Posts Tagged: "anticompetitive"

In “big IP cases that count,” the U.S. Federal Trade Commission (FTC) has had a mixed record lately, going one-for-three – good in baseball but bad in government appellate litigation. (The biggest recent FTC loss that counts, the Supreme Court’s unanimous April 2021 AMG decision (see here), did not involve IP, but had major negative implications for the FTC’s future ability to obtain monetary relief in IP-related prosecutions). In August 2020, the Ninth Circuit vacated a district court “finding that Qualcomm had engaged in unlawful licensing practices, and reversed a permanent, worldwide injunction against several of Qualcomm’s core business practices.” (The full Ninth Circuit subsequently denied the FTC’s request for rehearing en banc, and the FTC threw in the towel in March 2021, electing not to seek Supreme Court review).

In a previous article, we laid out the basics of “patent pools”, which license patents that are declared essential for technology standards. A recent article published in the University of San Diego Law Review, titled Glory Days: Do the Anticompetitive Risks of Standards-Essential Patent Pools Outweigh Their Procompetitive Benefits? (Glory Days), criticized patent pools, alleging inefficiencies and anticompetitive risks of pools for standard essential patents (SEPs). While the authors make several rebuttable suggestions, the crux of the authors’ complaints about SEP patent pools is that SEP pools should bear all the burdens and expenses of verifying with a litigation-grade level of certainty that all patents in the pool are essential and valid before an implementer will even engage in a licensing discussion with the pool. This approach is not economically or practically realistic and is designed to justify hold out and provide cover for implementers to refuse to engage in licensing discussions.

On February 13, the Ninth Circuit heard oral argument in the FTC v. Qualcomm case. Counsel for Qualcomm and the Federal Trade Commission (FTC) argued primarily about whether Qualcomm’s behavior resulted in anticompetitive harm, while the attorney from the Department of Justice, which had been granted five minutes to argue on Qualcomm’s behalf, faced tough questions about claims that the district court’s injunction posed a threat to national security. While the DOJ’s intervention in this case is interesting, the best summation of the argument came from the bench when Judge Stephen Murphy, District Court Judge of the Eastern District of Michigan sitting by designation stated: “Anticompetitive behavior is prohibited under the Sherman Act. Hyper-competitive behavior is not. This case asks us to draw the line between the two.”

On July 15, retired Federal Circuit Chief Judge Paul Michel filed an amicus brief in Qualcomm’s appeal of the Federal Trade Commission’s (FTC) antitrust case to the U.S. Court of Appeals for the Ninth Circuit. The following day, the United States government filed a statement of interest with the appellate court as well. Both parties filed in support of Qualcomm’s request for a partial stay of an injunction handed down this May in the Northern District of California, which requires Qualcomm to license its standard essential patents (SEPs) to modem-chip suppliers after determining that the company’s “no license, no chips” policy violated U.S. antitrust law.

On May 2, the Antitrust Division of the U.S. Department of Justice (DOJ) took the unusual step of submitting a Statement of Interest in the Federal Trade Commission’s (FTC’s) case against Qualcomm to take a position contrary to the FTC. The DOJ argued that “[b]ecause an overly broad remedy could result in reduced innovation, with the potential to harm American consumers, this Court should hold a hearing and order additional briefing to determine a proper remedy that protects competition while working minimal harm to public and private interests.” In response, the FTC informed the court that it “did not participate in or request” the DOJ’s filing, that it “disagree[d] with a number of contentions” made by the DOJ, and that the DOJ “misconstrues applicable law and the record.” In the end, the court agreed with the FTC and issued injunctive relief against Qualcomm without conducting the further remedy proceedings the DOJ advocated. The public feuding between the two federal antitrust enforcement agencies about how to resolve a case litigated by one them was a remarkable spectacle. It also brought into focus a broader divide between the FTC and DOJ on the role of antitrust law in addressing patents that are essential to industry standards (SEPs) and subject to commitments to license on fair, reasonable, and non-discriminatory (FRAND) terms.

In a June 4 op-ed to IPWatchDog, James Edwards launched a scathing attack against Judge Koh and her 233-page ruling, which found Qualcomm to have engaged in anticompetitive behavior against competitors within the cellular chipset market. However, just as Mr. Edwards claims Judge Koh failed in her undertaking, so too has Mr. Edwards by ignoring the context and facts of the case. His argument against Judge Koh, deliberately or otherwise, does not mention the fact that this case involved the licensing of standard essential patents (SEPs) subject to the FRAND commitment, a contract between the patent holder and the standard setting organization to license the relevant patents on “fair, reasonable, and non-discriminatory” terms. Indeed, Mr. Edwards makes no mention of standard essential patents in a deliberate attempt to obfuscate the facts and fit a narrative that intellectual property rights writ large are under attack by this decision.

On Thursday, May 9, the Affordable Prescriptions for Patients (APP) Act was introduced into the U.S. Senate by Senators John Cornyn (R-TX) and Richard Blumenthal (D-CT). If passed by Congress and signed into law, the bill would modify the Federal Trade Commission (FTC) Act to give the FTC additional antitrust authority to challenge the anticompetitive nature of certain actions by pharmaceutical patent owners in the service of providing more consumer access to generic and biosimilar drugs.

Increasingly, Delrahim’s speeches are moving past where he began in his USC speech in November 2017, discussing this being the appropriate time to now have a discussion about the proper role antitrust enforcement plays with respect to standard setting, to his LeadershIP April 2018 speech where he explained the Antitrust Division will not hesitate to enforce against collusive anticompetitive conduct detrimental to patent owners. Furthermore, Delrahim has now several times discussed his view that in a free market, competition based economy the remedy for patent owners violating obligations to SSOs is a contractual remedy, not an antitrust remedy.

Barcode reading solutions provider Code Corporation of Salt Lake City, UT, announced that it had filed antitrust actions against engineering conglomerate Honeywell International (NYSE:HON) at both the U.S. International Trade Commission and in the Eastern District of Texas. Code, which is seeking an injunction on the importation and sale of barcode readers marketed by Honeywell for the healthcare industry, alleges that Honeywell engaged in a campaign to mislead distributors about the legitimacy of Code’s barcode reader products as part of an effort to monopolize that market.

On Monday, November 6th, Singapore-based semiconductor designer Broadcom (NASDAQ:AVGO) announced that it had offered a proposal to acquire San Diego, CA-based semiconductor rival Qualcomm (NASDAQ:QCOM). The deal values Qualcomm at about $130 billion and Broadcom would pay $70 per share; stockholders would receive $60 in cash and $10 in Broadcom shares in the deal. That $70 per share price was higher than Qualcomm’s per share price on November 6th, when it popped above $65 per share early in the day before declining towards $62 by midday trading. According to Broadcom’s press release on the news, its proposal represents a 28 percent premium over the closing price of Qualcomm stock on Thursday, November 2nd.

Qualcomm accused Apple of engaging in tortious interference relating to Qualcomm’s licensing activities with Apple’s contract manufacturers. Specifically, Qualcomm asserts that Apple pressured contract manufacturers to withhold licensing payments they would normally have made to Qualcomm. Apple has allegedly also pressured contract manufacturers to refuse to comply with Qualcomm auditing procedures, leading to Qualcomm’s inability to verify the accuracy of royalty reports… Qualcomm also notes that its licensing activities with Apple’s contract manufacturers go back years before Apple sold its first cell phone in 2007, as early as February 2000 in the case of Taiwanese firm Compal Electronics. Qualcomm asserts that its licensing agreements with the contract manufacturers were consistent with policies set out by the European Telecommunications Standards Institute (ETSI).

One reason the PTAB is convenient for reaching reverse payment deals is that there is no direct antitrust oversight, since its judges are administrators with very narrow legal authority. Further, while there is a statute requiring agreements between Hatch-Waxman firms to be submitted to the Federal Trade Commission (FTC) for antitrust review, the parties may attempt to evade it. The statute requires submission of agreements that relate to the manufacture or sale of either firm’s drug. The parties might therefore feel justified (rightly or wrongly) in not submitting a consent decree stating that the patent is valid and would be infringed by the proposed generic, since this does not expressly address manufacture or sales. Alternatively, it could be that the parties submit a district court consent decree (which includes no reverse payment), but not the PTAB settlement (which could include a reverse payment). After all, a PTAB settlement simply says that the parties agree to terminate the IPR – it need not declare the patent valid – and this arguably does not relate to manufacture or sales.

The FTC’s complaint alleges that Endo paid the first generic companies that filed for FDA approval – Impax Laboratories, Inc. and Watson Laboratories, Inc. – to eliminate the risk of competition for Opana ER and Lidoderm, in violation of the Federal Trade Commission Act. The FTC is asking the district court to declare that the defendants’ conduct violates the antitrust laws, and further seeking an order that the companies disgorge their ill-gotten gains. Of course, the FTC asks for a permanent bar to prevent the companies from engaging in similar anticompetitive behavior in the future.