Industry: Electronics

There have been several developments since we last wrote about Intel and Apple’s suit against Fortress and several of its so-called “patent assertion entities” (collectively, “Fortress”) based on the allegedly anticompetitive practice of patent “aggregation.”  Recall that the plaintiffs’ first amended complaint was dismissed without prejudice in January 2021 because Judge Chen of the U.S. District Court for the Northern District of California found that certain of the alleged product markets were too broad and that the complaint lacked adequate allegations of Fortress’s market power in any of those markets.  The court held that plaintiffs did not sufficiently allege that Fortress was charging supracompetitive prices to license its patents, or that there were no substitute patents that could be licensed instead of Fortress’s patents.

For years, antitrust commentators have warned of threats to innovation and competition posed by “thickets” of patents—the “dense web[s] of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology.”  See Carl Shapiro, “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting” (March 2001), available at https://www.nber.org/chapters/c10778.pdf. At least one judge on the Federal Circuit has also noted concern about this issue.  E.g. Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307, 1328-29 (Fed. Cir. 2016) (Mayer, J., concurring) (calling for elimination of “generically-implemented software patents” to “clear the patent thicket”).

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.

In another development in the ongoing cathode ray tube (CRT) multidistrict litigation, Judge Tigar of the Northern District of California ruled that Costco could not recover any damages it sustained as an indirect purchaser of price-fixed CRTs.  Costco attempted to bring state law antitrust claims against the conspirators under California law, which allows indirect purchasers to recover damages.  However, applying Washington choice-of-law principles (where Costco originally filed suit before the case was transferred to the MDL court), the court held that Washington law, which does not allow for recovery by indirect purchasers, governed Costco’s claims. 

The Department of Justice ("DOJ") announced this week that Hitachi Chemical Co. will plead guilty to a criminal charge for conspiring with competitors to fix the prices of electrolytic capacitors sold in the United States and elsewhere. The Tokyo-based company will pay an undisclosed fine and has agreed to cooperate with the DOJ's investigation.

Earlier this month, defendants in the In re Cathode Ray Tube Antitrust Litigation moved to challenge the standing of major retailers to pursue damages claims under the Supreme Court’s 1977 Illinois Brick decision.

On December 14, 2015 Judge Yvonne Gonzalez Rogers heard oral argument on a motion to dismiss filed by Apple in an antitrust action brought against the company in connection with its 2007 deal to sell iPhones exclusively to AT&T Mobility.  The next day, Judge Rogers denied Apple’s motion.  The lawsuit, one of several arising from the Apple-AT&T agreement, raises interesting questions about how to define a relevant product market using an “aftermarket” theory. 

We have previously posted about United States v. Apple, Inc., a blockbuster trial that ended with Judge Denise Cote of the Southern District of New York concluding that Apple had conspired with five publishing companies to raise the price of e-books.  At oral argument before the Second Circuit, the panel hearing Apple’s appeal seemed particularly interested in whether the district court had erred in applying the relatively lenient per se standard rather than the rule of reason, under which the plaintiffs would have had to prove that the anti-competitive injury caused by Apple outweighed any pro-competitive benefits of its conduct.  

Today the United States Supreme Court denied certiorari in two cases, Motorola Mobility LLC v. AU Optronics et al. and Hsiung and AU Optronics Corp. America Inc. v. United States, declining to resolve a closely watched circuit split on the applicability of the Foreign Trade Antitrust Improvements Act (“FTAIA”) in regulating foreign conduct.  

On December 1, 2014, we wrote about the Seventh Circuit’s decision in Motorola Mobility LLC v. AU Optronics Corp., which affirmed dismissal of the vast majority of Motorola’s claims regarding LCD panels.

On the day before Thanksgiving—less than two weeks after oral argument—the Seventh Circuit issued its ruling on Motorola’s interlocutory appeal in Motorola Mobility LLC v. AU Optronics Corp., affirming dismissal of the vast majority of Motorola’s claims regarding LCD panels. 

Today the Seventh Circuit Court of Appeals hears oral argument from the parties and amicus curiae the United States concerning the reach of the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a, in Motorola Mobility LLC v. AU Optronics.  Last March, as we’ve written previously, the court ruled against Motorola in an interlocutory appeal concerning the FTAIA’s application to offshore components manufacturers.  The court subsequently withdrew its opinion, denied a petition for en banc review, and ordered oral argument.

In July, we wrote about two putative class action lawsuits alleging that Panasonic, Samsung, and other electronics manufacturers had formed a cartel to boost prices of certain electronic capacitors. Since then, the cases have been consolidated, interim lead co-counsel have been appointed, the Antitrust Division has confirmed its own investigation, and the court has set a preliminary case schedule.

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.

With DOJ’s Antitrust Division and the FTC ramping up antitrust enforcement, it is critical for companies to take a hard look at their compliance programs and update them on a regular basis to avoid potential antitrust violations and discover antitrust malfeasance early on so a company can have the option of self-reporting and applying for leniency under DOJ’s leniency program. The United States Sentencing Guidelines provide guidance to companies in the organization of their corporate antitrust compliance programs; Guidelines considerations include establishing standards and procedures to prevent and detect criminal conduct and monitoring, auditing and periodically evaluating compliance with the program, including providing anonymous or confidential means for reporting potential breaches.  In addition to these threshold requirements, it is important that any antitrust compliance program provide guidance in a number of areas that present potential pitfalls.  Today, we discuss guidance on communications with competitors and dealing with customers and suppliers. 

In summer 2013, Best Buy faced off against Toshiba and HannStar in a price-fixing trial that was part of the multi-district Flat-Panel litigation, TFT-LCD (Flat-Panel) Antitrust Litigation, 07 MD. 01827 (N.D. Cal.).  Although there has been a lot of press about Best Buy’s inability to collect its $22 million verdict due to set offs, and the parties’ protracted battle over attorneys’ fees, there has been little to no coverage of the court’s treatment of the passing on of the overcharge under applicable Minnesota law.

On August 1, 2014, Judge Cote preliminarily approved a $450 million settlement in the Apple e-books litigation.  As many of you will recall, a June 2013 trial resulted in a finding that the various plaintiffs (including numerous states, the United States, and a class action) succeeded in proving that Apple had conspired with five book publishers to raise e-book prices.

Amazon and the publisher Hachette are engaged in a fierce dispute over the pricing of e-books sold by Amazon.  At issue is how the profits from the sale of e-books should be divided between Amazon and the publisher and who should bear the impact of Amazon’s discounting of e-books.