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.

The Supreme Court granted certiorari to review American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008). As explained in the September 4, 2008 Post, that case applied the Copperweld doctrine to a sports league 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).  This case’s journey to the Supreme Court was unusual.  As explained in the February 24, 2009 Post, the NFL — the prevailing party — also sought review because it wanted an authoritative decision on the scope of its antitrust liability for league activity.  And the Supreme Court requested the Solicitor General’s view about whether to grant certiorari.  The Supreme Court ultimately disagreed with the Solicitor General’s view and granted certiorari.

As examined in the February 17, 2009 Post, there have been a number of recent appeallte decisions reviewing successful Noerr-Pennington immunity defense assertions.   Alternative Electrodes, LLC v. EPMI, Inc., No. 08-CV-1247 (JFB)(ETB), 2009 WL 250474 (E.D.N.Y. Feb. 4, 2009), provides a recent illustration of the allegations necessary to defeat that defense.
In that case, plaintiff, a medical device manufacturer, claims that its competitor filed sham patent litigation against it and other competitors and made false statements about the patent litigation to plaintiff’s customers to allow it to monopolize (or gain a dangerous probability of monopolizing) the market for electrical muscle stimulation devices used to treat difficulty swallowing.  Plaintiff alleged, among other things, “from the beginning of the patent litigation that the primary, if not sole purpose, of instigating suit was to advise customers of the pending (but meritless) litigation and attempt to drive [plaintiff] from the market.  The litigation was objectively unreasonable and was initiated in order to interfere directly with [plaintiff’s] business relationships and activities. …  The sham patent suit strategy failed.  Recognizing the frivolity of the claim in light of prior art, these Defendants completely dismissed their suit … without any penalty or payment of any kind.”  Id. at *7.  The Court held that “such allegations are sufficient to withstand a motion to dismiss” based on the Noerr-Pennington immunity defense because “Plaintiff alleges that the litigation was both subjectively and objectively baseless and plausibly supports this claim with the assertion that there could be no valid patent claim due to the existence of ‘prior art.’”  Id.

Today the FTC announced a settlement with Whole Foods that requires Whole Foods to divest 32 supermarkets in 17 geographic markets.  The FTC also required to Whole Foods to transfer Wild Oats’ intellectual property, including the “Wild Oats” name.  The divestiture, which will have to be an FTC approved buyer, is intended to restore competition between these stores that was adversely affected by the acquisition.  The FTC press release, agreement containing consent order and analysis to aid public comment are attached — FTC Press Release (Whole Foods), Whole Foods Consent Order, Whole Foods Analysis to Aid Public Comment.

The remedy in this case illustrates how rescission rather than divestiture is rare.  The preference is to put the assets in the hands of a firm that is eager to run the business as opposed to a firm seeking to exit.  Thus, it is in the seller’s interest to force consummation of the transaction as soon as legitimately possible.  (Note that there are certain limited circumstances that will justify rescission where although legal, the parties gamed the system, see, e.g., FTC v. Elders Grain, 868 F.2d 901 (7th Cir. 1989 (Posner, J.)).

This merger has resulted in considerable litigation.  Whole Foods defeated the FTC federal action for a preliminary injunction.   That decision was reversed (see July 29, 2008 Post).  Then on Whole Foods’ application for rehearing en banc, the original panel amended its decision to make clear that one judge did not join the opinion reversing the order below.  With one judge dissenting, there was no opinion of the Court, which would have been binding on future panels, and thus there was no need for en banc review (see December 1, 2008 Post).  The FTC had also imposed a harsh expedited schedule for its administrative proceeding and took the unusual step of appointing an FTC commissioner as the presiding judge.  Whole Foods unsuccessfully challenged this process as a denial of due process in a plenary lawsuit it brought in federal court (see December 11, 2008 Post).

The September 4, 2008 Post examined a recent Seventh Circuit decision that held that the NFL was immune under the antitrust laws for its exclusive licensing of team logos on headwear to Reebok.  American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008).  The Supreme Court has just expressed an interest in reviewing the case.  It has “invited” the Solicitor General to “file briefs expressing the views of the United States.”  This case is also unusual because both parties sought Supreme Court review.  Although it won below, the NFL sought Supreme Court review so that its potential antitrust liability for league activity will no longer depend on which Circuit it is sued.

The United States Court of Appeals for the Seventh Circuit applied the Copperweld doctrine to a sports league for the first time. In so doing, it recently 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. American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) (attached  American Needle v. NFL). The plaintiff — an unsuccessful bidder — alleged that the collective action by the teams to combine all of their intellectual property rights and create an exclusive license was a conspiracy to prevent other vendors from obtaining licenses to the team names and logos in violation of Section 1 of the Sherman Act. The plaintiff also alleged that the teams monopolized “the NFL team licensing and product wholesale markets” in violation of Section 2 of the Sherman Act. Id. at *2. The Seventh Circuit held that the teams should be treated as a single entity under the Copperweld doctrine. 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. The Seventh Circuit did so because “the teams share a vital economic interest in collectively promoting all of NFL football” (id. at *7) and should be able to cooperate so that the NFL “can compete against other entertainment providers.” Id. at *8.

The United States Court for the District of Columbia affirmed summary judgment dismissing a class action brought by wholesalers of brand name drugs, which alleged that Biovail misused its patent for Tiazac – a hypertension drug – to keep a generic version from the market. Meijer, Inc. v. Biovail Corp., Nos. 05-7066, 05-7069, 06-7118, 2008 WL 2853281 (D.C. Cir. July 25, 2008) (attached Meijer v. Biovail). Plaintiffs claimed that Biovail falsely asserted to the FDA its newly acquired patent protected Tiazac from generic competition. After Andrx – the first-to-file generic manufacturer — advised the FDA that it disagreed with Biovail’s claim, Biovail brought an action for patent infringement action. Under the Hatch-Waxman Act scheme, commencement of the patent infringement action barred Andrx from bringing a generic to market for either 30 months from the date that Andrx certified to the FDA that its generic did not infringe Biovail’s patent or when it prevailed in the litigation. While the litigation was pending, Andrx encountered difficulty sourcing its generic. The D.C. Circuit affirmed summary judgment holding that plaintiffs lacked antitrust injury because they failed to demonstrate but-for Biovail’s conduct, Andrx would have been able to enter the market with its generic. Id. at *6.

On May 29, 2008, in Floral Accounting Systems, Inc. v. Florists Transworld Delivery, Inc., No. 06-1098, 2008 WL 2224416 (W.D. La. May 29, 2008), the district court unsealed an antitrust settlement holding that antitrust settlements were entitled to less protection than typical disputes between private parties because antitrust cases by the very nature implicate public interests. The parties had a dispute over the scope of their antitrust settlement agreement. The agreement contained a confidentiality provision which both parties sought to enforce and thus sought to have the agreement filed under seal. The district court declined the request with the exception of the amount of license fees to be paid — which it considered a trade secret. This case is consistent with the trend among federal courts to deny sealing documents filed in litigation. To increase the chance of obtaining an order sealing documents, the movant should try to show that the documents contain trade secrets.

On May 2, 2008, the Eastern District of Pennsylvania granted class certification in In re Wellbutrin SR Direct Purchaser Antitrust Litig., No. 04-5525, 2008 WL 1946858 (E.D. Penn. May 2, 2008). Plaintiffs claim that GlaxoSmithKline unlawfully extended its monopoly over Wellbutrin SR through fraud on the patent office and sham litigation against potential generic entrants. Defendant argued that a conflict exists among class members because national wholesalers benefit from the lack of generic competition — generic manufacturers often bypass wholesalers. The court rejected this argument because as generic Wellbutrin SR has been available since 2004, no theoretical conflict could still exist. Plaintiffs met the other requirements for class certification. Notably, plaintiffs offered a “colorable method” to prove common impact. Plaintiffs’ expert plans to examine the impact of generic entry on brand name pharmaceuticals through an analysis of public data collected on the dispensation and purchases of prescription drugs. In this case, class certification was straightforward. It can become more difficult when, for example, prices are negotiated on an individual basis. See, e.g., Blades v. Monsanto Co., 400 F.3d 562, 569 (8th Cir. 2005) (denying class certification because, inter alia, “the market for seeds is highly individualized, requiring particularized evidence to determine the competitive price that would have prevailed”).

Yesterday, the United States Court of Appeals for the D.C. Circuit granted Rambus’ petition for review. This decision was much awaited among antitrust counselors because it represented an attempt by the FTC to extend the antitrust laws to cover deceptive practices directed at standard-setting organizations. After administrative proceedings, the FTC held that Rambus violated Section 2 of the Sherman Act and Section 5 of the Federal Trade Commission Act by concealing to a standard-setting organization that it held patents in a technology which it urged the organization to adopt. Rambus then allegedly used the organization’s adoption of its technology to overcharge for licenses. In rejecting the claim under Section 2, the court explained, “if JEDEC, in the world that would have existed but for Rambus’s deception, would have standardized the very same technologies, Rambus’s alleged deception cannot be said to have had an effect on competition in violation of the antitrust laws; JEDEC’s loss of an opportunity to seek favorable licensing terms is not as such an antitrust harm. Yet the Commission did not reject this as being a possible—perhaps even the more probable—effect of Rambus’s conduct. We hold, therefore, that the Commission failed to demonstrate that Rambus’s conduct was exclusionary, and thus to establish its claim that Rambus unlawfully monopolized the relevant markets.” Rambus Inc. v. FTC, No. 07-1086 at 19 (D.C. Cir. Apr. 22, 2008). With respect to Section 5 of the FTCA, the court also expressed “serious concerns about strength of the evidence relied on to support some of the Commission’s crucial findings regarding the scope of JEDEC’s patent disclosure policies and Rambus’salleged violation of those policies.” Id. Notably, the court did not address whether such conduct would violate Section 5 even if it could not support liability under the Sherman Act. The FTC has recently taken such a position in its action against Negotiated Data in the March 10, 2008 Post. A copy of the slip opinion in Rambus is attached.

Rambus v. FTC