Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Alleged patent troll’s state antitrust, unfair competition claims against Samsung dismissed, (Mar 28, 2016)

By Linda O’Brien, J.D., LL.M.

Following the dismissal of boycott and monopsonization claims brought by alleged “patent troll” Cascades Computer Innovation LLC against mobile device manufacturer Samsung Electronics Co. and its patent aggregator RPX Corp., the federal district court in Oakland, California has dismissed the remaining state law claims with prejudice (Cascades Computer Innovation LLC v. RPX Corporation, March 25, 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 federal 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. Cascade also alleged two state law claims—for violations of California’s Cartwright Act and Unfair Competition Law (UCL).

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. In February 2016, the court, in granting the defendants’ motion, dismissed the boycott and monopsonization claims on the ground that the claims were based on patent infringement.

Before the court was the defendants’ motion to dismiss the state law claims.

The court determined that judicial economy warranted dismissal of the state law claims with prejudice. The plaintiff’s argument that the court should simply decline to exercise supplemental jurisdiction over the claims was rejected. The court noted that the state law claims under the Cartwright Act were premised entirely on the same allegations that were found insufficient in the dismissal of the federal antitrust claims. Requiring a state court to re-adjudicate the issues relating to futile claims would be unnecessary waste of judicial resources.

Further, in light of the failure of all other claims, the plaintiff failed to allege any unlawful practice by the defendants under the UCL. To bring an action, a private plaintiff must show economic injury caused by unfair competition. Here, the court explained, Cascades’ complaint failed to allege any conduct by the defendants that significantly threatened or harmed competition. Remanding this futile claim to state court also would constitute a waste of judicial resources, the court concluded.

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

Attorneys: Daniel Richard Ferri (Niro Law, Ltd.) and Martin L. Fineman (Davis Wright Tremaine LLP) for Cascades Computer Innovation LLC. Aaron T. Chiu (Latham and 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