Quick Hits – Antitrust

by Lee Gesmer on July 14, 2008

The Federal Trade Commission has asked for en banc review of the D. C. Circuit’s decision in the FTC’s Rambus proceeding. I expect this case to be appealed to the Supreme Court, and given the Court’s propensity to accept antitrust cases over the last several years and the importance of this case, the case stands a better-than-average chance of being accepted for review by the Court. Of course better-than-average is still difficult, so the FTC shouldn’t get its printing presses warmed up quite yet.

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The Supreme Court granted review of the Ninth Circuit’s decision in Pacific Bell v. Linkline, and will hear and decide the case next term. The issue in this case, as described in the Pacific Bell’s petition to the Supreme Court, is –

Whether a plaintiff states a claim under Section 2 of the Sherman Act by alleging that the defendant – a vertically integrated retail competitor with an alleged monopoly at the wholesale level but no antitrust duty to provide the wholesale input to competitors – engaged in a “price squeeze” by leaving insufficient margin between wholesale and retail prices to allow the plaintiff to compete.

The Ninth Circuit held that there was an antitrust duty, and Pacific Bell is appealing that ruling. The SCOTUS blog page for this case is here.

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I strongly recommend that patent and antitrust attorneys read Massachusetts U.S. District Judge Stearns’ recent decision in Hertz v. Enterprise Rent-A-Car. (Warning; non-lawyers should steer clear).

Hertz sued Enterprise under the Sherman Antitrust Act. At issue is Enterprise’s patent 7,275,038, an Internet-based computerized transaction system for the car rental business.

Hertz, threatened by the prospective (and then actual) issuance of this patent brought suit for declaratory judgment of non-infringement on a variety of grounds, each of which was considered by Judge Stearns in considering Enterprise’s motion to dismiss.

In this characteristically incisive and well-reasoned decision Judge Stearns addresses a pouporri of legal matters:

  • Jurisdictional issues relating to a Walker Process claim antitrust claim (arising from patent invalidity based on fraud on the Patent Office; Walker Process Equip Co., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965)).
  • The difference between an “amended complaint” and a “supplemental complaint” and its relevance to jurisdictional issues in this case.
  • The level of specificity necessary to plead fraud-related claims arising in a patent context.
  • The pleading requirements for a claim of tortious interference with advantageous business relations under state law.
  • The pleading requirements under M.G.L. c. 93A where the complaint fails to allege that the anticompetitive effects of defendant’s actions were felt primarily and predominantly in Massachusetts.
  • Whether there is sufficient case or controversy to support a declaratory judgment action under the Supreme Court’s 2007 decision in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007), which supplanted the “reasonable apprehension of imminent suit” test with a more lenient standard for declaratory judgment actions in patent cases.
  • Whether the patent complaint stated “plausible claims” as required by the Supreme Court the 2007 antitrust decision in Bell Atlantic v. Twombly (and which Judge Stearns held applies to patent-based claims).

Enjoy, legal mavins …..

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When lawyers win a trial they like to publicize their efforts in a “war story” article. After all, one of the best parts of winning is the bragging rights.

These stories often are so self-serving they aren’t worth reading, but I have to recommend the article recently published on the ABA’s “Antitrust Source” website: Defending “The Last Man Standing”: Trench Lessons from the 2008 Criminal Antitrust Trial, United States v. Swanson. The defense lawyers in this case describe in detail how they took on a criminal price fixing conspiracy case brought by the government, and obtained a hung jury after an lengthy trial. The feds declined to retry the case, so this was a de facto win. The article describes all of the problems faced by the defense, which was representing an individual executive, Gary Swanson: witnesses who had pleaded guilty and were testifying for the government; an enormous volume of discovery materials, language issues (Korean), emails that were extremely damaging (at first sight), and more.

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