Antitrust Attorney Blog

A monopolization counterclaim alleging predatory conduct in connection with an allegedly improper and invalid trademark was dismissed for lack of antitrust injury. Dish Network, LLC v. Fun Dish Inc., 1:08 CV 1540 (N.D. Ohio, Dec. 16, 2010).

The defendant alleged that the plaintiff had engaged in predatory acts to monopolize the market of direct broadcast satellite of multichannel video programming distribution.

The District Court granted a motion to dismiss on the section 2 monopolization counterclaim for failure to allege an antitrust injury. The court explained that in order to have antitrust standing, a private antitrust plaintiff must allege injury in fact and antitrust injury. Injury in fact requires that there be actual injury, or threatened injury, caused by the defendant's allegedly unlawful conduct.

Antitrust injury, the court stated, is injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendant's acts unlawful. That is, the plaintiff must show that the alleged antitrust violation tends to reduce competition, and that the plaintiff's injury would result from a decrease in that competition rather than from some other consequence of the defendant's actions.

In this case, the court found that the counterclaim failed to allege either injury in fact or antitrust injury. The counterclaim alleged that the plaintiff sought to impair competition, but did not allege an actual injury to competition. Further, the allegations of injury to it were purely conclusory, of the type that no longer satisfy pleading standards as articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

A two-count antitrust counterclaim arising from alleged patent misuse and fraud on the Patent Office survives a motion to dismiss, but prompts a threat by the court to impose sanctions if one of the allegations ultimately lacks merit. Hurricane Shooters, LLC v. EMI Yoshi, Inc., 2010 WL 4983673 (M.D. Fla. Dec. 2, 2010).

Plaintiff is the owner of two patents for plural chamber drinking cups for serving mixed drinks and shooters. It alleged infringement. The defendant counterclaimed that the plaintiff violated section 1 by acquiring multiple patents in order to obtain licenses from competitors at exorbitant rates, and section 2 by procuring a patent by fraud on the Patent Office. The plaintiff moved to dismiss the two antitrust counterclaims.

The court denied the motion. It did not decide whether the section1 claim was a per se or rule of reason claim. "Regardless of terminology," it ruled, "the ultimate purpose of the antitrust inquiry is to form a judgment with respect to the competitive significance of the restraint at issue." The court acknowledged that it is not a violation of the antitrust laws to acquire patents from others, and a patent owner may exclude others. However, a patent owner may not exploit it in a way that injures competition, such as, by example, fixing the prices at which licensees will sell the patented article.

The court, noting its obligation to assume the truth of the allegations, denied the motion on the grounds that the counterclaim alleges that the plaintiff and the company from which it acquired the patent conspired to restrain competition. It then warned that, because the mere acquisition of a patent is not a violation, "if it is determined, at a later stage, that these allegations were lacking in merit, the Court will not hesitate to award sanctions."

The court then addressed the fraud on the Patent Office monopolization claim. The counterclaim alleged that the patents were acquired through "inequitable" conduct, and that one of the patents resulted from knowing and willful misrepresentations to the Patent Office that subject matter added to the claims was not new matter. That was, the court ruled, sufficient to state a claim for monopolization.

The Second Circuit affirmed a summary judgment dismissing a section 2 monopolization class action in a market for extra-sweet pineapples. American Banana Co., Inc. v. J. Bonafede Co., Inc., 09-4561-CV, 2010 WL 4342217 (2d Cir. Nov. 3, 2010). The complaint was filed on behalf of two classes -- direct purchasers of extra-sweet pineapples (retail stores such as Whole Foods and IGA) seeking both injunctive relief and treble damages, and indirect purchasers (consumers who purchased from the direct purchasers) seeking only injunctive relief.

The complaint alleged that a research cooperative of competing pineapple growers that included Del Monte, Dole and Maui patented an extra-sweet pineapple designated as the 73-114. Del Monte began selling the 73-114 in North America in 1996, identified as the MD-2. In 2000, Dole began selling its version of the 73-114, calling it the MG-3. Maui sold a related pineapple (73-50) which it called CO-2. The CO-2 pineapple had been patented by Del Monte.

Del Monte sent so-called "threat letters" to various Costa Rican laboratories developing MD-2 seeds, alleging that the MD-2 plant material had been stolen, and that Del Monte held a patent on the MD-2 variety. Del Monte also sued Dole, challenging its sales of the MG-3. That case was settled, and Dole agreed not to market its MG-3 pinapple. Del Monte also asserted that Maui's sales of the CO-2 pineapple infringed its patent, but Del Monte dismissed that claim when it became clear that Maui's sales of the CO-2 preceded the patent by more than one year.

The class action complaint alleged that Del Monte monopolized the market for extra-sweet MD-2 pineapples by filing a patent application for a product it knew to be unpatentable, by sending misleading letters threatening litigation against competitors who sold the patented pineapple, and by pursuing sham litigation to enforce the allegedly fraudulent patent against competitors. A class of direct purchasers was certified. The class of consumers was not certified.

The district court struck plaintiffs' expert, who had sought to define the product market as Del Monte's MD-2 pineapple. The expert did not adequately consider competition from the other sweet pineapples, the MG-1 and the CO-2, and thus defined the market too narrowly. However, even assuming a properly-defined market, the case failed. Noerr-Pennington immunizes suits unless they are objectively baseless, and pre-suit efforts incident to litigation, such as threat letters, are also immune unless they are sham. Del Monte's claims were not objectively baseless, even though Del Monte later dismissed the patent claim against Maui relating to the CO-2 pineapple. Moreover, the court found there was no plausible evidence that the threat letters and litigation had any adverse competitive impact. Finally, Del Monte had a legitimate business purpose for its conduct, and so it could not have been exclusionary.

On appeal, the court's decision reflected how judicial attitudes towards antitrust have changed. Long gone are the days where the Supreme Court would say that summary procedures should be used "sparingly" because motive and intent are important, and evidence is often in the hands of the defendants. Now, the Second Circuit says, "summary judgment is particulatrly favored [in antitrust cases] because of the concern that protracted litigation will chill pro-competitive market forces."

The appellate court addressed only the district court's conclusion that there was no competitive injury from the challenged conduct. The court concluded that there was no genuine dispute that the allegedly exclusionary conduct had in fact delayed any entry to the market, regardless of how defined. Competitors and potential competitors testified that they had not been dissuaded from competing by the litigation or threatening letters. Because the plaintiffs could not show any injury to competition, there was no need for the court to address the other issues.

Joint action involving sports leagues continue to raise antitrust issues. Antitrust attorneys at Stein, Mitchell & Muse represented the PGA Tour in an FTC investigation that was closed in 1995. Similar issues have now been addressed by the Third circuit in a recent decision involving tennis tournaments. The Third Circuit affirmed a jury verdict exonerating a new plan by the ATP tennis tour that favored some tournaments over others, and restrained the ability of the top players to choose which tournaments to participate in. The plan revised the schedule to make some tournaments more convenient and desirable to the top players, and also made participation in some tournaments mandatory for the best players. The plan also prohibited the top 50 players from participating in tournaments that compete against ATP tournaments. All of the restrictions were justified by the decline in top-player participation in ATP tournaments.

The plaintiff tennis tournaments could no longer compete for the top players, and became less successful.

On appeal from a jury verdict in favor of the ATP, the court ruled that in the absence of a timely objection, a market definition under § 1 is the same as a market under §2. It affirmed the jury verdict that the plaintiffs failed to prove a relevant product market. The court rejected a per se analysis to restraints on player mobility because horizontal restraints are necessary for the tennis tour, like other sports, to make the product available at all. It rejected a "quick look" analysis because in the context of a tennis tour, the net competitive impact of a restraint on the top players with plausible competitive justifications was not immediately apparent. The court did not find it necessary to decide whether the tennis tour was a single enterprise for § 1 purposes. Nor did the court decide whether the district court properly ruled that there could be no personal liability against the ATP directors unless they participated in inherently unlawful acts.

Deutscher Tennis Bund v. ATP Tour, Inc., No. 08-4123. (3d Cir. June 25, 2010).