The Court of Justice, the highest court in the European Union (‘EU’), has ruled that communications between corporations and their in-house counsel are not protected by the Legal Professional Privilege (‘LPP’), the European version of the attorney-client privilege.

The Court’s decision in Case C-550/07 P, Akzo Nobel Chemicals and Akcros Chemicals v. Commission, means that in-house counsel will not be able to assert the attorney-client privilege in  investigations by the European Commission.  The competition authorities of individual EU Member States will still apply their national rules on LPP, which may recognize communications with in-house counsel as privileged.       

The case arose from the European Commission’s Directorate General for Competition’s dawn raid of Dutch chemicals group Akzo Nobel NV in February 2003.  The officials were investigating alleged price-fixing among producers of heat stabilizers, an additive used in the manufacturing of certain plastics.

Among the documents seized in the raid were two emails between a company general manager and an in-house lawyer admitted to the Netherlands Bar.  Akzo claimed that these documents were covered by LPP.  In May 2003, the Commission adopted a decision rejecting this claim.

After an unsuccessful appeal to the General Court, Akzo appealed to the Court of Justice in November 2007.

Akzo argued that the General Court had incorrectly interpreted the decision of the Court of Justice in Case 155/79 AM&S Europe v. Commission [1982] ECR 1575.  In AM&S, the Court of Justice held that one of the conditions for LPP to attach to an exchange between a client and a lawyer is that the lawyer must be “independent,” that is to say “not bound to the client by a relationship of employment.”  The General Court, Akzo claimed, had interpreted this language too literally.  The condition that a lawyer must be independent could not exclude in-house lawyers.  An in-house lawyer enrolled at a Bar or Law Society was subject to rules of professional ethics and discipline that made that lawyer as independent as an external lawyer.

The Court of Justice rejected this argument.  The requirement that written communications be exchanged with an independent lawyer in order to be protected by LPP was “based on a conception of the lawyer’s role as collaborating in the administration of justice and as being required to provide, in full independence and in the overriding interests of that cause, such legal assistance as the client needs.”  This, according to the Court, necessitates the absence of any employment relationship between the lawyer and his client. 

In addition, the Court noted, in-house lawyers may be required by their employers to perform other tasks which may have an effect on the corporation’s commercial policy.  In this case, the Akzo lawyer was the company’s competition law coordinator.  The Court stated that such functions reinforce the ties between the lawyer and his employer to such an extent that he does not enjoy a level of professional independence comparable to that of an external lawyer. click here for more »

An antitrust violation involving a patent is not necessarily a defense in a patent infringement suit, the U.S. Court of Appeals for the Federal Circuit has ruled in Princo v. ITC.

In its third opinion in the long-running Princo case, the court rejected recordable CD manufacturer Princo’s argument that an agreement between two firms to market one firm’s patent and suppress the other renders the patent that was marketed unenforceable under the “patent misuse” defense – even if the agreement violates the Sherman Act.

Both Sony and Philips, key members of the consortium that developed the recordable CD (CD-R) standard, own patents on a method of encoding position information on a CD-R. Both patents are included in the bundle licensed by the consortium, but only Philips’s patent is actually used.

When Philips sued Princo for infringement of various patents, Princo raised the patent misuse defense, which can block the enforcement of a patent when the patent holder uses its patent in an anticompetitive way.

The classic examples of patent misuse are where a patent holder ties licenses to use a patented product to a promise to use unpatented supplies, or where a patent holder makes licensees promise to honor the patent beyond its expiration date.  Princo’s theory was different.  It claimed that if Sony and Philips agreed to market Philips’s patent as part of the CD-R standard and keep Sony’s patent on the shelf – an illegal agreement not to compete – Philips’s patent became unenforceable because of patent misuse.

In a review by 10 judges of the Federal Circuit, a majority of six found that Sony and Philips’s agreement, if proven, would not be patent misuse, even if it constituted a Sherman Act violation.

Judge Bryson, writing for the majority, said that misuse is limited to situations where a patent holder leverages his patent rights against licensees to gain additional benefits that the patent doesn’t guarantee – analogous to a tying claim.  An agreement between two patent holders not to compete, said the court, is not the same as leveraging a patent.  It may be the basis for an antitrust counterclaim, but it is no defense against patent infringement.

Online and other private gambling companies are looking forward to their winnings as a result of the ruling by the European Court of Justice in Luxembourg (ECJ) that Germany’s state-run gambling monopoly violates European Union law.

The EU’s highest court has ruled that Germany’s justification for the state monopoly on gambling rang hollow and struck down the law in a landmark decision that opens the door to the German market for private betting companies, including online companies.

Under a 2008 bill, Germany allows only state lotteries – a gambling monopoly that Germany sought to justify by arguing that it protects consumers from the harm of gambling and prevents gambling addictions.

However, the ECJ labeled this justification “unjustifiable” in light of the “intensive advertising campaigns” undertaken by the state-run gambling companies and the addictive automated gambling machines also allowed under Germany’s monopolistic rules.  The ECJ opined that, “[i]n such circumstances, the preventive objective of that monopoly can no longer be pursued, so that the monopoly ceases to be justifiable.” In addition, the ECJ noted that Germany’s gambling legislations is “contrary to the fundamental freedoms of the EU.”

This ruling comes after the German legislation was challenged in regional courts by online gambling companies; the regional courts then asked the ECJ for a ruling on the legality of the German monopoly.  This ruling is in stark contrast to previous ECJ rulings deeming state lotteries in other EU states legal because of their goal of limiting the negative consequences of gambling on society.

The consequences of this ruling could be far-reaching in Germany, where the state-run lottery and betting companies have earned billions in euros.  In addition to staunching the flow of gambling income to the state, this ruling could redirect those billions to private gambling companies and allow private gambling companies to flourish in a market previously closed to them.

Although the full consequences of the ruling are yet to be seen, the European Gaming and Betting Association welcomed the ruling as part of “much-needed reform” in Germany.   “Other member states have opened or are opening their markets. They show that consumers can be better protected in a market that is both regulated and open to competition,” it said.

A class of more than 4,500 dairy farmers spread across 11 southeastern states in two geographic markets has been certified by Judge J. Ronnie Greer of the U. S. District Court for the Eastern District of Tennessee in a case alleging a conspiracy to monopolize the production, marketing and processing of milk.

The dairy farmers allege multiple claims of antitrust conspiracy against Dean Foods Company (the nation’s largest dairy processor), National Dairy Holdings, L.P., Dairy Farmers of America, Inc., and other defendants.

The class is divided into two subclasses.  One is comprised of roughly 3,000 farmers who are members of the Dairy Farmers of America and the other consists of independent and cooperative dairy farmers.  All class members sold grade A milk to the defendants from January 1, 2001, to the present.

In opposing class certification, the defendants argued that the two subclasses have a “fundamental and irremediable conflict of interest” because the Dairy Farmers Association subclass members benefited from the alleged unlawful behavior at the expense of the independent farmers.  While Judge Greer found this aspect of the case “troubling,” he granted certification because the defendants failed to provide any testimony supporting their argument, rendering it “somewhat hypothetical.”  Judge Greer noted, however, that he may decertify or modify the class if evidence supporting the defendants’ argument can be established.

Judge Greer rejected class certification for a breach of contract claim brought on behalf of farmer-members of the Dairy Farmers Association because the claim necessarily would require each class member to individually demonstrate membership in the association at the time of the alleged breach, making the contract claim “not susceptible to class action treatment.”

The European Union’s antitrust regulator is setting its sights on a $200 million deal for a partial sale of an insecticide business owned by Sara Lee, the food company, to S.C. Johnson & Son, which chiefly makes home-care products.

Both companies are based in the United States, and a European Commission press release acknowledged that the transaction may not “have a Community dimension.”  Even so, the Commission continued, the deal may “affect[] trade within the EU market and threatens to significantly affect competition within” countries that requested the investigation. 

The European Commission’s procedures did not trigger an automatic investigation of the deal.  Rather, the regulator began it after receiving requests from half a dozen European countries, including France, Greece, Italy, Belgium, the Czech Republic, and Spain. 

This isn’t the first time that the Europeans have looked at Sara Lee’s dealings.  The Commission is currently looking into a proposed sale of Sara Lee’s body care unit to Unilever, and is expected to rule by the end of October.  In June, the Commission also cleared the sale of Sara Lee’s air freshener unit to Proctor Gamble.  The deals are part of Sara Lee’s plan to sell off businesses unrelated to its core food business.

The insecticide investigation could prove costly to Johnson, which at the end of August finalized its largest debt offering ever, for $550 million in bonds, which were partially slated for the purchase of Sara Lee’s insecticide business.

The Canadian Competition Bureau has announced that it will consider possible revisions to the Canadian merger enforcement guidelines.

The Bureau will hold a series of discussions on whether its merger enforcement guidelines issued in 2004 are a good reflection of current Canadian merger review practices.  The purpose of such guidelines is to evaluate the potential competitive effect of mergers.

The decision comes in the wake of the recent publication of the revised Horizontal Merger Guidelines issued in the United States, as well as recent theoretical advances in the antitrust and economics fields in analyzing mergers.  Moreover, Canada recently revised its competition law in March 2009 and changed its merger notification process so that it bore more resemblance to that of the United States.  For instance, before the passage of the Canadian antitrust overhaul last year, the country’s competition statute required companies to wait 42 days, followed by a three-year post-merger period during which the government could challenge the merger.  The new law will require a 30-day waiting period during which the government can temporarily stop the deal to ask for more information about it, followed by another 30-day waiting period.  The government can only review closed deals for one year. 

However, Canada’s merger enforcement guidelines have not yet been formally changed.  Paul Collins, Canada’s Senior Deputy Commissioner of Competition for the Mergers Branch, will coordinate the discussions.  Information will be provided at a later date regarding the times and locations of the consultations.

A federal judge has declared a defense expert the winner in a battle of the experts over class certification in a suit alleging price-fixing conspiracies in the markets for plastics additives.

Relying heavily on expert testimony, U. S. District Court Judge Legrome D. Davis for the Eastern District of Pennsylvania has denied plaintiffs’ motion to certify a class of direct purchasers of organotin heat stabilizers (“tins”) and epoxidized soybean oil (“ESBO”) –  plastics additives used in the manufacture of polyvinyl chloride (“PVC”) – in the case of In re: Plastic Additives Antitrust Litigation.

The decision is a victory for defendants Dow Chemical Co., Union Carbide Corp., Rohm & Haas Co. and Arkema Inc., who argued that their economics expert had demonstrated flaws in the plaintiffs’ case showing that the announcements of price increases bore little or no relation to the actual prices paid by the purchasers.

The legal basis for the court’s decision was that plaintiffs failed to establish that they could show impact by evidence common to the class.  The heart of the decision, however, was the court’s lambasting of the opinion of plaintiffs’ expert witness, Dr. John Beyer.

The ruling comes after the Third Circuit Court of Appeals vacated Judge Davis’ decision in 2006 granting certification of the class.  The case was remanded back to the district court for further proceedings consistent the Circuit’s 2008 decision in In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008). 

When Judge Davis granted certification to class plaintiffs in 2006, he followed what he believed to be common practice of the time:  he declined to balance the credibility of the parties’ experts on the issue of the predominance of common evidence demonstrating antitrust impact.  But the Third Circuit’s 2008 decision in Hydrogen Peroxide up-ended what Judge Davis considered “common practice.”  On remand Judge Davis relied on language from Hydrogen Peroxide, explicitly affirming a district court’s obligation to consider all relevant evidence and arguments, including expert testimony.  Id. at 307.

Under this framework, Judge Davis evaluated and ultimately picked apart plaintiffs’ arguments that they can demonstrate antitrust impact by evidence common to the class, rather than individual to its members, and in particular Dr. Beyer’s opinion in support of these arguments. click here for more »

A federal judge has denied General Electric Company’s request to pull the plug on Mitsubishi Heavy Limited’s potential billion-dollar case alleging GE has tried to snuff out competition in the wind turbine market.

United States District Court Judge J. Leon Holmes in Fayetteville, Arkansas, has denied GE’s motion to dismiss an attempted monopolization case brought by Mitsubishi.  Mitsubishi alleges that GE seeks to monopolize the market for variable-speed wind turbines in the United States through a pattern of “sham” patent litigation and other methods. 

However, the Judge did grant GE’s request to stay discovery in the case until the GE patent infringement claims against Mitsubishi have been resolved.  As Judge Holmes explained, “If GE prevails in any of the infringement actions, then Mitsubishi’s claims in this action will be moot because GE will have the right to exclude Mitsubishi from the market” pursuant to GE’s patent claims. 

Mitsubishi is seeking damages that could exceed $1 billion.  Mitsubishi filed its attempted monopolization claim in this case against GE on May 10, 2010.

The case is the latest in a series of acrimonious episodes between the two heavyweights over the growing U.S. market for wind turbines.  Mitsubishi is on track to build a turbine assembly plant in Fort Smith, Arkansas.  Mitsubishi has been battling GE over patent claims since 2008.

Sonia Williams, a Mitsubishi Power Systems America spokesperson, observed that “[t]he judge did decide to stay discovery for the present.  Nevertheless, we are heartened by his suggestion that he may terminate the stay if he finds appropriate circumstances.”  GE had no comment on the ruling.

The U. S. Court of Appeals for the Second Circuit denied rehearing en banc today of its recent decision in the reverse-payment case of Arkansas Carpenters Health and Welfare Fund v. Bayer AG (In re Ciprofloxacin Hydrochloride Antitrust Litigation) – despite the original three-judge appellate panel’s extraordinary invitation to the parties to submit briefs requesting rehearing by the entire court.

The case involves so-called “reverse payment” or “pay-for-delay” patent infringement settlements in which a brand-name pharmaceutical manufacturer pays the allegedly infringing generic manufacturer to settle claims that the generic product infringes the brand-name manufacturer’s patent, in exchange for which the generic agrees not to market its product.  Antitrust enforcement officials and consumer groups argue that such settlements cost consumers billions of dollars per year in the form of higher drug prices. 

The plaintiffs sued Bayer and generic manufacturers of the blockbuster antibiotic Cipro, alleging that Bayer’s payment of hundreds of millions of dollars to the generics in settlement of patent infringement litigation violated the antitrust laws.  The trial court granted summary judgment for the defendants, which a three-judge panel upheld on appeal.

The three-judge panel, however, wrote – some might say reluctantly – that its decision was bound by a prior Second Circuit panel’s opinion upholding a similar patent settlement, In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187 (2d Cir. 2006).  Tamoxifen held that patent settlements are presumptively lawful, unless the patent holder procured the patent by fraud on the Patent and Trademark Office or brought a baseless patent infringement lawsuit (e.g., because the patent holder knew that the patent was invalid or unenforceable). 

The Cipro panel described the anticompetitive effects of reverse payment settlements, and invited the parties to submit briefs to request rehearing of its decision and whether the Second Circuit sitting en banc should overrule Tamoxifen.  Today, the Second Circuit declined to do so, with only Judge Pooler dissenting, in an opinion.  Judge Pooler voted for rehearing because “the ‘enormous importance’ of the issues that this case raises is beyond dispute,” and “[i]t will be up to the Supreme Court or Congress to resolve” them. 

Legislation to ban or strictly limit these kinds of settlements remains pending in Congress in the forms of S. 369 and H.R. 1706.  Supporters of the legislation continue to try to attach it to various legislative vehicles, and it may be considered again before the end of the year. 

An article detailing the history of reverse-payment antitrust litigation is available here.