Category: Rule of Reason - Antitrust Commentary

Jul

11

Reverse Payment Settlements in Patent Disputes Are Not Immune From the Antitrust Laws

Posted by : Matthew Wild | On : July 11, 2013

Category: Antitrust, FTC Actions, Immunity, Intellectual Property, Rule of Reason, Section 1 (Sherman Act)

On June 17, 2013, in FTC v. Actavis, Inc., the Supreme Court reversed a ruling, which held that settlements that have the patentee paying the patent infringer to withdraw its patent challenge and not to infringe (i.e., reverse payments) are immune from the antitrust laws as long as the agreement not to infringe is within the scope of the patent. The Supreme Court held that these agreements are subject to the rule of reason under § 1 of the Sherman Act and an inquiry into the patent’s validity is unnecessary to the analysis. Rather, the size of the reverse payment alone can be used as a proxy for the strength or weakness of the patent. A large reverse payment can be sufficient for the agreement to violate the rule of reason. The Supreme Court noted that other ways to settle patent litigation, such as allowing the alleged infringer to market the infringing product after a delay but before the patent’s expiration, would pass muster under the rule of reason. This decision is going to change the way brand name pharmaceutical companies settle patent disputes with generic drug manufacturers as those settlements frequently involve large reverse payments in exchange for the generic drug manufacturer staying out of the market. The decision is linked here: FTC v. Actavis.

Author: Matthew S. Wild, Wild Law Group PLLC

Apr

22

Kansas Enacts Legislation Making Resale Price Maintenance Subject To The Rule Of Reason

Posted by : Matthew Wild | On : April 22, 2013

Category: Antitrust, Resale Price Maintenance, Rule of Reason, State Antitrust and Consumer Protection Claims

Overruling the recent Kansas Supreme Court decision in O’Brien v. Leegin Creative Leather Products, Inc. discussed in the May 8, 2012 Post, the Kansas legislature has mandated that resale price maintenance is subject to the rule of reason. This legislation is remarkable in light of all the uproar over the United States Supreme Court’s decision in Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007), that made resale price maintenance subject to the rule of reason. For example, as discussed in previous posts of May 4, 2009 and October 29, 2009, the Maryland legislature enacted the first Leegin repealer statute making resale price maintenance per se unlawful and 41 state attorneys general have urged Congress to repeal Leegin.

Author: Matthew S. Wild, Wild Law Group PLLC

May

08

Resale Price Maintenance Is Per Se Unlawful In Kansas

Posted by : Matthew Wild | On : May 8, 2012

Category: Antitrust, Per Se Analysis, Resale Price Maintenance, Rule of Reason, State Antitrust and Consumer Protection Claims

On May 4, 2012, the Kansas Supreme Court held in O’Brien v. Leegin Creative Leather Products, Inc. that resale price maintenance is a per se offense of the Kansas antitrust law. The Kansas statute differs meaningfully (with express prohibitions on agreements involving the pricing of goods) from the general language of § 1 of the Sherman Act (prohibiting only agreements in “restraint of trade”). As noted in earlier Posts, the U.S. Supreme Court’s decision in, Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007), which held that resale price maintenance is subject to the rule of reason under §1 of the Sherman Act, has not been favorably received. Congress has proposed legislative repeal; several state attorneys’ general have obtained consent decrees prohibiting such practices as per se offenses of their state antitrust laws; and Maryland repealed Leegin. It remains to be seen how long Leegin survives. Companies should remain cautious in imposing RPM programs because they may still face substantial liability under state law.

Author: Matthew S. Wild, Wild Law Group PLLC

Jan

19

California Attorney General Halts Resale Price Maintenance

Posted by : Matthew Wild | On : January 19, 2011

Category: Antitrust, Consent Decrees, Government Investigations, Per Se Analysis, Resale Price Maintenance, Rule of Reason, State Antitrust and Consumer Protection Claims, State Attorneys General

Tags:Antitrust, biolelements, california attorney general, cartwright act, consent decree, leegin, matthew s. wild, matthew wild, Resale Price Maintenance

On January 11, 2011, Bioelements and the California Attorney General entered into a consent decree that enjoins Bioelements from entering into any agreements with retailers and distributors concerning what price they may charge for Bioelements’ products and to send notice to all retailers and distributors that any such polices are immediately rescinded. The action was brought in California Superior Court under the Cartwright Act, which the California Attorney General has interpreted to provide per se treatment for resale price maintenance in contrast to Section 1 of the Sherman Act after Leegin. See March 12, 2010 Post. Notably, the injunction extends to all of Biolelements’ transactions even if they take place outside of California. Bioelements also had to pay $51,000 in fines and expenses. This action is a cautionary tale that companies cannot rely on Leegin that resale price maintenance will be subject to lenient rule of reason treatment. A number of state attorneys general have brought resale price maintenance actions under their state laws and Maryland amended its antitrust law expressly to prohibit resale price maintenance.

Mar

12

Resale Price Maintenance Is a Per Se Violation of California Law

Posted by : Matthew Wild | On : March 12, 2010

Category: Antitrust, Consent Decrees, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

Tags:Antitrust, california attorney general, cartwright act, dermaquest, matthew wild, Resale Price Maintenance, sherman act, unfair competition law, wild law group

On February 23, 2010, the California Attorney General entered into a consent decree with Dermaquest, Inc., which prohibits Dermaquest from engaging in resale price maintenance. Specifically, the order enjoins Dermaquest from requiring resellers to charge a specified price or to increase their prices. The action was brought under the Cartwright Act and the Unfair Competition Law. California now joins Illinois, New York and Michigan (see March 31, 2008 Post) in treating resale price maintenance as a per se offense in violation of its state antitrust law even though such conduct is subject to rule of reason review under section 1 of the Sherman Act after Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007). This case reinforces the dangers to a manufacture when it implements a resale price maintenance program under the belief that because such conduct might be permissible under the Sherman Act, there is no genuine exposure. The California complaint and consent decree appear here:Dermaquest Complaint and Dermaquest Judgment.

Oct

29

41 State Attorneys General Ask Congress to Prohibit Resale Price Maintenance

Posted by : Matthew Wild | On : October 29, 2009

Category: Antitrust, New York Cases, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

Tags:Antitrust, dr. miles, h.r. 3190, leegin, matthew s. wild, matthew wild, Resale Price Maintenance, s. 148, section 1 of the sherman act, sherman act, State Attorneys General

In letters dated October 27, 2009 (State AG Letter re HR 3190; State AG Letter re S 148), 41 state attorneys general wrote to Congress asking them to overrule Leegin Creative Leather Product, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). In Leegin, the Supreme Court held that resale price maintenance — the practice in which a manufacturer requires a retailer to sell its products at a certain price — was subject to the rule of reason. In doing so, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons, Co., 220 U.S. 373 (1911), which held that resale maintenance is a per se violation of section 1 of the Sherman Act. The state attorneys general urge passage of H.R. 3190, which provides that “[a]ny contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler or distributor shall violate section 1 of the Sherman Act.” As reported in the May 23, 2008 Post, 35 state attorneys general wrote to Congress on May 8, 2008 asking that it enact nearly identical legislation (S. 2261).

Practitioners should know that resale price maintenance can still be a per se violation of state antitrust laws. As reported in the May 4, 2009 Post, Maryland enacted such a law. And as reported in the March 31, 2008 Post, the New York, Michigan and Illinois attorneys general brought an action against Herman Miller in which they alleged that Herman Miller’s resale price maintenance program was a per se violation of their state antitrust laws. Herman Miller entered into a consent decree.

Sep

30

FTC and DOJ Urge Reversal in American Needle v. NFL

Posted by : Matthew Wild | On : September 30, 2009

As noted in the June 29, 2009 Post, the Supreme Court granted certiorari to review the Seventh Circuit’s decision in American Needle v. Nat’l Football League. As explained in the September 4, 2008 Post, American Needle applied the Copperweld doctrine to a sports league’s joint licensing scheme for the first time. In so doing, it affirmed summary judgment in favor of the NFL, its teams and Reebok in an antitrust challenge to an exclusive license of team names and logos to Reebok for use on headwear. (The decision is linked to the September 4 Post). As explained in Wild, et al., “Private Equity Groups Under Common Legal Control Constitute a Single Enterprise Under the Antitrust Laws,” 3 NYU Journal of Law and Business 231, 237 and n.31 (attached under articles above), that doctrine treats two or more firms that are under common ownership or have a unity of interest in a common course of action as a single firm incapable of conspiring or otherwise acting collectively under the antitrust laws.

In their amici curiae brief, the government urges reversal. It argues that the Seventh Circuit extended the Copperweld doctrine in a manner inconsistent with prior precedent — e.g., Texaco Inc. v. Dagher, 547 U.S. 1 (2006), in which the Supreme Court applied the rule of reason to a price-setting joint venture and NCAA v. Board of Regents, 468 U.S. 85 (1984), in which the Supreme Court applied a “quick look” to a NCAA restriction on each individual college’s right to broadcast their football games. While the government conceded that the league should be entitled to Copperweld immunity under circumstances in which the teams need to cooperate such as to produce games, the licensing of NFL team logos is not one of them. Indeed, the government observed that the NFL joint licensing scheme was similar to the type of scheme under review in Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979). In BMI, the Supreme Court applied the rule of reason to a joint venture in which composers created a clearinghouse to sell a blanket license to works by more than one of them. The American Antitrust Institute and Consumer Federation of America also filed a brief as amici curiae urging reversal. Their brief and the government’s brief are linked below. DOJ and FTC Brief; AAI Brief

Aug

12

MLB Grants Exclusive License for Baseball Cards to Topps

Posted by : Matthew Wild | On : August 12, 2009

Category: Antitrust, Immunity, Intellectual Property, Rule of Reason, Section 1 (Sherman Act)

Tags:american needle, Antitrust, baseball cards, copperweld, copperweld doctrine, major league baseball, matthew wild, national football league, nfl, section 1, section 2, sherman act, topps

On August 6, 2009, the New York Times reported that Major League Baseball granted an exclusive license to Topps for baseball cards. To justify its legality under the antitrust laws, the MLB Executive Vice President is quoted as having relied on the recent Seventh Circuit decision in American Needle v. NFL, under review by the Supreme Court, which upheld a similar licensing scheme implemented by the NFL with respect to headwear (see September 4, 2008, February 24, 2009 and June 29, 2009 Posts). In that case, the Seventh Circuit held that the NFL was shielded from liability under the Copperweld doctrine. The Court reasoned that because “the teams share a vital economic interest in collectively promoting all of NFL football,” they could not conspire within the meaning of the antitrust laws when jointly marketing a license that no one time could sell by itself. MLB’s reliance on American Needle might be unnecessary, however, in light of the Second Circuit’s decision in Major League Baseball Properties, Inc. v. Salvino, Inc., No. 06-1867 (2d Cir. Sept. 12, 2008) (see October 6, 2008 Post). In that case, the Second Circuit upheld MLB’s exclusive licensing of team logos under the rule of reason. Although it would be easier to obtain immunity under the Copperweld doctrine than litigate a full blown rule of reason case, the MLB should take comfort in the fact that two circuits would uphold the licensing scheme regardless of which rationale is applied.

May

04

Maryland Enacts the First Leegin Repealer Statute

Posted by : Matthew Wild | On : May 4, 2009

Category: Antitrust, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

Tags:Antitrust, dr. miles, leegin, maryland antitrust law, matthew wild, overrule leegin, Resale Price Maintenance, section 1, sherman act

Maryland has amended its antitrust law to make resale price maintenance agreements per se illegal, thus overruling Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007). In Leegin, the Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911), and held that a resale price maintenance agreement in which the manufacturer requires a reseller to sell at a certain price is no longer a per se violation of Section 1 of the Sherman Act but instead is subject to rule of reason analysis. Application of the rule of reason creates a burden on plaintiffs because they have to show that the restraint had an adverse effect on the relevant market and not just the price of the manufacturer’s goods that were subject to restraint. This abrupt change in the law has been poorly received by state antitrust authorities. As reported in the May 23, 2008 Post, 35 state attorneys general petitioned Congress to amend the Sherman Act to overrule Leegin. And as reported in the March 31, 2009 Post, the state attorneys general of New York, Illinois and Michigan obtained a consent decree against Herman Miller in the United States District Court for the Southern District of New York for resale price maintenance involving the Aeron chair. Their position was that their state antitrust law do not recognize the departure by Leegin and still provide that resale price maintenance is a per se offense.

Oct

06

After Excluding an Economist’s Expert Report, the Second Circuit Upholds Major League Baseball’s Licensing of Team Logos

Posted by : Matthew Wild | On : October 6, 2008

The United States Court of Appeals for the Second Circuit recently held that Major League Baseball’s licensing of team logos was subject to rule of reason review under Section 1 of the Sherman Act. The court affirmed summary judgment in favor of MLB because the appellant did not challenge the licensing program under that rule. Major League Baseball Properties, Inc. v. Salvino, Inc., No. 06-1867 (2d Cir. Sept. 12, 2008) (attached MLB Properties v. Salvino). The baseball clubs give (with a few exceptions) exclusive licensing rights to a single entity. According to the MLB’s expert Frank Fisher (a world renowned economist), this system offers many efficiencies including allowing MLB licensing to compete better with other sports licensing; offering one-stop shopping to licensees; centralized management on matters such as quality control, intellectual property rights enforcement and negotiations and sales to licensees. According to Fisher, these efficiencies should result in lower licensing fees. The appellant had offered an expert report from economist Mr. Louis A. Guth, a Special Consultant for NERA, who disputed these efficiencies and asserted that the MLB licensing entity functioned as a cartel unresponsive to demand. The Second Circuit affirmed the exclusion of Guth’s report under Daubert v. Merrell Dow because (unlike Fischer’s report) it was unsupported by evidentiary citations or empirical analysis. The Second Circuit held that the rule of reason and not the per se rule or “quick look” analysis applied because the “arrangement might plausibly be thought to have a net precompetitive effect, or possibly no effect at all on competition.” Through different reasoning, the Second Circuit in this case reached the same result as the Seventh Circuit did in a challenge to a nearly identical licensing program by the NFL. See American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) discussed in the Post of September 4, 2008. In that case, the Seventh Circuit held that the NFL teams were incapable of conspiring with themselves under the Copperweld doctrine in these particular circumstances. In this case, the Second Circuit did not address the Copperweld doctrine, but it did observe that the relevant market should include licenses for other professional sports. Therefore, it would be unlikely for the MLB’s licensing activities to have an effect on competition. This case should prove useful for practitioners for its discussion of when the per se rule, rule of reason or quick look analysis applies, the tests used under these analyses and the pitfalls of an inadequate expert report.

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