Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Alleged patent troll’s boycott, monopsonization claims against Samsung dismissed, (Feb 24, 2016)

By Linda O’Brien, J.D., LL.M.

The federal district court in Oakland, California has dismissed boycott and monopsonization claims brought by an alleged “patent troll” against mobile device manufacturer Samsung Electronics Co. and its patent aggregator RPX Corp., on the ground that a jury had found that Samsung did not infringe the patent-at-issue and all of the antitrust claims were based on patent infringement (Cascades Computer Innovation LLC v. RPX Corporation, February 23, 2016, Rogers, Y.).

Cascades Computer Innovation LLC controls a portfolio of patents, one of which purportedly optimizes the operation of the Android operating system for smartphones and tablet computers—U.S. Patent No. 7,065,750 (the ’750 Patent). Cascade brought antitrust claims against Motorola Mobility and Samsung Electronics, which manufacture a high percentage of all Android-compatible devices sold in the United States.

In an amended complaint, Cascades brought four antitrust claims against Samsung and RPX, alleging: (1) a horizontal conspiracy to restrain trade in violation of Section 1 of the Sherman Act; (2) a vertical conspiracy to restrain trade in violation of Section 1; (3) a conspiracy to monopsonize in violation of Section 2; and (4) a separate Section 2 monopsonization claim against RPX.

Cascades claimed that the manufacturers agreed to negotiate licenses for Cascades-controlled patents only through RPX Corp., a patent aggregator, which was formed to protect member manufacturers from allegedly baseless patent infringement claims brought by “patent-assertion entities” (PAEs), commonly called patent trolls.

The antitrust action was stayed in March 2014, in light of patent litigation in the federal district court in Chicago, testing the validity and infringement of the ’750 patent. After a jury found that Samsung did not infringe the patent at issue, Samsung and RPX moved for judgment on the pleadings, arguing that all of the boycott and monopsonization claims were based on patent infringement and should be dismissed.

Collateral estoppel. The court determined that the doctrine of collateral estoppel established non-infringement of each of the manufacturing defendants. Although conceding that collateral estoppel applied to Samsung’s non-infringement of the ’750 patent, Cascades contended that collateral estoppel did not apply to the other defendant manufacturers, since their implementation of the Android operating system was distinct from Samsung’s. The court rejected this argument, noting that the mere fact that the Android operating system was modified by Samsung to ensure hardware compatibility did not preclude application of the doctrine and there were no allegations that any modification of the purported infringing component of Android was material to Cascades’ infringement theory.

Antitrust standing. The plaintiff failed to state a viable federal antitrust claim. Cascade’s failure to license an invalid or non-infringed patent could not serve as a basis for a cognizable antitrust injury. The plaintiff’s allegations relating to market power referred solely to the market for the ’750 patent, and allegations involving other patents were insufficiently detailed or wholly conclusory. Finally, Cascade’s allegations of Samsung’s market share of 17 percent were insufficiently dominant and the complaint lacked sufficient allegations of a “dangerous probability” of Samsung achieving monopsony power.

The case is No. 4:12-cv-01143-YGR.

Attorneys: Daniel Richard Ferri (Niro, Haller & Niro) and Martin L. Fineman (Davis Wright Tremaine LLP) for Cascades Computer Innovation LLC. Aaron T. Chiu (Latham & Watkins LLP) for RPX Corp. Dylan Ian Ballard (Sheppard, Mullin, Richter & Hampton LLP) for Samsung Electronics Co. Ltd.

Companies: Cascades Computer Innovation LLC; RPX Corp.; Samsung Electronics Co. Ltd.

Cases: Antitrust CaliforniaNews