By David Golden

The ongoing battle over what constitutes a “reasonable” licensing royalty for standard-essential patents has now been joined by the U.S. Court of Appeals for the Federal Circuit with its decision in Ericsson, Inc. v. D-Link Systems, Inc., concerning the alleged infringement of patents essential to the ubiquitous Wi-Fi networking technology.

This definitional battle is also being fought in standard-setting organizations, such as the Institute of Electrical and Electronics Engineers (“IEEE”), the promulgator of Wi-Fi standards, which recently adopted a resolution that defines the calculation of a “Reasonable Rate” for standard-essential patents.

Many modern electronic devices, such as smartphones and tablets, incorporate voluntary industry-wide communication and networking standards, such as Wi-Fi, cellular data, and Bluetooth technologies. Generally, the members of organizations that create and maintain such standards compete in the markets for these products, and frequently own patents that are essential to the implementation of the standards. Thus, the member companies’ collective selection of technologies to include in the organization’s standard can prove advantageous in both product and technology licensing markets. It is not surprising then that the Supreme Court has described private industry standard-setting organizations as “rife with opportunities for anticompetitive activity.”

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By Rosa M. Morales

Signs continue to accumulate that antitrust regulators are on the lookout for innovative anticompetitive tactics by pharmaceutical companies seeking to delay entry of lower-priced generic drugs.

This growing interest by federal and state regulators in policing the anticompetitive suppression of generic drugs was the subject of a recent post on this blog by Ankur Kapoor.  Among the antitrust enforcement actions analyzed was a reverse-payment case filed earlier this month by the New York State Attorney General against Actavis and its recently acquired, wholly-owned subsidiary Forest Laboratories.

In recent comments, Eric Stock, chief of the Antitrust Bureau of the New York State Attorney General’s Office shed light on what antitrust enforcers may be looking at when he discussed “forced switching” – one of the anticompetitive tactics used by the pharmaceutical companies that is attracting the interest of antitrust enforcers.  “Forced switching” occurs when pharmaceutical companies “force” the use of new branded drugs by either pulling older branded versions from the market or reducing their supply.

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By David Golden

Plaintiffs in the long-running In re Intel Corporation Microprocessor Antitrust Litigation class action have suffered a major setback with last week’s denial of class certification by the U.S. District Court for the District of Delaware.

The lawsuit, filed in 2005, alleges that Intel illegally excluded its major rival, Advanced Micro Devices (commonly referred to as “AMD”), from the U.S. market for x86 computer microprocessors[1] by paying computer manufacturers “loyalty payments” and “rebates” to use only Intel chips. The proposed class is compromised of indirect purchasers that bought computers that contained Intel microprocessors. The plaintiffs contend Intel’s payments to computer manufacturers reduced competition for chips, and ultimately raised the prices consumers paid for computers.

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By Ankur Kapoor and Rosa M. Morales

Nearly a year after the Supreme Court held in FTC v. Actavis that reverse-payment settlement agreements between branded and generic pharmaceutical companies are subject to antitrust scrutiny under the rule of reason, federal district courts are struggling with the thorny issue of whether plaintiffs need to show them the money.

More specifically, district courts remain confounded by what constitutes a “payment” for purposes of antitrust challenges to settlements of Hatch-Waxman pharmaceutical patent infringement litigation, and whether a monetary transfer from the patent holder to the alleged infringer, i.e., a “reverse payment,” is necessary to state an antitrust claim attacking the competitive effects of the settlement.  Before embarking on a rule-of-reason analysis in such cases, some district court judges seem reluctant or unwilling to say “go” before they see the green.

As discussed in a previous post – “Are Bright-Line Rules The Right Prescription For Reverse-Payment Cases?” – in January the U.S. District Court for the District of New Jersey dismissed the antitrust challenge to a reverse-payment settlement in In re Lamictal Direct Purchaser Antitrust Litigation because there was no cash payment from the patent holder to the would-be generic competitor, and narrowly interpreted Actavis as imposing a “bright-line” requirement of a cash payment.  The court therefore held that it was unnecessary to engage in the requisite full-blown rule-of-reason analysis to determine the settlement’s anticompetitive effects (if any).

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By Jeffrey I. Shinder and Ankur Kapoor

As antitrust law evolves to address new problems posed by ever-shifting dynamics in industries both old and new, two schools of thought are vying for control of challenges to reverse-payment settlement agreements that resolve patent infringement litigation brought by pharmaceutical manufacturers against potential generic competition.

One school favors the establishment of bright-line rules to give firms and courts predictability in the law.  The Supreme Court’s still controversial Illinois Brick decision, which generally limits damages recoverable under federal antitrust law to direct purchasers, is one example of this approach.  (Expressing the contrary view on whether indirect purchasers should have standing to recover their damages are the many state antitrust laws allowing indirect-purchaser recovery and the Supreme Court of Canada’s rejection of the Illinois Brick doctrine.)

Another school of thought emphasizes that, in antitrust law, substance and economic reality should trump form because rigid, bright-line rules inevitably encounter cases in which application of a rigid rule leads to undesirable results, or, worse, give firms with market power a roadmap on how to exclude competition without fear of antitrust scrutiny.  This school of thought is grounded in the recognition that, because restraints often arise in factual and legal contexts as complex as the industries in which they arise, they cannot properly be evaluated without assessing and balancing their anticompetitive and procompetitive effects.   While this inquiry can sometimes be taxing, it is often necessary to reach a result that promotes unrestrained competition and markets – which generally are valued by all schools of thought.  The Supreme Court reaffirmed this principle in 2010 with its decision in American Needle v. NFL, which held that the National Football League could be considered a “combination” or “conspiracy” subject to Section 1 of the Sherman Act, depending on the specific factual and economic circumstances of the NFL’s member football teams’ conduct at issue.

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