Posts in Antitrust

The term “patent misuse” refers to specific types of prohibited behavior engaged in by the owner of the patent rights. Patent misuse is an affirmative defense that recognizes that it is possible for a patent owner to abuse the exclusive right enjoyed as a result of the issuance of a patent. As an affirmative defense, patent misuse cannot be used as a sword, but can only be used by an alleged infringer if and when the patent owner seeks to enforce the exclusive right of the patent in a patent infringement suit. Once a patent infringement suit is initiated, the alleged infringer, in order to successfully rely upon the patent misuse defense, must “show that the patentee has impermissibly broadened the ‘physical or temporal scope’ of the patent grant with anticompetitive effect.” If the alleged infringer can demonstrate that the patent owner did engaged in prohibited behavior, the patent will be unenforceable despite the fact that it is valid. In this respect, patent misuse is similar to the doctrine of inequitable conduct, which also works to make an entire patent unenforceable.

With copyright misuse having recently been successful in a rather high profile case I thought it would be worthwhile to revisit patent misuse and misuse concepts generally. To do that in a way that allows the casually interested reader to follow along probably requires first taking a step back away from the intellectual property centric theories to discuss some basic antitrust law concepts. This seems particularly appropriate since many of the misuse cases have a distinct antitrust flavor.

On November 9, 2011, the United States District Court for the Eastern District of California, per Senior Judge Terry J. Hatter, Jr., granted Costco a summary judgment victory due to the fact that Omega engaged in copyright misuse. Yes, the plot thickened. The district court originally granted summary judgment to Costco on the basis of the first sale doctrine, which was overturned by the Ninth Circuit and then affirmed by the Supreme Court in the tie decision, or non-decision of December 2010. That meant that the case would proceed because the first sale doctrine summary judgment victory was erased. But not so fast! Judge Hatter had other ideas!

We conclude that the FTC has not identified sufficient evidence to raise serious doubt about the current efficiencies of the IP marketplace. Indeed, the available empirical evidence suggests that these existing rules and practices work well. The interests of consumers are well represented by standard setting organizations and competition among technology implementers who at the end of the day must make goods and services that people wish to purchase.

Earlier this month Dechert LLP, representing an undisclosed number of companies (“stakeholders”), sent a letter to IMG College (“IMG”) and its licensing division, the Collegiate Licensing Company (“CLC”), and demanded that IMG and CLC cease and desist any efforts to restrict the number of licensees permitted to supply merchandise bearing the brands of various NCAA colleges and universities. It looks likes trademark and antitrust issues are back on the menu in sports, which makes intellectual property nerds like me very happy. We all knew American Needle Inc. v. National Football League (“Needle”) would embolden private antitrust suits; it was just a question of when. But a pivotal question is should Needle be extended to permit private antitrust suits in collegiate athletics?

About 10 years ago, the NFLP decided that they wanted Reebok (and only Reebok) to make hats with the teams’ logos on them. American Needle, Inc., a competitor of Reebok, had been making these types of hats for the NFL for a really long time, and as a result of the NFLP’s deal with Reebok, it lost its contract with NFLP to make said hats. American Needle, Inc. did not have much of a sense of humor about this and sued the NFL under Antitrust principles. Enter American Needle v. National Football League et al. Needle is a big case because if the NFL had gotten what it asked for, the player’s union wouldn’t have been able to decertify and the players wouldn’t have been able to bring an antitrust suit.

One of the most debated issues in patent and antitrust law today involves pharmaceutical patent settlements. Brand-name drug manufacturers pay generic firms to settle patent litigation and delay entering the market. How should the antitrust laws respond? The Cipro case presents an ideal vehicle for Supreme Court review. It involves a simple, undisputed payment from brand to generic to delay entering the market.

In part 1 of my interview with Mark Lemley we discussed whether the Supreme Court will take the i4i v. Microsoft case and address the presumption of validity, as well as what implications such a ruling would have on the value of previously acquired property rights. In part 2 of the interview, which appears below, we move past the presumption of validity to several other patent matters, including reverse pharma payments and In re Ciproflaxacin, the Stanford Patent Prize, patent misuse, patent trolls and the usual fun questions with a heavy emphasis on science fiction.

The Federal Trade Commission and Department of Justice on Friday, August 19, 2010, issued revised Horizontal Merger Guidelines that outline how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law. These changes to the Guidelines mark the first major revision of the merger guidelines in 18 years, and is…

The Federal Trade Commission approved a settlement with Intel Corp. that resolves charges the company illegally stifled competition in the market for computer chips. Intel has agreed to provisions that will open the door to renewed competition and prevent Intel from suppressing competition in the future. Under this agreement Intel must modify its intellectual property agreements with AMD, Nvidia, and Via so that those companies have more freedom to consider mergers or joint ventures with other companies, without the threat of being sued by Intel for patent infringement.

Who among us likes monopolies? Monopolies charge super competitive prices and consumers have no leverage, which leads frequently to inferior goods or services that consumers are forced to accept. This aversion to monopolies has been ingrained in American culture and heritage since the founding of the Nation, and was taken to new extremes during President Theodore Roosevelt’s Administration. While a patent does not confer a monopoly, patents can result in economic power through exclusion of competitors. It is this fundamental aspect of the patent right granted by the government that attracts investors to companies that have acquired patent rights.

86 law, economics, public policy and business professors filed an amici curiae brief with the United States Court of Appeals for the Second Circuit seeking the en banc review of the panel decision in In re Ciprofloxacin Hydrochloride Antitrust Litigation, which issued on April 29, 2010. Mark A. Lemley, William H. Neukom Professor, Stanford Law School and partner in the San Francisco law firm Durie Tangri LLP, is representing the 86 professors pursuing this matter pro bono as a concerned law professor and not on behalf of any client. When asked for comment he offered that he thinks “the Cipro case may well be the turning point in legal treatment of reverse settlements.”

The plaintiffs had argued that defendants had in fact violated Section 1 of the Sherman Act when they settled their dispute concerning the validity of Bayer’s Cipro patent by agreeing to a reverse exclusionary payment settlement. Bayer agreed to pay the generic challengers, and in exchange the generic firms conceded the validity of the Cipro patent. The Second Circuit panel affirmed the granting of summary judgment, finding themselves confined by the previous Second Circuit ruling in Tamoxifen. The panel did, however, make the extraordinary invitation to petition the Second Circuit for rehearing in banc, citing the exceptional importance of the antitrust implications, the fact that the primary authors of the Hatch-Waxman Act have stated reverse payments were never intended under the legislation and the fact that the Second Circuit in Tamoxifen simply got it wrong when they said that subsequent generic entrants could potentially obtain a 180 exclusive period even after the first would-be generic entrant had settled.

European Union regulators on Wednesday dropped an antitrust investigation into Rambus Inc. after the company agreed to cap royalty fees for memory chip patents. In an agreement reached between EU regulators and Rambus, Rambus will not charge any royalties for SDR and DDR chip standards and to bring fees for newer versions of DDR down from 3.5 percent to 1.5…

The United States Department of Justice on Friday filed papers with the United States Federal District Court for the Southern District of New York, challenging the settlement reached by Google and the plaintiffs in the copyright litigation challenging how Google is digitizing books and offering them for free. The DOJ told the court in a 32 page filing that the…