Mar

08

Posted by : Matthew Wild | On : March 8, 2009

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.

Feb

26

Posted by : Matthew Wild | On : February 26, 2009

Yesterday, the Supreme Court in Pacific Bell Telephone Co. v. Linkline Communications, Inc., No. 07-512 (Feb. 25, 2009) (LinkLine decision  here) unanimously rejected a price squeeze claim alleged under Section 2 of the Sherman Act.  Pac Bell is a DSL transport service and retail service provided.  Linkline, an independent DSL service provider, competed with Pac Bell on the retail level but needed to purchase Pac Bell’s transport service to provide DSL to its retail customers.  Linkline alleged that Pac Bell engaged in a price squeeze by charging Linkline too high a wholesale price for DSL transport service and charging its retail customers too low a price on DSL service.  The Court rejected this claim because (1) Pac Bell had no obligation to deal with Linkline and thus the prices it charged to Linkline are of no consequence and (2) Pac Bell was not alleged to have engaged in predatory pricing at the retail level — i.e., charging prices below  cost with a dangerous probability that it can raise its prices later and recoup its losses.  Chief Justice Roberts aptly summarized the Court’s rationale, “Trinko holds that a defendant with no antitrust duty to deal with its rivals has no duty to deal under terms and conditions preferred by those rivals.  Brooke Group hold that low prices are only actionable under the Sherman Act when prices are below cost and there is a dangerous probability that the predator will be able to recoup the profits it loses from low prices.  In this case, plaintiffs have not stated a duty-to-deal claim under Trinko or a predatory pricing claim under Brooke Group.  They nontheless tried to join a wholesale claim that cannot succeed with a retail claim that cannot succeed and alchemize them into a new form of antitrust  liability never before recognized by this Court.  We decline the invitation to recognize such claims.  Two wrong claims do not make one that is right.”

The background to this case is unusual.  The June 3, 2008 Post reported a rare disagreement between the DOJ’s Antitrust Division and FTC over whether to grant certiorari.  The Antitrust Division filed a brief supporting certiorari (which the FTC declined to join) and the FTC issued a statement explaining why certiorari should be denied.  It also seems as if the Supreme Court reached out to decide this case as Linkline argued that it abandoned its price squeeze claim and wanted to pursue a predatory pricing claim under Brooke Group.  The Court rejected the mootness argument and believed that the issues were adequately explored to make a reasoned decision based on the amici’s submissions.

Feb

24

Posted by : Matthew Wild | On : February 24, 2009

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.

Feb

23

Posted by : Matthew Wild | On : February 23, 2009

On February 18, 2009, the United States Court of Appeals for the Tenth Circuit affirmed dismissal of a complaint filed by a ski rental store against the Deer Valley, Utah ski resort operator with its own ski rental operation alleging monopolization and attempted monopolization in violation of Section 2 of the Sherman Act.  Christy Sports LLC v. Deer Valley Resort Co., Ltd., No. 07-4198 (10th Cir. Feb. 18, 2009) (Christy Sports v. Deer Valley Resort Decision).  Plaintiff had sought to prevent enforcement of a restrictive covenant governing its use of property sold by the ski resort operator.  When the ski resort operator sold the parcel of land on which the ski rental store operates, it imposed a restrictive covenant in the deed only permitting the operation of a ski rental business with its permission.  For years, the ski resort operator permitted plaintiff to operate accepting a share of the profits in return.  Preferring to capture that business in the future, the ski resort operator sought to enforce the restrictive covenant and put the ski rental store out of business.  The Tenth Circuit rejected plaintiff’s claims under Section 2 of the Sherman Act for two independent reasons.  First, the Court rejected plaintiff’s relevant product market definition of ski rental stores.  Rather the Court held that the relevant market was the skiing experience.  It reasoned that skiers do not come to the area to rent skis and that ski rentals are just one component of the skiing experience that they seek.  It should be of no consequence that the ski resort operator charges more for ski rentals and as a consequence, less for e.g., lift tickets.  Second, the Court held that there were no allegations of anticompetitive conduct.  The antitrust laws do not forbid a business from imposing a restrictive covenant on a neighboring parcel of land to avoid competition and justify its investment in entry.  Accordingly, nothing precludes the enforcement of an otherwise permissible restrictive covenant.

Feb

17

Posted by : Matthew Wild | On : February 17, 2009

In January 2009, the United States Court of Appeals for the Second Circuit affirmed a district decision granting a motion to dismiss an action alleging that defendants “conspired to influence the FCC.”  The Court held that such activity cannot give rise to antitrust liability under the Noerr-Pennington doctrine.  Kahn v. iBiquity Digital Corp., No. 07-0475-cv, 2009 WL 102810 (2d Cir. Jan. 15, 2009).  That doctrine provides immunity for, among other things, lobbying the government including agencies which is precisely what the defendants were alleged to have done.  In another case, the United States Court of Appeals for the Ninth Circuit upheld application of the Noerr-Pennington doctrine in Kaiser Health Foundation, Inc. v. Abbott Laboratories, Inc., Nos. 06-55687, 06-55748, 2009 WL 69269 (Jan. 13, 2009).  This time defendant’s commencement of litigation against generic drug manufacturers was protected.  The Noerr-Pennington doctrine also shields litigation as a basis for antitrust liability unless it is “sham” litigation.  The Ninth Circuit affirmed dismissal of the monopolization claims based on Abbott’s seventeen patent infringement lawsuits against generic drug manufacturers noting that it could hardly be sham litigation when Abbott prevailed in seven of them and Abbott “had a plausible argument on which it could have prevailed” in the other ten suits.  Id. at *13.  In Wolfe v. City of Anaheim, No. 07-56031, 2008 WL 542079 (9th Cir. Dec. 31, 2008), the Ninth Circuit affirmed dismissal on summary judgment based on the Local Government Antitrust Act of 1984, 15 U.S.C. section 35(a).  That statute immunizes municipalities from antitrust damages.  Plaintiff had sought to recover damages from the City of Anaheim for alleged wrongful denial of a taxicab franchise under, inter alia, the Sherman Act.  The statute clearly precluded such liability.

Feb

06

Posted by : Matthew Wild | On : February 6, 2009

In a significant victory to antitrust victims, the United States Court of Appeals for the Second Circuit refused to enforce a bar in arbitration contracts that prohibited collective actions.  In re American Express Merchants’ Litigation, No. 06-1871-cv (2d Cir. Jan. 30, 2009) (Amercian Express Merchants Litigation attached).  Plaintiffs were merchants who alleged that American Express tied acceptance of its charge card to its credit cards – it required merchants to accept both cards rather than allowing them to choose to accept only the charge card.  The merchants claim that this tying scheme allowed American Express to charge them supracompetitive fees on American Express credit card purchases in violation of Section 1 of the Sherman Act.  The merchant agreements had an arbitration provision, which also barred class or collective actions whether in arbitration or otherwise.  The Second Circuit held that such clauses are unenforceable where as here the amount of the potential claims are so small that it would effectively preclude plaintiffs from bringing antitrust actions or arbitration proceedings on their own.  The Court expressly chose not to address whether such restrictions are per se unenforceable in antitrust actions.

Nov

16

Posted by : Matthew Wild | On : November 16, 2008

On November 10, 2008, the DOJ Antitrust Division’s criminal section lost another high profile criminal price fixing trial. This time the individual defendant was acquitted of alleged participation in the highly publicized marine hose cartel that had resulted in numerous guilty pleas.  After a two-week trial, the jury returned a verdict in less than two hours.  Paul Calli, Michael Pasano and Marissel Descalzo of Carlton Fields, P.A. represented the defendant.  (Carlton Fields press release)  The criminal section has lost a number of high profile trials recently — DRAM (hung jury; decision not to re-prosecute) and magazine paper.

Oct

20

Posted by : Matthew Wild | On : October 20, 2008

In In re Apple & AT&TM Antitrust Litigation, No. 07-CV-05152-JW (N.D. Cal. Oct. 1, 2008) (attached IPhone Decision), plaintiffs alleged that the arrangement in which the Apple IPhone worked exclusively with AT&TM not only for the initial two-year contract period but also for three additional years after their contracts expired with AT&TM violated Section 2 of the Sherman Act.  Plaintiffs also alleged that Apple’s restrictions on dowloadable applications for use on IPhones violated Section 2.  Plaintiffs alleged Section 2 claims of monopolization and attempted monopolization of the market for IPhone applications and monopolization, attempted monopolization and a conspiracy to monopolize the market for voice and data services to IPhone owners.  The Northern District of California held that there were cognizable relevant product markets limited to Apple IPhone customers in these aftermarkets.  The court distinguished cases in which customers voluntarily commit to a lock-in through a contract such as when a franchisee agrees to purchase certain products from its franchisor.  In this case, the Complaint alleged that the lock-in was created through deceit or unbeknownst to the customers at the time of purchase.  The Complaint alleged that the IPhone customers did not know that they could not unlock their IPhones from AT&TM service after the two-year commitment or  the limitation on downloadable applications.  This case is consistent with the Supreme Court’s approach in determining whether aftermarkets represent separate relevant product markets.  The key inquiry is whether the consumer knows or has reason to know of limitations in purchasing products or services in the afermarket before he becomes locked-in by the initial purchase.

Oct

06

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.

Sep

04

Posted by : Matthew Wild | On : September 4, 2008

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.