In In re: MDL 2048 Cox Enterprises Inc. Set-Top Cable Television Box Antitrust Litigation, Western District of Oklahoma Judge Robin J. Cauthron denied a motion to dismiss a proposed class action by Oklahoma City customers against Cox Communications Inc. In this suit, originally filed as part of a nationwide multidistrict class action litigation, Cox customers claim that Cox violated the Sherman Act by forcing premium cable subscribers to rent a set-top box in order to access the full range of services to which they subscribe. Cox moved to dismiss the suit, arguing that the plaintiffs’ definition of the Oklahoma City market where the company provides premium cable service is inadequate because it ignores competitive forces at play in the defined region. In denying Cox’s motion to dismiss the court held that the issue of whether Cox has sufficient market power is an issue for resolution at summary judgment or on the merits and plaintiffs have met the burden necessary at this stage to pursue their claims.
DOJ Concerned About The Exploitation of Standard-essential Technology Patents Through Unfair Licensing Strategies
January 24, 2013 – 10:36 am
Fiona M. Scott-Morton, the Antitrust Division’s Deputy Assistant Attorney General for Economic Analysis claimed in a recent speech entitled “The Role of Standards in the Current Patent Wars” that companies controlling patents that are essential to an established technological standard can often charge anticompetitively high licensing rates despite their commitments to follow fair, reasonable and nondiscriminatory (FRAND) licensing practices.
She explained that the FRAND commitments are an important component in the Division’s willingness to allow competitors to agree on industry standards. “If the [FRAND] commitments are so vague and ill-defined as to have little meaning,” she warned, “then consumers may not realize all the benefits of the standard, which may be efficient and create new products and services due to the patent-holders’ exercise of market power, which may result in higher prices, less product choice and less investment in the overall network.”
The problem lies not in the idea of standards, but in the ability of individual patent holders to extract more than the value of the IP after “the licensee has already invested in a product and faces costs to designing around the patent.” Scott-Morton explained that the DOJ urges standard-setting organizations to secure comprehensive and binding FRAND commitments for patents before incorporating them into a standard to blunt technology owner efforts to exploit these patents. “It is in everyone’s interest,” she said, “for the scope of disclosure to be broad before a standard is set in order to maximize opportunities to avoid hold-up after the standard is set.”
Class Action Challenging Baseball and Hockey Television Deals to Move Forward
January 24, 2013 – 10:35 am
In Laumann et al. v. National Hockey League et al Southern District of New York Judge Shira A. Scheindlin allowed class actions to move forward against the National Hockey League, Major League Baseball, and television providers Comcast and DirecTV relating to their control of sports broadcasts. The class members are purchasers of baseball and hockey sports programing who allege that the sports leagues and the TV providers monopolized the broadcast of games on television and over the Internet, anticompetitively blacking out some telecasts and charging supra-competitive prices.
Judge Scheindlin rejected the defendants’ argument that the distribution of live telecasts should be immune from antitrust scrutiny because it is a core function of the sports league’s joint venture operations. The court explained that a long line of precedent held to the contrary “that limiting the telecasting of professional sports games [is] subject to antitrust scrutiny.”
China Sanctions LCD Makers For LCD Price-Fixing
January 23, 2013 – 12:05 pm
China announced that it was sanctioning LG Corp., Samsung Electronics Co. Ltd., and four Taiwanese companies $56 million for fixing liquid crystal display panel prices. This sanction marks China’s entry into the global cartel enforcement scene, and shows that despite lingering questions about just how leniency process works in China, multinational companies can no longer ignore China when it comes to seeking leniency for price-fixing schemes.
In 2008,China’s Anti-Monopoly Law (“AML”) created China’s merger control regime at the Ministry of Commerce and gave China’s National Development and Reform Commission and another agency authority to pursue other kinds of anti-competitive conduct. The country has also had another measure since 1997 called the Price Law, which covers price-fixing and a variety of other behavior, but the government has only rarely applied the measure to major foreign companies. It was that law that the NDRC used to fine the LCD makers for fixing LCD panel prices from 2001 to 2006.
The Price Law doesn’t specifically lay out the possibility that companies can win leniency by coming forward with information about a price-fixing plot, though it does give the government some leeway in assessing fines that range from one to five times the illegal gains. The AML explicitly allows full or partial immunity for those who report illegal conduct to the government. Although China does seem to have some leniency measures in place, it still lacks the kind of clear-cut explanations of the leniency process offered by regulators in the U.S. and EU, and regulators have considerable discretion as to whether to grant leniency to those who seek it.
Court Approves the Settlement of “Post-It” Trademark Infringement Suit
January 23, 2013 – 11:28 am
In 3M v. Unemployed Philosophers Inc., Minnesota District Court entered a consent judgment that ends 3M Co.’s trademark and unfair competition suit against Unemployed Philosophers Inc. over Unemployed Philosophers’ use of 3M’s “Post-It,” “Post,” and “Its” trademarks in naming several of Unemployed Philosophers’ products. Under the terms of the consent judgment, which is part of a settlement in the case, Unemployed Philosophers’ use of 3M’s marks is deemed as likely to cause confusion and mistake; to deceive current and potential customers about the origin or approval of Unemployed Philosophers’ products by 3M; and to cause dilution by the blurring and tarnishing of 3M’s famous “Post-It” mark. The judgment also bars Unemployed Philosophers from future use of any mark or product name that is confusingly similar to or likely to cause dilution of 3M’s mark. The judgment further directs Unemployed Philosophers to cease selling and making sticky note products or related goods that use or feature the terms “Post-,” “-It” or “-Its,” whether alone or in combination with other terms or characters. Unemployed Philosophers has until Aug. 1 to sell out of its existing stock of products that feature the marks at issue, after which time the company may only hang onto a small number of the products for historical or archival purposes, according to the deal.
Seventh Circuit Dismisses Sulfuric Acid Antitrust Class Action
January 23, 2013 – 11:03 am
In In re: Sulfuric Acid Antitrust Litigation, the U.S. Court of Appeals for the Seventh Circuit dismissed an antitrust class action filed by sulfuric acid purchasers, accusing U.S. and Canadian sulfuric acid mining companies of price-fixing by entering into deals where the U.S. companies agreed to distribute Canadian sulfuric acid and shut down or curtail their own production of sulfuric acid. In their suit, plaintiffs claimed that these shut down agreements represented price-fixing and a per se violation of antitrust laws. The Seventh Circuit disagreed, and held that the rule-of-reason test that requires plaintiffs to demonstrate that an agreement’s potential harms to competition outweigh any competitive benefits was the appropriate standard. The court further held that the shut down agreements could have plausibly been viewed as a way for the Canadian companies to minimize the risk of entering the U.S. market. According to the court, without the shut down agreements, Canadian companies might not have entered into the market, so the plaintiffs’ claim that the price would have been lower without the agreements is doubtful.
FCC Rule Requiring Cell Phone Providers to Sell Internet Access to Competitors on Commercially Reasonable Terms Upheld
January 23, 2013 – 9:02 am
In Cellco Partnership vs. Federal Communications Commission et al., a panel of the District of Columbia Circuit rejected Verizon’s challenge to an FCC rule that required mobile internet providers to negotiate roaming agreements with their rivals. The rule was intended to enable cell phone users to access the internet in areas not served by their own carriers.
Verizon argued that the Commission had exceeded its regulatory authority in imposing this rule by essentially treating mobile providers as common carriers required to provide service to all. A unanimous three-judge appeals panel disagreed, upholding the FCC rule that forced mobile Web providers, such as Verizon, to offer data-roaming deals to competitors on “commercially reasonable” terms. The court explained that the 1934 Communications Act “plainly empowers the commission to promulgate the data-roaming rule.” The court explained that although the rule “bears some marks of common carriage,” it “does not on its face impose a common carriage obligation.” If the rule is applied in a way that does impose common carrier obligations on the plaintiffs, the panel commented, Verizon could return to court.
Respirator Manufacturer Violates Antitrust Laws by Enforcing Patents Obtained by Fraud
January 23, 2013 – 9:01 am
In Transweb LLC v. 3M Innovative Properties Co. et al., a District of New Jersey jury found that defendant 3M Innovative Properties attempted to enforce two patents that it had obtained by fraud and violated the antitrust laws. The plaintiff, a supplier of filtration materials and 3Ms only competitor for certain government certified respirators, had alleged that this conduct restrained competition in the filtration technology market.
The jury found that two 3M-held patents were invalid and thus the plaintiff could not have infringed them. By seeking to enforce patents obtained by fraud, 3M attempted to monopolize the market violating the antitrust laws. The jury awarded lost profits damages just over $34,000 plus attorneys’ fees.
Follow-on Class Action Against Michigan Blue Cross/Shield to Move Forward
January 23, 2013 – 9:00 am
In The Shane Group Inc. et al. v. Blue Cross Blue Shield of Michigan, Eastern District of Michigan Judge Denise Page Hood has ruled that a proposed class action may move forward. The putative class claims the health insurance company included anticompetitive most-favored-nation (MFN) provisions in its hospital contracts that required the hospitals to charge rival insurers at least as much as (or more than) Blue Cross in exchange for the insurer’s agreement to pay higher rates. The case rests on allegations similar to those in several other cases including a Department of Justice, Antitrust Division, prosecution. All of the cases rest on the theme that Blue Cross failed to use its dominant position in the insurance market to negotiate lower prices and instead sought to insulate itself from competition while increasing health care costs.
The defendant insurer argued that the plaintiffs could not prove that they were injured by the allegedly anticopetitive MFN clauses. The court held that the defendant’s proposed pleading standard was stricter than that required by either the Supreme Court or circuit precedent. “[T]he detailed and specific facts Blue Cross claims must be alleged in a complaint,” the court explained, are “not required to plausibly allege injury.” The allegation that the plaintiffs purchased services from hospitals covered by the defendant’s MFN provisions were sufficient to allege an injury against the insurer.
Court Dismisses Petition Over 2010 NFL Secret Salary Caps
January 22, 2013 – 3:12 pm
In Reggie White et al. v. National Football League, Minnesota District Court Judge David S. Doty, dismissed a petition filed by the NFL Players’ Association, claiming that the NFL and team owners conspired to set secret salary caps during the uncapped 2010 season. The NFLPA filed its petition in May contending that the owners violated a 1993 settlement, which governed labor negotiations with team owners, by agreeing amongst themselves to limit players’ salaries to $123 million per club in 2010. According to the 1993 settlement, the owners agreed to forfeit the salary cap if they opted out of its collective bargaining agreement (“CBA”), as an incentive to reach a new deal. This is what happened during the 2010 NFL season. However, before the 2011 season, the parties reached a new 10-year CBA. In dismissing NFLPA’s current petition, the court held that according to the terms of the new 2011 CBA, the court is divested of jurisdiction in this matter, and NFLPA is required to dismiss with prejudice all claims stemming from the 1993 labor settlement.