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.
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Posted by : | On : March 3, 2008
February 13, 2008. The FTC sued Cephalon for exclusionary conduct that is preventing generic competition with its branded drug Provigil. The FTC alleged that Cephalon settled with four different generic manufacturers. These generic manufacturers dropped their patent challenges to Provigil in exchange for cash payments. Under the vagaries of the Hatch-Waxman Act, generic entry is not possible until 180 days after one of these generic manufacturers enters the Provigil — which because their patent challenges have settled, will not be until after Provigil’s patent expires in 2012. The FTC adopted a new litigation strategy in this case. In the past, the FTC challenged these types of settlements in administrative proceedings and claimed that the basis for the “unfair method of competition” was a contract in restraint of trade — a violation of Section 1 of the Sherman Act. However, in FTC v. Schering-Plough, 402 F.3d 1056 (11th Cir. 2005), the FTC’s administrative decision was reversed by the Eleventh Circuit on petition for review. The Eleventh Circuit held that a reverse patent settlement is not by itself a Section 1 violation.The FTC’s current litigation strategy avoids the implication of Schering-Plough in two respects. First, by avoiding administrative proceedings altogether and commencing the action in the United States District Court for the District of Columbia, the FTC avoids review by the 11th Circuit. Second, the FTC is proceeding under a different theory of liability. The alleges that Cephalon willfully maintained its monopoly over Provigil through the patent settlements in violation of Section 2 of the Sherman Act. Accordingly, Schering-Plough — a Section 1 case — is inapposite. The FTC Press Release and Complaint are attached. FTC Press Release (Cephalon), FTC Complaint (Cephalon)