In DSM Desotech Inc. v. 3D Systems Corp., Northern District of Illinois Judge Sharon Johnson Coleman dismissed allegations that 3D Systems Corp. tried to monopolize the market for 3D printing. Desotech, a resin manufacturer, sued its rival 3D Systems, accusing it of trying to squeeze smaller competitors out of the highly concentrated resin market by discouraging owners of its popular printers from using resins sold by third-party vendors. Desotech’s suit originally accused 3D Systems of attempted monopolization, patent infringement and other wrongdoing in a wide-ranging, nine-count complaint. However, the court dismissed all but two claims from Desotech’s suit, holding that Desotech failed to show that 3D Systems illegally tied its 3D printers to the resin they used in the printers to construct three-dimensional objects with lasers. The court further held that there is no evidence that 3D Systems has sought to limit resin variety; instead, 3D Systems licensed resin for use in its machines if the resin manufacturer submitted the resin for qualification and licensing. Finally, according to the court, there is no evidence that 3D Systems is charging supracompetitive prices, so Desotech has failed to present sufficient evidence of anti-competitive conduct in the resin aftermarket. As part of the same ruling, the court also dismissed Desotech’s claims that 3D Systems violated Illinois state deceptive trade practices and tortiously interfered with Desotech’s prospective economic advantage.
Court Allows Defendants to Use Pass On Defense in LCD Price-Fixing MDL
February 24, 2013 – 4:42 pm
In In re: TFT-LCD Flat Panel Antitrust Litigation, Northern District of California Judge Susan Ilston, denied plaintiffs’ motion for partial summary judgment, ruling that Florida law allows the defendants to use the “pass-on” defense, in a multidistrict litigation over price-fixing on liquid crystal display panels. The suit, which was brought in October 2010, against AU Optronics Corp., Hitachi Displays Ltd., LG Electronics Inc. and others, stems from a 2006 investigation by U.S Department of Justice, European, Japanese and South Korean antitrust regulators that led to criminal penalties against LCD manufacturers. In the present suit, plaintiffs field a motion for partial summary judgment, arguing that the “pass-on” defense, in which a group claims the distributors passed on any price overcharges they faced to their customers and avoided suffering damages, is not available to defendants in this case. The court denied plaintiffs’ motion, holding that there is no clear Florida case law precluding the pass-on defense under the Florida Deceptive and Unfair Trade Practices Act, and the applicability of the consequential damages/lost profits cases, in other contexts, is unclear. The court further held that Florida courts have not addressed this issue or how ‘loss’ or ‘actual damages’ would be calculated in the context of price-fixing cases under the FDUTPA.
Foreign Drug Maker Lacks Antitrust Standing If It Does Not Compete in the U.S.
February 23, 2013 – 5:51 pm
In Ethypharm SA France v. Abbott Laboratories, the Third Circuit held that because Ethypharm chose to license its anti-cholesterol drug Antara for U.S. distribution, rather than entering the US market itself, the plaintiff lacked standing to sue Abbott Laboratories for conspiring to keep Ethypharm’s drug off the market.
Ethypharm alleged that Abbott agreed with Reliant Pharmaceuticals, the U.S. distributor for Antara, that restrained competition by protecting the market position of Abbott’s anti-cholesterol drug TriCor. Because Ethypharm did not itself seek U.S. Food and Drug Administration approval for Antara, it cannot sell the drug in the U.S. and thus cannot compete with Abbott. Ethypharm’s licensee Reliant is the only company authorized to compete in the U.S. market with Antara.
“Ethypharm wants to have it both ways,” the panel opinion read. “It wants to pass on to a 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 Third Circuit concluded that such a firm lacked antitrust standing.
GSK Settles Generic Flonase Law Suits
February 23, 2013 – 5:49 pm
In IBEW-NECA Local 505 Health & Welfare Plan et al. v. SmithKline Beecham Corp., Eastern District of Pennsylvania Judge Anita B. Brody approved a settlement between GlaxoSmithKline PLK (GSK) and two groups of plaintiffs. The class action accused the defendant of restraining competition by preventing rivals from marketing generic versions of the allergy medication Flonase.
Direct and indirect Flonase purchasers, as well as generic-drug developer Roxane Laboratories alleged in a series of cases that GSK delayed the entry of generic Flonase and thus increased costs for consumers. The cost of the steroid nasal spray increased from $60 to $70 per bottle from August 2004 until March 2006, when generic versions finally hit the market. By 2009, the price had fallen to $20, a drop that plaintiffs alleged would have occurred much sooner had it not been for GSK’s improper conduct.
In October 2002, Roxane sought to introduce generic Flonase. Just days before the FDA was set to approve Roxane’s application, GSK began filing citizen petitions with the FDA seeking delay until the agency could establish guidelines to determine the bioequivalency of nasal spray products. Although the FDA rejected GSKs petitions and approved Roxane’s ANDA, the delay had caused prices to remain high longer than they otherwise would have.
In December 2012, Roxane settled its case with GSK, and another case in the Eastern District of Pennsylvania also just settled.
The terms of the settlement were not disclosed, and the drug company, without admitting wrong-doing, stated that it settled to avoid the expense and uncertainty of litigation.
Chiropractic Organization May Not Negotiate Prices for Its Members
February 20, 2013 – 8:28 am
In U.S. v. Oklahoma State Chiropractic Independent Physicians Association, filed in the Northern District of Oklahoma, the Antitrust Division and the defendant association have entered a consent decree preventing an Oklahoma chiropractic association from negotiating joint contracts with insurers that the DOJ believes thwarted competition and drove up prices for consumers. The decree, which must first be reviewed by the court, would resolve the Antitrust Division’s contention that the defendant negotiated anticompetitive contracts with at least seven insurers on behalf of the group’s members, comprising about 45 percent of Oklahoma chiropractors.
Under the settlement, the association is required to stop (1) communicating with chiropractors about pricing or contracting; (2) jointly determining prices for chiropractic services; and (3) negotiating insurance contracts on behalf of competing chiropractors.
“By jointly negotiating fees on behalf of competing chiropractors,” Assistant Attorney General Bill Baer” said, “the association and its executive director increased the prices that consumers paid for chiropractic services in Oklahoma.” He explained that the prohibitions in the consent decree will increase competition.
The defendant denied that its practices were anticompetitive, stating that it agreed to settle merely because it wanted to end the investigation.
The Antitrust Division will accept public comments on the decree for 60 days while seeking the required court approval.
DOJ & USPTO Seek to Prevent Ban on Patented Products
February 12, 2013 – 5:24 pm
The Department of Justice and the Patent and Trademark Office are pressing the International Trade Commission (ITC) not to ban imports that use standard-essential patents (SEP) when the manufacturers that are willing to license the necessary patents are accused to infringing them. “[I]n some circumstances,” the agencies argued, “the remedy of an injunction or exclusion order may be inconsistent with the public interest.” The Federal Trade Commission took a similar position in an amicus brief filed last summer.
SEP owners, the DOJ and USPTO argued, have agreed with standard-setting organizations that if their patents are chosen for a standard, then they will license those patents on fair, reasonable and nondiscriminatory (FRAND) terms, at least when the patent is essential to the standardized technology. These patent owners thus should not be allowed to use the threat of an import ban to extract unfairly high royalty rates. Such an order should be reserved for situations in which the user refuses to license the patent on reasonable terms or perhaps where damages would be unavailable to the patent holder.
These lobbying efforts are the result of a shift from federal court to the ITC by patent owners after a 2006 U.S. Supreme Court decision in the E-bay case that made winning injunctions in federal district court more difficult. The ITC, which has no power to award damages, generally issues orders excluding the importation of a produce that infringes a valid and enforceable U.S. patent.
Denial of State Action Exemption is Not an Immediately Appealable Collateral Order
February 11, 2013 – 10:33 am
In Auraria Student Housing v. Campus Village Apartments LLC, the U.S. Court of Appeals for the Tenth Circuit held that a private party may not immediately appeal a district court’s denial of an argument that the state-action doctrine exempts the defendant’s conduct from antitrust scrutiny.
Auraria Student Housing sued its competitor in the Denver housing market, Campus Village, alleging that the defendant’s agreement with the University of Colorado to provide freshman lodging monopolized Denver’s student housing market. The defendant responded that because state policy authorized its housing arrangement with the school, the agreement was exempt from antitrust scrutiny under the antitrust state action doctrine, also known as the Parker doctrine. The district court denied the defense on the ground that the student housing arrangement would not have been sufficiently foreseeable to those who adopted the relevant state policy to trigger the exemption.
Campus Village, with support from precedent in other circuits, sought to file an interlocutory appeal. But the Tenth Circuit held that it lacked jurisdiction to address the issue because it did not constitute a final decision. Although the collateral order doctrine empowers appellate courts to immediately review some issues, a denial of a state-action exemption did not fall within that category. “Extending the collateral order doctrine to private parties contesting an order denying Parker immunity,” the panel concluded, “does not serve a substantial public interest and would constitute precisely the type of expansion the doctrine discourages.”
FTC & Google Enter Consent Decree on Patent Issues
February 11, 2013 – 10:32 am
The FTC has expressed concerns that Google’s Motorola Mobility subsidiary had violated Section 5 of the FTC Act by attempting to enjoin the users of patents that are essential to produce standardized technology. In the decree, Google agreed to license those patents on fair, reasonable and nondiscriminatory (FRAND) terms and refrain from seeking injunctive relief in either the federal courts or before International Trade Commission if the licensee is willing to accept a license. If the potential licensee states in writing that it will not on any terms accept a license for Google’s standard-essential patents or refuses to enter a license on terms imposed by a court, then Google would be free to seek injunctive relief.
Critics contended that the decree will do little to curb Google’s use of the threat of injunctive relief because potential licensees and Google have dramatically different views of what a reasonable royalty should be. Google is likely to characterize these companies as “unwilling,” freeing it to seek to enjoin their use of the standardized technology. The decree does generally require Google to accept a court’s decision, when the parties could not agree on a fair royalty. But an exception allows Google to seek an injunction if the potential licensee had sought to enjoin Google’s use of a standard-essential patented technology.
FTC & Google Agree to Commitment Letter on Allegations that Google Used Its Search Engine Anticompetitively
February 8, 2013 – 9:20 am
The Federal Trade Commission resolved its long-running investigation of Google by entering a commitment letter with the internet search giant. At the behest of Google’s competitors, the FTC investigated whether the company unfairly promoted its own specialized search offerings over those of other companies. The Commission focused on whether Google had created universal results pages to replace mere lists of search results in order to restrain competitors rather than to improve the quality of its offerings. In the end, the Commission concluded that the latter was true. “The totality of the evidence indicates that, in the main, Google adopted the design changes that the commission investigated to improve the quality of its search results, and that any negative impact on actual or potential competitors was incidental to that purpose.” Other search engines, the FTC recognized, had made many of the same types of changes to their search pages as Google had. That parallel conduct supported Google’s position that the innovations improved quality and were not motivated by anti-competitive animus. The matter thus fell well within the long-standing reluctance of antitrust investigators to question a firm’s product design choices.
The FTC unanimously agreed not to proceed with a case involving Google’s innovation in search page design, but other issuers were more controversial. Some commissioners were concerned about a practice known as scraping, Google’s use of content from other websites linked to a threat to block that website from Google’s search results if it objected to Google’s use of its content. Chairman Leibowitz described scraping as “clearly problematic and potentially harmful to competition because it undermines incentives to innovate,” adding “[w]hy would you create a new site for restaurant reviews if someone else can take them?”
In the commitment letter, Google agreed that websites could keep their content out of Google’s vertical search offerings without being removed from Google’s general web search results.
The Commission also investigated whether Google restrained trade by making it difficult for advertisers to deal with both Google and rival search engines. Google agreed not to restrict the way businesses use the AdWords search advertising platform in ways that made it harder for advertisers to move their ads to other search engines when advertising on different sites.
Three of the Commission’s five members criticized the decision to use a commitment letter rather than a formal consent decree. Commissioner Rosch, though personally concluding that no relief was needed, criticized the use of a commitment letter to restrain conduct because “[w]ithout a consent decree, the practices could be revived at any time without penalty.”
An investigation of these same practices by the European Commission is on-going, and experts anticipate that the European enforcement agency will press for more substantial relief than the FTC did.
Court Rejects Double Recovery Claim In LCD Antitrust MDL
February 7, 2013 – 7:09 pm
In Rockwell Automation Inc v. AU Optronics Corporation et al., Northern District of California Judge Susan Illston rejected LG Display Co. Ltd.’s argument that Rockwell Automation Inc.’s state price-fixing claims would lead to duplicative recovery in the multidistrict litigation over liquid crystal display panels.
LG brought counterclaims and affirmative defenses against Rockwell’s Wisconsin state law claims arguing that the Wisconsin statute barred double recovery since LG had already paid to settle and continued to face claims from buyers both “above and below Rockwell on the distribution chain.” Judge Illston rejected LG’s argument and held that based on her earlier decisions in this MDL, duplicative recovery is often a “necessary consequence” from state indirect purchaser damages claims in cases alleging a nationwide price-fixing plot when federal claims from direct buyers are also involved.