The U.S. Department of Justice is seeking to restore competition in the voting machine market by requiring Election Systems & Software, the country’s largest seller of computerized voting machines, to undo much of its recent merger with Diebold.  DOJ will allow this merger of the nation’s two largest sellers of such machines to survive only if the combined company divests itself of the product lines it acquired.

Back in September, we wrote about a private antitrust suit filed challenging this merger.

In the merger, Election Systems & Software, the country’s largest seller of voting machines, bought the voting machine unit of the country’s number-two biggest seller, Diebold.  Diebold, of course, made some news back in 2003, when its CEO announced that he would “deliver” Ohio for George W. Bush in the 2004 election.  Not surprisingly, this comment made people take a close look at the electronic voting machine systems that have become standard fare since the epic election courtroom battles that took place during the 2000 presidential election and culminated in the Supreme Court’s Bush v. Gore decision. 

Last September, when privately held ESS took over Diebold’s voting equipment unit (called Premier), competitor Hart Intercivic Inc. cried foul, claiming that the merged company would control two thirds of the voting machine market in the country.

DOJ is stating that it will permit the merger to continue only if ESS sells “all of the intellectual property associated with all versions – past, present and in development – of the [Diebold] voting equipment systems to another company,” according to the DOJ’s press release.  “ESS also must divest all Premier tolling and fixed assets, as well as inventory of parts and components.”  But that does not mean that the merger was pointless.  Justice’s press release states that the conditions affect only ESS’s ability “to produce” voting systems.  According to The Wall Street Journal, ESS may still have the right to service the machines. click here for more »

Will a federal court of appeals send modern antitrust analysis diving into the deep end of a patent pool case to determine whether a jointly-developed standard should be considered patent misuse?

On March 3, the U.S. Court of Appeals for the Federal Circuit sat en banc to consider how to apply the patent misuse doctrine to patent pooling arrangements for standardized technologies, including the significance of evidence of anticompetitive effects such as the blocking the development of new technologies.

At issue in Princo v. U.S. International Trade Commission is whether it was patent misuse for a patent pool established by Philips, Sony and others to both include a potentially blocking patent that was not actually used in the standard and preclude that patent from being licensed outside the pool. 

Philips and Sony agreed to jointly develop a standard for recordable and rewritable compact discs (known as the “Orange Book”).  In developing the standard, they did not jointly develop any technology.  Rather, they used technologies each independently had developed.  In one instance, they chose one of two competing methods.  The Sony patent not chosen was, by some accounts, not commercially feasible.  However, an independent patent analyst believed one claim of the Sony patent could read more generally on the standard and, thus, block Orange Book adopters from practicing the standard.  Therefore, Philips determined to include the Sony patent in the pool, and subjected Sony to the pool’s requirement not to license the patent for use outside the Orange Book standard. click here for more »

The U.S. Department of Justice is pulling hard on the reins to slow down a proposed merger between Churchill Downs, the famous racetrack home to the Kentucky Derby, and Youbet.com, an online horseracing gambling website.

The DOJ has issued the companies a “second request” under the Hart-Scott-Rodino Act for additional information on the proposed merger. 

Second requests are rare, and dramatically increase the transaction costs associated with a merger.  Some merger agreements even contain provisions that terminate the merger in the event of a second request.

That doesn’t appear to be the case in the Churchill Downs-Youbet.com merger, however.  Churchill Downs’s CEO recently stated he expects the deal to finish the second quarter of 2010.  Youbet.com has scheduled a special meeting of stockholders on April 6 to vote on the planned merger.

Procrastination may be the thief not only of all time, but also of $3.5 billion from the pockets of health care consumers, according to the FTC.

Citing a cost of billions of dollars to consumers, the FTC is challenging “pay-for-delay” reverse settlements in which pharmaceutical companies pay generic drug companies to not make a generic version of a drug.

There are two fronts in this effort.  The FTC is attempting to convince Congress to ban the practice outright, and in the meantime it is litigating two lawsuits opposing the practice on antitrust grounds. 

One lawsuit was filed in February 2008 in the Eastern District of Pennsylvania against Cephalon, Inc., which paid four generic drug companies to stay out of the market of the drug Provigil.  Another case was filed in January 2009 against AndroGel in the U.S. District Court for the Northern District of Georgia.  The AndroGel case has the added element of joint promotional efforts between the defendants and backup supply deals, in addition to a pay-for-delay reverse settlement.

The FTC has already been unsuccessful once in a case involving reverse payments against Schering-Plough Corporation in the Eleventh Circuit, but it hopes that additional factors in the two new cases will bring success.  The Cephalon case has an added claim of attempted monopolization of the market, while the AndroGel case involves co-promotion agreements between competitors.  Neither element was present in the Schering-Plough case. click here for more »

The U.S. Department of Transportation (“DOT”) has issued a show-cause order that tentatively approves the antitrust immunity application for the joint venture between members of the oneworld airline alliance, including American Airlines, British Airways, and Iberia.  The tentative approval applies to transatlantic traffic, which American Airlines and British Airways dominate for routes between the U.S. and the U.K.

For approval, the DOT required the oneworld alliance to give up four daily landing slots at Heathrow Airport near London.  This requirement represents a much less demanding concession from American Airlines and British Airways than requested for previous immunity applications.  For example, in 2002, the DOT requested that the alliance give up 14 daily landing slots and remove certain routes from the ambit of the antitrust immunity application, i.e., “carve outs,” so that antitrust liability would still apply to those city pairs.

American Airlines and Japan Airlines, which is also a oneworld member, have also applied for antitrust immunity for transpacific routes.  That application is still pending before the DOT.