May 30, 2012

Court Strikes Flash Memory Card Claims As Too Tardy

Patent holders of technologies supporting digital camera and cell phone flash memory cards known as Secure Digital Memory Cards (“SD Cards”) have succeeded in defeating antitrust claims against them as too tardy.

Judge Jeffrey S. White has dismissed the plaintiffs’ claims in Oliver v. 3D-3C, LLC, in the U.S. District Court for the Northern District Court of California, after finding the claims are untimely under the four-year statute of limitations for asserting private antitrust claims under the Clayton Act.

Panasonic, Toshiba and SanDisk, through an entity known as SD-3C, LLC, provide intellectual property licenses for other companies that wish to manufacture and sell SD Card technology.  Under the terms of the licenses, the manufacturers are required to pay a royalty on each card sold.

A group of consumers filed the antitrust claim against SD-3C and the three-company team, arguing that they used the licenses to inflate and control prices.

The court based its decision largely on the decision in Samsung Electronics Co, LTD v. Panasonic Corp., which dismissed claims on similar grounds in 2010.  Unlike the Samsung case, in which a competitor filed the claim, the consumers here argued they were in a different position, since the price did not actually injure them until they purchased the products more recently.  This argument relied on cases such as Kaiser Foundation v. Abbott Laboratories, which held the limitations period did not bar claims based on continuing violations.

Panasonic, Toshiba and SanDisk, created the royalty agreement in 2003 and amended it once in 2006.  The Court here held that the statute of limitations period began when the companies made an agreement on royalty prices, and that the plaintiffs’ claims arose when the defendants made their last alleged overt acts – more than four years ago – not when the plaintiffs made their purchases.

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Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

    May 23, 2012

    Microsoft Restrictions On Web Browsers Draw Competitors’ Ire

    Microsoft’s restrictions on third-party web browsers in its upcoming Windows RT mobile operating system is drawing criticism from the general counsel of the Mozilla Foundation, the non-profit organization responsible for the development of the popular Firefox web browser.

    Google, which has developed its own Chrome web browser, has wasted no time in joining Mozilla’s criticism. 

    Windows RT is a slimmed-down version of Windows 8, the next-generation Windows operating system due late this year.  Windows RT is specifically designed for ARM microprocessors, which are commonly used in mobile devices like tablets and smartphones.  It represents the first version of the Windows operating system not intended for the x86 architecture used in desktop and laptop computers for decades.  In short, Windows RT is Microsoft’s response to the runaway successes of Apple’s iOS and Google’s Android operating systems. 

    The restrictions at issue allegedly prevent other browsers from running in Windows RT’s “classic” Windows mode, although other browsers can be used in the new Windows Metro “tiled” mode.  The controversy evokes memories of 1998, when Netscape, Mozilla’s predecessor, accused Microsoft of illegally bundling Internet Explorer with Windows 95.  The controversy led to a series of lawsuits against Microsoft, including United States v. Microsoft, and the European Commission’s investigation

    However, 14 years have gone by, and the operating system landscape has shifted dramatically.

    Nevertheless, and perhaps not surprisingly, Microsoft’s decision to restrict third-party web browsers immediately attracted the interest of the United States government and the European Commission.  The U.S. Senate Judiciary Committee is reportedly looking at Mozilla’s and Google’s allegations, and the European Commission is exploring the issue as well.  The EC is likely to invoke Microsoft’s commitment to give European Union consumers a choice of browsers, implemented as the so-called “browser ballot” agreement with the European Commission.  However, both the European and U.S. cases involved desktop and laptop operating systems, and their applicability to Windows RT is debatable. 

    In addition, Microsoft’s announced restrictions on third-party applications are hardly unusual for mobile devices.  For example, through its popular App Store, Apple exerts complete control over which applications can be installed on iPhones and iPads, and Apple’s policies have been repeatedly criticized for allegedly restricting competition from third-party applications and services.

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    Categories: Antitrust Enforcement, Antitrust Policy, International Competition Issues

      May 21, 2012

      Recorded Music Market Consolidation Comes Under Senate Scrutiny

      The latest round of music industry consolidation is coming under antitrust scrutiny as the antitrust subcommittee of the U.S. Senate Judiciary Committee prepares for a hearing examining Universal Music Group’s proposed acquisition of the recorded-music business of EMI Music Ltd.

      If the proposed $1.9 billion acquisition is approved, the number of major music labels will be half of what it was in the mid-1990s.

      Universal Music Group’s 2011 proposal to acquire competitor EMI Music is already under review by the U.S. Federal Trade Commission and the European Commission.  Although the review by the Senate antitrust subcommittee will have no formal impact on the FTC decision, discussions in the Senate hearing could well shape the debate on whether the acquisition should be approved.

      Currently, four major labels control 90 percent of the U.S. recorded music market.  If Universal and EMI merge, 90 percent of the U.S. market would be controlled by just three companies.

      Universal is the largest recorded music company with roughly 30 percent of the global recordings market.  EMI is the fourth largest with roughly 10 percent of the global market.  Approval of the deal would concentrate roughly 40 percent of the recorded music market in Universal.

      The FTC is reviewing whether the deal would violate antitrust laws by giving Universal enough market power to stifle competition either individually or collusively.  Opponents of the acquisition argue that it would reduce competition by allowing too much market concentration and by creating a company that could effectively control the future of digital media services.  Such opponents include rival music label Warner Music Group, the Consumer Federation of America, and digital rights group Public Knowledge.  Supporters include the American Federation of Musicians and SAG-AFTRA.

      When asked about the Senate hearing, a Universal spokesman stated that the company “welcome(s) the opportunity to answer any questions that the subcommittee may have, address the facts and debunk myths.”  The hearing could be scheduled as early as June.

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      Categories: Antitrust Enforcement

        May 17, 2012

        Kansas Supreme Court Beefs Up Antitrust Scrutiny Of Resale Price Maintenance

        Resale price maintenance policies that pass muster under federal antitrust law may not survive state antitrust scrutiny in Kansas, according to that state’s highest court. 

        The Kansas Supreme Court has overturned a lower court’s decision granting defendant handbag and accessory maker Leegin Creative Leather Products, Inc. summary judgment in a state antitrust suit brought by a class of consumers challenging Leegin’s resale price maintenance pricing policy.

        The plaintiffs in O’Brien v. Leegin Creative Leather Products Inc. allege that Leegin’s resale price maintenance pricing policy amounted to illegal price fixing and violated the Kansas Restraint of Trade Act (“KRTA”). 

        Leegin’s resale price maintenance practices fared better in a federal antitrust challenge to those practices in the U.S. Supreme Court decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007).  In that case, the U.S. Supreme Court decided that – contrary to the longstanding per se ban on vertical resale price maintenance established in the early 1900s – resale price maintenance no longer constituted a per se Sherman Act violation and would instead need to be evaluated under the rule of reason. 

        According to the Kansas high court, however, the KRTA does not follow in lockstep with federal antitrust law.  While federal antitrust decisions may be persuasive authority, they are nonbinding on Kansas state courts.  The Kansas high court thus declined to apply federal law precedent relating to the requirement to show “antitrust injury” and the application of a rule of reason standard of review to vertical price maintenance claims.  The U.S. Supreme Court’s decision in Leegin did not preempt the state antitrust claim under the KRTA.

        The Kansas legislature, however, has been quick to react.  State lawmakers have proposed a bill (House Bill No. 2797) to “correct” the court’s ruling and overturn it for any pending or future lawsuits.  The stated intention of the proposed bill is to “minimize conflicts between the Kansas restraint of trade act and section 1 of the Sherman Act … and reduce uncertainty as to the law applicable to commerce in Kansas.”

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        Categories: Antitrust and Price Fixing, Antitrust Litigation

          May 11, 2012

          Cloned Horses Champing At The Bit For Their Day In Court

          Cloned horses are going to get their day in court to show that they should be treated as the equals of horses with more traditional pedigrees.

          A member of the American Quarter Horse Association (“AQHA”) has filed a complaint, alleging that an AQHA rule prohibiting the registry of cloned horses and their offspring violates antitrust laws.

          The case is Abraham & Veneklasen Joint Venture, et al.  v. American Quarter Horse Association, in the U.S. District Court for the Northern District of Texas.

          Plaintiff Jason Abraham and two of his companies, Abraham & Veneklasen Joint Venture and Abraham Equine Inc., allege that AQHA’s rule 227(a), in effect since 2004, violates Section 2 of the Sherman Act and the Texas Free Enterprise and Antitrust Act of 1983.  Plaintiffs claim that AQHA has market power in the U.S. market for high quality registered Quarter Horses. 

          Plaintiffs allege that their cloned horses are excluded from AQHA events as a result of AQHA’s rule prohibiting cloned horses and their offspring from registering in AQHA’s registry of Quarter Horses.  AQHA events include approximately 8,000 sanctioned races throughout the U.S. each year.   Purses for AQHA races totaled over $129 million in 2011.  Plaintiffs also allege that AQHA’s enforcement of the rule harms purchasers of the horses by limiting the supply, and increasing the prices, of registered Quarter Horses. 

          Plaintiffs seek to have the rule amended to permit cloned horses and their offspring to be registered and eligible for AQHA events.  Plaintiffs are also seeking treble damages, including for lost profits and the diminution in value of their horses. 

          AQHA is currently reviewing the lawsuit according to a statement by vice president Don Treadway posted on the AQHA website.

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          Categories: Antitrust Litigation

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