to transatlantic traffic, which American Airlines and British Airways dominate for routes between the U.S. and the U.K.

For approval, the DOT required the oneworld alliance to give up four daily landing slots at Heathrow Airport near London.  This requirement represents a much less demanding concession from American Airlines and British Airways than requested for previous immunity applications.  For example, in 2002, the DOT requested that the alliance give up 14 daily landing slots and remove certain routes from the ambit of the antitrust immunity application, i.e., “carve outs,” so that antitrust liability would still apply to those city pairs.

American Airlines and Japan Airlines, which is also a oneworld member, have also applied for antitrust immunity for transpacific routes.  That application is still pending before the DOT.

The fate of the massive digital library that Google hopes to create now lies in the hands of U.S. District Judge Denny Chin, who heard nearly a full day of oral argument on Thursday from supporters and opponents of the proposed settlement agreement that would settle the class action brought on behalf of authors and publishers against Google Book Search.

The parties in The Authors’ Guild, et al. v. Google Inc. are moving for court approval of a class action settlement that would allow Google to provide varying degrees of access to a vast body of information, including subscriptions to its 12-million book library and displaying snippets of out-of-print books that are still covered by copyright.

After informing the parties and two courtrooms full of supporters and objectors that he would not rule on the motion that day, Judge Chin heard a veritable great debate over whether proposed settlement would benefit or harm consumers, authors and publishers.

Supporters of the settlement argued the benefits include public access to books including out-of print books and orphan works, locating rights holders for unclaimed works, and access for the digitally disenfranchised and visually impaired.

Opponents argued the settlement raised a plethora of issues, including raising antitrust concerns, violations of copyright law, and even jurisdictional and notice issues.

The hearing began with arguments from non-party supporters of the settlement.  click here for more »

Sticks and stones may break your bones, but disparagement will hardly ever monopolize your market, is the message of Broadcom Corporation’s motion to dismiss a “monopolization-by-disparagement” case brought by its competitor Emulex Corporation.

The case, Emulex Corp. et al. v. Broadcom Corp. et al., No. SACV 09-1310 JVS (ANx), centers on statements Broadcom allegedly made during a 2009 attempt at a hostile takeover of Emulex, a competing communications technology company. Broadcom allegedly accused Emulex of “underperformance” and “unsatisfactory results” (among other shortcomings), and advised customers not to buy Emulex products.

This antitrust complaint, which Emulex filed in the Central District of California in November 2009, is Emulex’s third effort to recover for Broadcom’s statements. Its first effort was a complaint in California Superior Court alleging common law fraud and interference with contractual relations. Its second effort was a previous complaint in the Central District of California, alleging violations of the Securities Act. Emulex dismissed those cases when Broadcom withdrew its tender offer. click here for more »

Can antitrust law protect big companies as well as small companies and consumers?

An increasing number of large companies are discovering – as plaintiffs – that the answer is yes.

Many practitioners ascribe to the following paradigm: Antitrust enforcement is an anathema to large companies.  They point to the fact that big companies, like Microsoft, AT&T and Verizon, have repeatedly fought private plaintiffs and antitrust enforcers as defendants/respondents in civil antitrust proceedings.  But if antitrust enforcement represents inefficient, costly and intrusive forays into nullifying acts taken in an otherwise “free market,” why are these same large companies now seeking the assistance of antitrust enforcement?

Microsoft bitterly complains about Google’s dominance in Internet search, and phone companies balk at the market power of cable providers when they challenge them in video-programming and broadband markets.  One can imagine that these big company complainants, who formerly argued that plaintiffs had to satisfy high evidentiary thresholds to succeed in a monopoly maintenance or attempted monopoly case, are now revisiting that position.

Is this ironic?  Should any complaints by these large companies be given any credence in light of these companies’ former hostility to enforcement?  One would think that they should be given the same consideration as any other antitrust complaint.  If these complaints raise facts and economic theories that are consistent with the pro-consumer rationale at the heart of the Sherman Act, enforcers should act upon them.

Practitioners that specialize in antitrust enforcement may find large companies to be unlikely allies, yet still welcome their efforts to act as private attorneys general in the arena of antitrust enforcement, particularly as government enforcement efforts may be constrained in the future by our nation’s large deficit.

Plaintiffs in The Apple iPod iTunes Anti-Trust Litigation – a putative class action accusing Apple of anti-competitive conduct in the portable MP3 player market – are hoping the third time’s the charm as they again seek to convince the court they have a viable claim.

The plaintiffs have filed an amended complaint after the U.S. District Court for the Northern District of California twice rejected claims that the relationship between iTunes and iPod products constituted illegal tying.

The amended complaint argues that the relationship between Apple’s iTunes and iPod products constitutes unlawful maintenance of monopoly power and attempted monopolization under the Sherman Act, and also violates various California statutes.

According to the plaintiffs, consumers paid a higher price for iPods than they would have if competing devices had the capability to play songs from the iTunes store.  However, while the plaintiffs claim iPods are the only portable player on which songs purchased from iTunes can be played, such songs can still be played on a non-portable basis (such as directly through a computer, or through a computer linked to a receiver).  This ability of consumers to purchase and play iTunes songs without ever purchasing an iPod is the primary reason the court previously rejected plaintiffs’ tying claims.

It will be interesting to watch whether the plaintiffs’ reformed complaint survives court scrutiny.  This is especially true in light of the plaintiffs’ attempt to pursue monopolization claims against two products that the court has already ruled are not illegally tied.

St. Vincent’s Hospital in Manhattan may have survived its recent brush with possible monopolization, but its financial health leaves it susceptible to relapse.  That’s the diagnosis of some antitrust practitioners, who are bracing for another outbreak.

The weak financial health of St. Vincent’s Hospital has been in the news lately.  News reports indicate that St. Vincent’s, located on Manhattan’s West 12th Street, is again having difficultly meeting its financial obligations.  (St. Vincent’s is no stranger to the bankruptcy process, having gone through a Chapter 11 proceeding in 2005.)

One proposal would have shored up St. Vincent’s financial position by reducing health services and competition.  Continuum Health Care Partners – a health care consortium that operates three Manhattan hospitals, including Roosevelt Hospital (at W. 55th Street), St. Luke’s Hospital (at W. 114th Street) and Beth Israel Medical Center (at E. 16th Street) – proposed acquiring St. Vincent’s and turning it into a strictly outpatient facility.  In other words, Continuum stated that it would shut down St. Vincent’s inpatient, emergency services facility if it were to operate St. Vincent’s. click here for more »

The U.S. Department of Justice is weighing whether to pursue an investigation into the legality of the National Collegiate Athletic Association (“NCAA”) Bowl Championship Series (“BCS”), which critics contend unfairly excludes smaller universities from the national football title.

Senator Orrin Hatch raised the issue in a letter to the Justice Department in October 2009 in which he complained that the BCS system is an artificial market barrier against smaller schools. Assistant Attorney General Ronald Weich has now responded to Senator Hatch in a letter that the DOJ is considering such a probe into “the current lack of a college football national championship playoff” because it “raises important questions affecting millions of fans, colleges and universities, players and other interested parties.”