December 12, 2013

Patent Troll Survives Slings And Arrows Of Motion To Dismiss Antitrust Claims

By Jeffrey I. Shinder

As Congress contemplates passing comprehensive legislation to deal with patent trolls, an intriguing antitrust case involving a defensive patent aggregator—an entity created to deal with such trolls—will proceed in federal court in San Francisco.

The case, Cascades Computer Innovation LLC v. RPX Corporation in the U.S. District Court for the Northern District of California, was brought by Cascades, a so-called patent troll, or non-practicing entity, which is an entity that enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based on those patents.

Cascades controls a portfolio of patents that include a patent that allegedly enhances the efficiency of the Android operating systems.  Cascades claims that the defendants, HTC Corporation, Motorola Mobility Holdings, Inc, and Samsung Electronics Co. Ltd agreed that none of them would deal with Cascades individually.  According to Cascades, the defendants instead agreed to negotiate any and all licenses with Cascades through their entity, RPX Corporation.  Cascades claims that this agreement is an unlawful conspiracy to create a buyers’ monopoly—a monopsony—in the market for Cascades’ licenses in violation of Section 1 and 2 of the Sherman Act.  click here for more »

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Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

    August 17, 2012

    Federal Judge Hangs Up On Apple’s Smartphone Antitrust Claims

    Judge Barbara B. Crabb of the Western District of Wisconsin has granted Motorola Mobility Inc. partial summary judgment on antitrust counterclaims that Apple Inc. has been asserting against Motorola in the patent infringement case of Apple Inc. v. Motorola Mobility Inc.

    The case stems from Apple’s release of the iPhone in 2005 without first seeking a license for the use of 3G technology developed and patented by Motorola.  Motorola proposed a patent license but, according to Apple, a high royalty rate kept Apple from signing an agreement.  

    Motorola also terminated agreements it made with Qualcomm Inc., the company providing Apple with chipsets used to connect iPhones to cellular networks.  When Apple continued to sell those phones, Motorola filed the patent infringement lawsuit.

    In response, Apple claimed Motorola’s actions were a violation of the Sherman Act.  According to Apple, Motorola’s high license fees and alleged interference with the Qualcomm agreement prevented fair and timely use of the 3G technology.

    Apple said Motorola’s actions were especially of concern because the technology in Motorola’s patents has been deemed essential to set standards for other companies industry wide, by the European Telecommunications Standards Institute.

    Judge Crabb rejected the antitrust claims because Apple – which continued to sell its popular iPhones – never suffered from an increase in costs or loss of its market share, indicating that it had not suffered any antitrust injury.

    The court also reasoned that Motorola did not violate antitrust law by bringing a patent infringement action against Apple because Motorola has a First Amendment right to petition the courts for relief and the litigation was not objectively baseless.

    Although the ruling removes the threat of antitrust liability, Motorola still faces Apple’s counterclaims that Motorola failed to grant patent licenses for 3G smartphone technology in a timely and nondiscriminatory manner in violation of its obligation to offer licensing under “Fair, Reasonable and Nondiscriminatory” terms (“FRAND”).   Judge Crabb agreed that Apple benefits from Motorola’s essential patents and therefore has a stake in enforcing Motorola’s promise to abide by ETSI’s intellectual property licensing rules which “protect companies that need to obtain licenses in order to practice the standards adopted by the organizations.”

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    Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

      July 31, 2012

      Third Circuit Agrees With FTC In Applying Stricter Reverse-Payment Settlement Test

      The U.S. Court of Appeals for the Third Circuit has reversed summary judgment in In re K-Dur Antitrust Litigation, and resurrected claims against defendant drug manufacturers that entered into so-called “reverse-payment” or “pay-for-delay” patent litigation settlements that allegedly delayed the sale of generic drugs.

      The Third Circuit held that settlement agreements in which patent holders make payments to settle patent infringement litigation against generic manufacturers may be unreasonable restraints on trade and unenforceable under federal antitrust laws.  The Third Circuit remanded the case to the district court “to apply a quick look rule of reason analysis based on the economic realities of reverse payment settlements rather than the labels applied by the settling parties.”  This is essentially the approach urged by the Federal Trade Commission (“FTC”) in its amicus brief.

      The Third Circuit test will apply a stricter level of scrutiny to such settlements than the approach used by the Second, Eleventh, and Federal Circuits, which have adopted a “scope-of-the-patent” test.  Under the scope-of-the-patent test, reverse payment settlements do not violate the antitrust laws if (1) the exclusion does not exceed the patent’s scope, (2) the patent holder’s claim of infringement was not objectively baseless, and (3) the patent was not procured by fraud on the patent and trademark office.

      The plaintiffs are purchasers of K-Dur 20, a sustained-release potassium chloride tablet, and include plaintiffs CVS Pharmacy, Inc., Rite Aid Corporation, and Louisiana Wholesale Drug Company, Inc.  Plaintiffs assert claims on behalf of a class of wholesalers and retailers that purchased the drug directly from defendants.

      The plaintiffs are challenging settlements between Schering-Plough Corporation, the patent holder and manufacturer of K-Dur 20, and Upsher Smith Laboratories and ESI Lederle (“ESI”), which sought to market generic versions of the drug.  Per the settlements, Upsher Smith and ESI agreed not to market their generic versions until September 1, 2001, which was some years prior to the expiration of Schering-Plough’s patents.  Schering-Plough also agreed to pay Upsher Smith $60 million in royalty payments for licenses to make cholesterol drug products, and agreed to pay ESI $5 million up-front plus varying amounts depending on FDA approval of ESI’s generic.  Plaintiffs argue that the settlements were shams and that the $60 million in royalties was actually compensation for Upsher Smith’s agreement to delay entry of the generic alternative.

      The Third Circuit opinion relies heavily on the goals of the 1984 Hatch-Waxman Act. That legislation was designed to facilitate generic entry and encourage generic manufacturers to challenge pharmaceutical patents. 

      The FTC has long believed that reverse-payment settlements are anticompetitive because they may delay generic competition.  According to a 2010 study by the FTC, “‘Pay-for-delay’ agreements are ‘win-win’ for the companies” at the expense of consumers, who are denied the option of lower-priced generics.  The FTC report concluded that as a result of such agreements, “brand-name pharmaceutical prices stay high, and the brand and generic share the benefits of the brand’s monopoly profits.”

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      Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

        June 27, 2012

        Court Holds Football Players’ Claims Fail To Thread American Needle

        Football players’ antitrust claims that the National Football League (“NFL”) and teams conspired to deprive them of their rights to football game footage are being kicked out of court after a federal judge found that the plaintiffs had failed to come within the Supreme Court’s holding in American Needle, Inc. v. National Football League, 130 S. Ct. 2201 (2010).

        Judge Paul A. Magnusen of the U.S. District Court for the District of Minnesota has dismissed with prejudice a putative class action antitrust lawsuit brought in Washington v. National Football League by retired NFL players against the NFL, NFL Ventures, L.P., NFL Productions, LLC, NFL Enterprises, LLC, and each of the 32 NFL teams.

        The plaintiffs, former professional athletes seeking to represent a class of similarly situated individuals, alleged that the defendants monopolized the market for former players’ images and likenesses in violation of the Sherman Act by not allowing them the rights to films and images from their games.

        The court found that the plaintiffs’ claims failed to come within the holding of American Needle that the NFL and its teams might, in some instances, be capable of concerted action in violation of the Sherman Act.

        Specifically, Judge Magnusen found that American Needle does not support plaintiffs’ contentions because that Supreme Court decision involved intellectual property that each team owned individually.  By contrast, the intellectual property involved in this case is historical football game footage – something that the individual teams do not separately own.  Judge Magnusen found this distinction dispositive on the ground that the NFL and its teams could not be considered to have conspired with respect to property that the teams and the NFL collectively owned.

        The court concluded that the plaintiffs failed to plausibly allege any antitrust violation from defendants’ conduct.  Judge Magnusen stated that “[i]f the NFL is refusing to pay Plaintiffs for the use of their images in its copyrighted material, then Plaintiffs may have a claim for a violation of their right of publicity.… What they have are claims for royalties, not claims for antitrust.  The Complaint is therefore dismissed with prejudice.”

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        Categories: Antitrust and Intellectual Property Law, Antitrust Law and Monopolies, Antitrust Litigation

          June 22, 2012

          Pharmacies Allege Antidepressant Manufacturers Depressed Generic Competition

          CVS and Rite Aid pharmacies have filed an antitrust complaint in the U.S. District Court for the District of New Jersey against Wyeth Inc. and Teva Pharmaceuticals for allegedly conspiring to keep generic versions of the popular antidepressant Effexor XR out of the hands of consumers.

          The two pharmacies allege in Rite Aid Corp et al. v. Wyeth Inc. et al, that the anticompetitive conspiracy included fraudulently obtaining patents for Effexor XR and wrongfully using litigation to keep generic manufacturers of that antidepressant from entering the market.

          The pharmacies claim that Wyeth, now part of Pfizer, obtained three patents by falsifying clinical data.  Wyeth’s data showed the extended release version of Effexor XR decreased nausea and vomiting, both side effects of the immediate-release version of the drug.

          According to the complaint, after obtaining the patents through false data, Wyeth listed them in the FDA Orangebook, enabling Wyeth to bring lawsuits against 17 generic manufactures that wanted to produce a cheaper version of the drug.

          Teva Pharmaceuticals was the first company to file suit against Wyeth.  Instead of further litigating, Teva agreed not to market a generic version of extended release Effexor XR until July 2010.

          In exchange, Wyeth agreed to give Teva an “exclusive license” to sell a generic option and settled the other 16 lawsuits, which allowed Teva to control the market for a longer period of time.  For one year, Teva was the only company selling a generic version of the extended release antidepressant.

          CVS and Rite Aid join several other companies in bringing antitrust claims against Wyeth and Teva.  A previous complaint was filed in the same federal court last November.

          Effexor XR, or venlafaxine hydrochloride, is prescribed by doctors to treat major depressive disorder.  The mental health condition affects 6.7 percent of adults in the United States.  Women are 70 percent more likely to experience the disorder than men.

          The plaintiffs in the two cases argue that Wyeth’s and Teva’s actions have inflated prices for their customers.  Reuters has reported that sales for brand name Effexor XR topped $2.5 billion during the period that Wyeth had control of the market.

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          Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

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