August 19, 2014

Appeals Court Upholds Dismissal Of Multi-Billion-Dollar Infringement Claims Against Visa And MasterCard Over Smart Card Technology

By Owen Glist

The U.S. Court of Appeals for the Federal Circuit has upheld summary judgment against SmartMetric, a maker of biometric smart cards, affirming dismissal of its claims that Visa and MasterCard infringed its patent for credit and debit card technology.

After a previous unsuccessful suit against Visa, MasterCard, and American Express over the same patent relating to “contactless” cards (see SmartMetric Inc. v. Am. Express Co., 476 F. App’x 742 (Fed. Cir. Apr. 11, 2012)), SmartMetric again sought damages in excess of $13 billion in this suit over “contact” cards embedded with chips.  The gravamen of SmartMetric’s claim was that the Visa and MasterCard networks infringed a patent for a system to access a database of local network service providers for a given payment card transaction.

The district court granted summary judgment on several alternative grounds, including SmartMetric’s unexcused failure to properly disclose its experts and expert reports and to show sufficient “direct” control by Visa and MasterCard over users of the allegedly infringing system — i.e., banks, merchants, and cardholders.  But the court’s primary ground was that SmartMetric failed to provide any reliable evidence that defendants’ systems actually functioned the way SmartMetric alleged.

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    August 21, 2012

    Pool Corp. Asks Court To Throw Antitrust Claims Into The Deep End

    Pool Corp., the largest distributor of swimming pool supplies in the U.S., has filed a motion in the U.S. District Court for the Eastern District of Louisiana to dismiss class action antitrust claims, arguing that the complaint fails to state a claim.

    Plaintiffs allege that Pool Corp. entered into illegal agreements with three different manufacturers: Pentair Water Pool and Spa, Hayward Industries, and Zodiac Pool Systems. These agreements were allegedly designed to keep new distributors of swimming pool supplies from entering the market.

    Pool Corp. is seeking to dismiss the claims of two different purported classes – direct purchasers (such as pool supply stores, golf courses and hotels) and indirect purchasers. The plaintiffs allege that Pool Corp. sought to suppress competition by buying out 13 competitors in five regions of the U.S. over the course of 14 years, and that new pool supply distributors closed at a rate of 40 percent because of Pool Corp.’s dominance.

    The motion to dismiss is partially based on the fact that similar complaints of anticompetitive conduct were already investigated and resolved by the Federal Trade Commission in November 2011. Pool Corp. settled the investigation and agreed to FTC recommendations, including training staff members about antitrust laws.

    FTC Commissioner J. Thomas Rosch had argued the FTC investigation should have been closed due to a lack of evidence that the Pool Corp.’s actions actually harmed competitors or consumers.

    In addition to relying on its settlement of the FTC investigation, Pool Corp. argues that the case should be dismissed because the plaintiffs fail to satisfy the elements of a claim under Section 1 of the Sherman Act. According to Pool Corp., the plaintiffs failed to adequately allege that the agreements with the manufacturers existed or that these agreements were made with the specific goal of restricting trade.

    Pool Corp. also asked the Court to consider whether or not “nationwide” is a specific enough geographic market to support a monopolization claim.

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    Categories: Antitrust Law and Monopolies, Antitrust Litigation, Uncategorized

      March 26, 2012

      Third Circuit Slashes Tire Company’s Recovery Of E-Discovery Costs

      The U.S. Court of Appeals for the Third Circuit has  vacated a district court award in excess of $367,000 for e-discovery costs to the winning defendants in Race Tires America Inc. v. Hoosier Racing Tire Corp.

      As we reported in an earlier edition of Antitrust Today, Judge Terrence F. McVerry of the U.S. District Court for the Western District of Pennsylvania ordered the plaintiff, Race Tires America Inc., to pay these costs after granting summary judgment in favor of the defendants.

      Race Tires argued that defendants entered into exclusive contracts which allegedly shut it out of the dirt oval track market. Judge McVerry held that Race Tires could not show it sustained an antitrust injury because such contracts are permissible when a sports entity freely decides it wants exclusivity and has precompetitive, good faith or business motives for entering into the agreements.

      After the Third Circuit affirmed the ruling in 2010, the district court clerk taxed almost all of the defendants’ e-discovery costs to the plaintiff under 28 U.S.C. § 1920(4). The statute allows recovery of “(f)ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”

      At issue on appeal was whether section 1920(4) authorizes the taxation of e-discovery vendor charges for data collection, preservation, searching, culling, conversion and production as either “exemplification” or “making copies” of materials where necessary for use in the case.

      In a decision by Judge Thomas Vanaskie, the Third Circuit sharply reduced the recovery to $30,000. The court held that none of the vendors’ work qualified as “exemplification” and that the only “copying” that was performed was the scanning of hard copy documents, converting native files to the .tif format, and the transfer of videotapes to DVDs.

      The appellate court reasoned that shifting the costs of e-discovery was inconsistent with the “American rule” against shifting the expense of litigation to the losing party and that “[n]either the language of § 1920(4), nor its history, suggests that Congress intended to shift all the expenses of a particular from of discovery – production of ESI – to the losing party.”

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      Categories: Uncategorized

        December 19, 2011

        Trans-Atlantic Antitrust Watchdogs Investigate Pricing Of E-Books

        The U.S. Department of Justice (the “DOJ”) and the European Commission have announced investigations of the e-book pricing arrangements of several international publishing companies.

        The investigations focus on a 2010 change in the way e-books are sold.  Prior to Apple’s introduction of the iPad, e-books were sold though a wholesale method which allowed retailers to purchase books at discount prices and subsequently determine the price charged to consumers.  This model permitted Amazon to sell e-books at a discounted rate, helping to increase sales of its Kindle products.

        It is alleged that after the release of the iPad as a competitor of the Kindle, Apple orchestrated an agreement among publishers to sell e-books through an agency model.  This agency model allowed publishers, not distributers, to set prices and impeded the ability of Amazon and other distributers to determine prices. 

        The European Commission has initiated official proceedings to determine whether five publishers, aided by Apple, “engaged in anticompetitive practices affecting the sale e-books in the European Economic Area.”  The publishers are Hachette Livre (Lagardere, Publishing, France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp. U.S.A.), Penguin (Pearson Group, U.K.), and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).  The terms of the agency agreements are alleged to potentially violate Article 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive business practices.  If these companies are found to have participated in agreements or practices that had the object or effect of restricting competition, they could be subject to liability.

        The DOJ has confirmed the existence of its investigation related to e-book pricing practices.  Little additional information was provided on the investigation which has been reported, but unconfirmed, since last year.

        State attorneys general in Texas and Connecticut, as well as a class action suit in federal court in the Northern District of California, are also addressing this issue.

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        Categories: Uncategorized

          April 19, 2011

          Court Refuses To Put Lid On Diaper Pail Advertising

          The United States District Court for the Central District of California has denied Playtex’s motion for a preliminary injunction to enjoin rival diaper-pail producer, Munchkin, from advertising claims of a superior diaper pail.  

          Munchkin is seeking a declaratory judgment in Munchkin, Inc. v. Playtex Products that Munchkin (1) is being truthful in claiming that its Diaper Pail is “The NEW #1 in Odor Control.  Proven Better at Odor Control than Diaper Genie II & Diaper Genie II Elite[, Playtex products,] in a laboratory test”; (2) has not engaged in unfair competition; and (3) has not engaged in deceptive trade practices.  Munchkin also alleges claims of false advertising and unfair competition against Playtex.  Playtex is asserting similar counterclaims.

          In its motion for a preliminary injunction, Playtex argued that Munchkin’s superiority claim – and the associated fine print – is literally false as its tests (1) do not support the claim of superiority; and (2) are not reliable.  The court disagreed, finding that Playtex failed to carry the necessary burden of demonstrating literal falsity, thereby failing to establish the likelihood of success on the merits required for a preliminary injunction.

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          Categories: Uncategorized

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