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THIS WEEKS CONTRIBUTING AUTHOR IS M. BRINKLEY TAPPAN EDITED BY KOREN W. WONG-ERVIN PATENTS
Court Dismisses NPEs Group Boycott Claims Against RPX, Motorola, Samsung, and Others
On January 24, a California federal court dismissed with leave to amend Cascades Computer Innovations claims that RPX, Dell, HTC, LG Electronics, Motorola Mobility, and Samsung Electronics formed a group boycott not to license its patents. Cascades, a non-practicing entity (NPE) whom the defendants accused of being a patent troll, holds rights to a portfolio of 38 patents relating to technology that optimizes the use of the Android operating system employed in certain mobile phones and computer tablets. Defendant RPX is also an NPE, but it is a defensive patent aggregator or anti-troll, formed to protect its members from NPEs that file infringement claims. RPX, which is funded by its more than 110 members, frequently acts as an intermediary for its members for purposes of acquiring patents and negotiating licenses. Cascades alleged that RPX and the manufacturing defendants (who are members of RPX) formed a buyers cartel through which they agreed that they would jointly refuse to license Cascades patents; none would negotiate a license with Cascades independently; and all would infringe on Cascades patents without paying royalties. The court granted the defendants motions to dismiss on the grounds that the complaint failed to allege a plausible antitrust conspiracy, failed to allege harm to the competitive process in a relevant market, failed to allege antitrust injury, and lacked economic sense. First, the court concluded that Cascades failed to meet the pleading requirements under Twombly, stating: Cascades alleges that the Manufacturing Defendants conspired, but does not answer [any of] the basic questions: who, did what, to whom (or with whom), where, and when? (Order Granting MTD at 10 (internal citations omitted).) Cascades alleged that the manufacturing defendants conspired, combined and/or entered into agreements with RPX, joint defense agreements, NPE insurance, common counsel, meetings, phone calls, emails, and
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discussions with RPX and otherwise to agree to not accept licenses from Cascades. (Complaint at 39.) As to when this alleged conspiracy formed, Cascades alleged that after negotiations with Cascades ended, RPX and the other defendants conspired. (Id. 28.) Cascades also alleged that RPX withdrew its offer when its members agreed to boycott Cascades. (Id. 37.) The court concluded that, [o]ther than Cascades allegation that negotiations with RPX broke down when one or more RPX members would not agree to fund the deal, all Cascades has alleged is parallel behavior. (Order Granting MTD at 10.) Second, the court held that, to the extent that Cascadess claims are analyzed under the rule of reason, Cascades failed to allege an unreasonable restraint of trade because it failed to identify specifically what it considers to be the relevant market. In its complaint, Cascades avoids its pleading obligations with subterfuge, it defines the relevant product market broadly as licenses, the Android market, and mobile phones and tablets that use the Android operating system; and narrowly as Cascades patents, licenses for Cascades patents, and products that use Cascades patented technology. . . . While Cascades does not need to limit its antitrust allegations to a single market or submarket, it does need to specify the market or markets in which the allegedly anticompetitive acts occurred. (Id. at 15.) Third, the court concluded that, due to Cascades vague allegations of a group boycott, Cascades has not alleged sufficient facts to show that the injury Cascades has suffered flows from the Defendants unlawful conduct. All of the harm allegedloss royalties, depressed market value for the patents, litigation expenses, loss of business growthderive from Cascades inability to license its patents. However, Cascades has provided insufficient facts from which to plausibly infer that the reason it suffered this harm is due to a conspiracy in a particular market, rather than due to individual business disputes between individual actors. (Id. at 17.) Fourth, the court also dismissed the complaint with leave to amend on the grounds that it made no economic sense. The court stated that, among other things, Cascades will need to provide specific facts to clarify why, absent a conspiracy, it is economically irrational for the Manufacturing Defendantswho are being sued by Cascades for infringement of one patent, the 750 Patentto decline an offer to license Cascades entire portfolio of 38 patents. (Id. at 1920.) The court further stated that, without clarification and specificity, it would not presume economic rationality where the circumstances giving rise to the lawsuit plausibly suggest nothing more than a tactical ploy to regain economic leverage that Plaintiff lost in the licensing negotiations. (Id. at 20.) Lastly, the manufacturing defendants contended that the lawsuit is based on protected litigation conduct of defending against patent infringement charges brought by Cascades, and that Noerr-2-
Pennington immunity applies because their alleged cooperative conduct began only after they were either charged with or sued for patent infringement. The court denied without prejudice this basis for dismissal stating that, [a]s a consequence of Cascades failure to plead the necessary specifics of the alleged conspiracy, the Court cannot determine at this time whether Defendants are immune from suit. (Id. at 23.) Determining whether the alleged conspiracy preceded the alleged joint litigation conduct necessarily requires an inquiry into the timing of the conspiracy itself, the timing of any perceived threats of litigation, the scope of any such perceived threat, etc. (Id.) Sources: Cascades Computer Innovation LLC v. RPX Corp. et al. (Order Granting Defendants Motion to Dismiss the Complaint with Leave to Amend), available at http://docs.justia.com/cases/federal/districtcourts/california/candce/4:2012cv01143/253289/93/0.pdf Scott Flaherty, Samsung, HTC, Others Duck Antitrust Suit Over NPE Boycott, Law360 (Jan. 24, 2013), available at http://www.law360.com/competition/articles/410265/samsung-htc-others-duck-antitrustsuit-over-npe-boycott- (subscription required)
pockets at both ends, and an angled cloth loop in the middle). The Federal Circuit held that claim construction is not an essential element of a patent infringement complaint, and that neither the Federal Rules nor the Supreme Courts precedents in Twombly and Iqbal require such allegations. Furthermore, held the court, the district court erred in its view of design patent law because infringement of a design patent is based on the design as a whole, not on any points of novelty. (Opinion at 7.) The court explained that the ordinary observer test applies, under which the criterion is if, in the eye of the ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other. (Id. at 7-8 (internal citations omitted).) Sources: Roger J. Hall v. Bed Bath & Beyond Inc. (Opinion), available at http://docs.justia.com/cases/federal/appellate-courts/cafc/-1165/-1165-2013-01-25.pdf Ryan Davis, Design Patent Plaintiffs Have Low Bar, Fed. Circ. Says, Law360 (Jan. 25, 2013), available at http://www.law360.com/ip/articles/410170/design-patent-plaintiffshave-low-bar-fed-circ-says (subscription required)
Federal Circuit Chief Judge Rader Criticizes Supreme Courts Analysis of IP Issues
In the keynote address at the New York State Bar Associations annual meeting, Chief Judge Randall Rader criticized recent Supreme Court jurisprudence, asserting that the Court relies too heavily on judge-made law, rather than on the language of the Patent Act. In particular, Judge Rader criticized the Supreme Courts analysis in Mayo v. Prometheus and eBay v. MercExchange. In Mayo, the Court determined that certain blood tests were not patentable, based, according to Judge Rader, on principles manufactured outside the statute. In eBay, the Court held that infringing products should be enjoined only where a four-factor test is met. According to Judge Rader, injunctions should be granted more liberally, pursuant to the purpose of the Patent Act. In both cases, according to Judge Rader, the Supreme Court failed to consider the language of the Patent Act in context. Source: Ryan Davis, Rader Calls Out High Courts Activism in IP Law, Law360 (Jan. 22, 2013), available at http://www.law360.com/articles/408846/rader-calls-out-high-court-sactivism-in-ip-law (subscription required)
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PHARMACEUTICALS
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United States fenofibrate market, unless and until it acquires the required FDA approval to do so. (Opinion at 30.) According to the court, Ethypharm wants to have it both ways: it wants to pass on to the licensee the expense and risk of qualifying to compete in the United States pharmaceutical market, but, when that arrangement fails to achieve success, Ethypharm seeks to avail itself of the United States laws protecting fair competition. The rules of antitrust standing do not permit that tactic. (Id. at 28.) The court stressed that it is not the general arrangement of the manufacturer and distributor that is problematic; it is the fact that Ethypharm cannot sell Antara in the United States because of legal barriers particular to the pharmaceutical market. (Id.) Sources: Ethypharm S.A. France v. Abott Labs (Opinion), available at http://www.ca3.uscourts.gov/opinarch/113602p.pdf Keith Goldberg, 3rd Circ. Shuts Down Ethypharm Antitrust Suit Against Abbott, Law360 (Jan. 23, 2013), available at http://www.law360.com/articles/409491/3rd-circ-shutsdown-ethypharm-antitrust-suit-against-abbott (subscription required) COPYRIGHTS
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California Congresswoman Prepared to Introduce Legislation Regarding the FCCs Authority to Enforce Open Internet Rules
Speaking at a conference on January 22, Congresswoman Anna Eshoo (D-Cal) stated that she is prepared to introduce legislation clarifying the FCCs authority to ensure a free and open Internet while preventing the use of Internet fast lanes or other discriminatory rules, should the D.C. Circuit agree with claims made by Verizon that the FCCs Open Internet rules exceed the agencys authority. The FCCs Open Internet rules, also known as the net neutrality regulations, were adopted by the agency in 2010 to prevent Internet service providers from using their power to block or impede online access. Verizon filed a lawsuit in September 2011 alleging that the regulations exceed the agencys authority. Source: Doug Halonen, Senior lawmaker vows backing for FCCs net neutrality rules, MLex (Jan. 22, 2013), available at http://www.mlex.com/US/Content.aspx?ID=310441 (subscription required) UPCOMING PROGRAMS
A special thanks to Debbie Bellinger and Ian Horkley for their weekly contributions to tidBITS.
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