Antitrust Update Blog

Update on Patent “Aggregation” Suit Against Fortress

Intel and Apple’s challenge to Fortress’s allegedly anticompetitive practice of patent “aggregation,” which we discussed previously on this blog, suffered another setback earlier this month.  The Northern District of California dismissed the plaintiffs’ first amended complaint, although it granted them leave to amend again. 

Recall that last July, Judge Edward Chen dismissed (with leave to amend) Intel and Apple’s original complaint, which alleged that the investment firm Fortress, and entities it controls, “have violated antitrust laws by (1) aggregating [from third parties] a massive portfolio of ‘weak’ patents covering electronics products and (2) aggressively enforcing those patents—e.g., by demanding that licenses be obtained and/or by filing meritless patent infringement actions.”  Judge Chen identified multiple deficiencies in the complaint, including that Plaintiffs’ definition of the relevant market—the “Electronics Patents Market”—was “vague and overbroad.” 

Interestingly, though, Judge Chen rejected Fortress’s argument that the Noerr-Pennington doctrine barred Plaintiffs’ claims.  That doctrine generally exempts from antitrust liability activities that involve petitioning the government.  The Northern District of Illinois recently invoked Noerr-Pennington to dismiss another patent “aggregation” suit against AbbVie, as our colleagues at the Biologics Blog have explained. But, unlike AbbVie, Fortress purchased the patents at issue from third parties, and Judge Chen stated that such activity is not petitioning implicating Noerr-Pennington.  Further, the court noted, while Fortress’s infringement suits might qualify as petitioning, Plaintiffs could seek “damages in the form of litigation costs” if the suits were linked to patent aggregation conduct that violates the antitrust laws. These statements, combined with Judge Chen’s granting Plaintiffs leave to amend, left the door open for Plaintiffs to reassert their theory.

Plaintiffs promptly filed an amended complaint.  This time, they identified thirteen distinct product markets rather than one overarching market.  But despite this added specificity, Plaintiffs fared no better before Judge Chen than they had before. 

Earlier this month, Judge Chen dismissed Plaintiffs’ claims once again.  As to four of the product markets, the court dismissed the claims with prejudice because Plaintiffs had not explained why there was a threat that Fortress would assert the relevant patents in those markets.  As to the other nine markets, the court dismissed the claims with leave to amend within 30 days.  The court reasoned that those alleged markets remained facially overbroad and that Plaintiffs had not plausibly alleged that Fortress had enough market power to cause anticompetitive effects.  Plaintiffs will likely amend their complaint again and try to cure these deficiencies.

The court did not discuss Noerr-Pennington in its dismissal order.  Should Plaintiffs’ second amended complaint survive the motion-to-dismiss stage, we will keep an eye on the progress of their patent “aggregation” theory of antitrust liability.