Last Monday, the court denied Qualcomm, Inc.’s motion to dismiss the Federal Trade Commission’s suit against it for allegedly using anticompetitive tactics to maintain a monopoly in baseband modem chips for cell phones. The FTC contends that Qualcomm is using its standard-essential patents (SEPs) to extract monopoly prices from cell phone and other cellular device manufacturers in violation of its commitment to license its patents on a “fair, reasonable, and non-discriminatory” (FRAND) basis.
Last week, the FTC filed a complaint against Qualcomm, a manufacturer of baseband processors, which are chips included in cell phones and other products with cellular connectivity that allow the devices to connect to cell networks. Qualcomm holds patents to technologies incorporated in the standards that allow all cell phones to communicate with one another, referred to as standard-essential patents or SEPs. Qualcomm’s patents mostly relate to older, 3G-CDMA cellular technologies, which are still necessary for modern cell phones to work as consumers expect. As a condition of declaring its patents standard-essential, Qualcomm committed to the telecommunications industry’s standard-setting organizations that it would license its patents on a “fair, reasonable, and non-discriminatory” (FRAND) basis.
In a significant Illinois Brick decision, the Ninth Circuit recently issued an opinion concluding that consumers who purchase apps from Apple’s “app store” directly purchase those apps from Apple, which acts as a distributor. The purchasers therefore have antitrust standing to sue Apple for alleged monopolization of the iPhone app market. The decision could make it easier for consumers to bring antitrust claims against sellers in e-commerce.
As we’ve written, Uber, the popular app-based car service, has been on the antitrust defensive, facing allegations that its algorithm for calculating prices restricts price competition. In Wallen v. St. Louis Metropolitan Taxicab Commission, No. 15-cv-01432 (E.D. Mo.), however, it’s on offense, joining forces with some of its riders and drivers in a claim that the St. Louis Metropolitan Taxicab Commission’s refusal to allow it and other ridesharing companies to operate in St. Louis is an antitrust violation. The plaintiffs allege that the Commission, composed of active market participants, is precluding competition by denying ridesharing services the ability to operate. The complaint also names as defendants the cab companies with which the Commission’s members are affiliated. The Commission and its members moved to dismiss on the basis that they are immune from antitrust liability, and the cab companies moved to dismiss for failure to state a claim. On October 7, 2016, the court denied the Commission defendants’ motion to dismiss and granted the cab companies motion to dismiss, with leave to replead.
It is plausible that Uber’s CEO, Travis Kalanick, may have violated antitrust law by fixing prices charged to Uber passengers, a judge in the United States District Court for the Southern District of New York concluded last week in denying Kalanick’s motion to dismiss. The lawsuit, Meyer v. Kalanick, is a putative class action initiated by Spencer Meyer, a resident of Connecticut, on behalf of people who, like him, have used Uber car services. The complaint also names a subclass of people who have been charged according to Uber’s “surge pricing” model.
Bad Basketball at High Prices? Timberwolves Season Ticket Holders Seek to Enjoin the Team’s “Draconian” Resale Policies
Minnesota Timberwolves season ticket holders unhappy with the team’s 20-45 record and hoping to resell their tickets have filed a putative class-action lawsuit over the team’s “draconian” ticketing policy.
New York Attorney General Eric Schneiderman is reportedly investigating the National Football League for antitrust violations in connection with its imposition of “price floors” on tickets for resale. In a 40-page report released last week, the NYAG’s office outlined numerous concerns about the market for event tickets. Among those concerns is the practice, by some NFL teams and the New York Yankees, of imposing minimum pricing requirements (typically prohibiting sale for less than face value) on their “official” online resale platforms. According to the NYAG, such “price floors” make it “easy for buyers to be fooled into believing what they are paying is the market price for a ticket, when in fact the buyer is paying a price artificially inflated by a price floor.”
In yet another high-profile enforcement action, last week EU Competition Commissioner Margrethe Vestager announced charges against Qualcomm Inc., a world leader in 3G, 4G, and next-generation wireless technologies and the world’s largest supplier of baseband chipsets, for allegedly abusing its dominant position in the baseband chipset market. The Commission preliminarily concluded that Qualcomm illegally paid a major customer to exclusively use Qualcomm chipsets, and also engaged in predatory pricing by selling chipsets below cost with the aim of forcing a competitor out of the market.
Our Antitrust practice group recently co-authored a series of articles in Inside Counsel discussing major antitrust issues facing in-house counsel today. Our articles expand on topics that we have covered in this blog, including the Actavis litigation, the change in the competition landscape across the globe and antitrust reforms in Europe and Asia, antitrust enforcement in e-commerce, the implications of the Supreme Court’s decision in North Carolina State Board of Dental Examiners on antitrust liability for professional boards, and the Department of Justice’s recent guidance on antitrust compliance programs.
EU Competition Commissioner Unveils Investigation into Amazon, Continuing Probe into the Tech Giants
On Thursday, the European Commissioner for Competition announced a formal investigation into whether Amazon, the largest distributor of e-books in Europe, has abused its dominance in the market for e-books. The investigation deals with specific clauses in Amazon’s contracts with publishers, which require the publishers to inform Amazon of more favorable or alternative terms offered to competitors and to offer similar terms to Amazon.
AU Optronics Corp. (“AUO”) filed a petition for a writ of certiori in Hui Hsiung, et al. v. United States of America on March 16, 2015, seeking Supreme Court review of the Ninth Circuit’s 2014 decision that upheld the convictions of AUO and its former executives for their participation in a global cartel to fix the price of liquid crystal display (“LCD”) panels. The United States Department of Justice, Antitrust Division, which had tried AUO and its former executives in the district court in San Francisco, filed its brief in opposition to the petition on May 15, 2015, and petitioners filed a reply on May 22, 2015.
In a long line of European regulators taking aggressive stances against American tech companies, Margrethe Vestager, the European Union’s (EU) antitrust chief, is determined to pursue antitrust claims against Google. In addition to bringing formal charges against Google for allegedly abusing its dominance in web searches, Vestager has opened a formal investigation into Google’s practice of “pre-installing its apps and services onto Android smartphones,” presumably based on the theory that doing so gives Google’s software preferential treatment compared to its competitors.
In today’s technology-heavy world, technical interoperability standards are quite common. Because those standards are often patented, patent owners may have the ability to extract a monopoly price and some argue those owners can “reduce the number of competitors practicing the standard.”
In what it is calling the Antitrust Division’s “first criminal prosecution against a conspiracy specifically targeting e-commerce,” the Department of Justice has announced that an individual has agreed to plead guilty to charges that he conspired to fix the prices of wall posters sold online through Amazon Marketplace. The matter is United States v. Topkins, No. 15 Cr. 201 (N.D. Cal.).
On Friday the Solicitor General filed an amicus brief in Kimble v. Marvel Enterprises. As we previously noted, in Kimble, the Supreme Court will consider whether to overturn Brulotte v. Thys Co., a 50-year-old precedent holding that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”
Will the European Court of Justice Conclude that Antitrust Law Prohibits Royalties for Invalid Patents?
The European Court of Justice recently announced that it will issue a decision in Genentech Inc. v. Hoechst GmbH, in response to a request from the Paris Court of Appeals for clarification on whether European antitrust law precludes payment of royalties on a patent licensing agreement after the invalidation of the patent. This case could have important implications for European antitrust law, particularly if the ECJ determines that the EU’s antitrust laws must be interpreted as curbing enforcement of private licensing agreements.
Bill Baer, the Assistant Attorney General in charge of the DOJ Antitrust Division, spoke about the DOJ’s antitrust enforcement priorities last Friday, February 6, at a speech in Miami. AAG Baer emphasized three priorities: exercising patience with market flux due to new disruptive new industry sectors, giving meaningful guidance to the business community, and crafting structural remedies as part of their merger enforcement efforts.
The U.S. Court of Appeals for the Fifth Circuit last week reversed a jury verdict and rendered judgment for American Quarter Horse Association (AQHA) in a much-contested antitrust case about AQHA's ban of cloned horses. The Fifth Circuit left open the possibility that a single entity like AQHA could conspire with its own members or sub-parts. The takeaway? Without transparency in decision-making procedures, organizations can find themselves vulnerable in antitrust litigation.
Our regular readers know that we have been carefully following the developments in Motorola Mobility LLC v. AU Optronics Corp., currently pending in the Seventh Circuit. The case addresses the reach of the Foreign Trade Antitrust Improvements Act (“FTAIA”), and will join recent decisions issued by the Second Circuit and Ninth Circuit earlier this year.
In Motorola Mobility LLC v. AU Optronics Corp. et al., the Seventh Circuit is currently considering the reach of the Sherman Act beyond United States borders and will join the Second and Ninth Circuits in interpreting some key provisions of the Foreign Trade Antitrust Improvements Act (“FTAIA”). In that case, which will be heard by the Seventh Circuit on a motion for rehearing, the parties have advanced vastly different interpretations of the FTAIA and the extent to which defendants’ conduct abroad has impacted the United States market, if at all.
Many of you will recall that on March 27, 2014, the Seventh Circuit issued a long-awaited decision concerning the scope of the Foreign Trade Antitrust Improvements Act (“FTAIA”) in Motorola Mobility v. AU Optronics. The Seventh Circuit held that the higher prices for mobile phones Motorola sold in the United States did not “give rise to” its foreign subsidiaries’ antitrust claims, and that Motorola could not show a “direct” effect on U.S. commerce sufficient to satisfy the FTAIA. Just days after this opinion, Motorola asked for a rehearing. After multiple letters back and forth between the Court, the parties, and the Solicitor General’s Office, on July 1, 2014 the Seventh Circuit vacated its prior opinion. Additional briefing is now underway, and is expected to be completed in October.