Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Monopolization counterclaim stayed in Fitbits’ patent infringement suit, (May 31, 2016)

By Michael Menzhuber, J.D., LL.M.

A motion by Fitbit, Inc. to bifurcate and stay a monopolization counterclaim, in its patent infringement action relating to wearable fitness trackers, was granted by the federal district court in San Jose, California. The court reasoned that a bifurcation and stay was warranted in the interests of conserving judicial economy and reducing jury confusion (Fitbit, Inc. v. Aliphcom, May 27, 2016, Davila, E.).

Fitbit filed a complaint against Aliphcom, Body Media, Inc., and Body Media, alleging infringement of a number of Fitbit’s patents relating to wearable fitness trackers. The defendants filed an answer that denied the allegations and asserted a counterclaim of monopolization. Fitbit, in response, filed a motion to bifurcate and stay the antitrust counterclaim on the basis of judicial economy, convenience of the parties, and the streamlining of complex litigation.

The defendants countered that Fitbit’s motion to bifurcate and stay its antitrust counterclaim should be denied because: (1) the efficiency gained by a bifurcation would be outweighed by the harm suffered by the defendants; (2) the stay would not improve efficiency since the discovery relevant to the antitrust claim and the discovery claim were not substantively distinct; and (3) even if the antitrust claim was bifurcated, the existence of significant evidentiary overlap between patent and antitrust issues favored the continuation of discovery.

Judicial economy. The court disagreed with the defendants. It found that resolving issues of patent validity and infringement before addressing the antitrust counterclaim may render the antitrust claim moot. In addition, the defendants would need to prove that the suit is “objectively baseless” in order to prevail on the antitrust claim, which requires convincing a court that no “reasonable patent owner” could believe that the defendants’ products infringed Fitbit’s patents. Even if the defendants prevailed on the question of infringement, the court could still rule that the suit was not objectively baseless because Fitbit may have filed the action with a realistic expectation of prevailing on the merits. Consequently, the court concluded that it would be highly unlikely that the antitrust issues would be resolved or rendered moot upon resolution of patent infringement and validity issues and that a bifurcation and stay would therefore conserve judicial economy.

Jury confusion. The court additionally found that the lack of evidentiary overlap between patent validity, infringement, and antitrust issues will cause jury confusion. In particular, the court noted that a jury could easily “blur the distinction between legitimate patent enforcement” and the exercise of unlawful monopolistic powers if it was presented with evidence alleging the lawful exercise of patent rights and the unlawful exercise of anticompetitive behavior. Allowing the defendants to introduce evidence concerning the antitrust issues would there increase the likelihood of confusion among the jury and interfere with its ability to address the more pertinent issue of patent infringement, according to the court. Bifurcation of the antitrust claim was therefore warranted.

The case is No: 5:15-cv-04073-EJD.

Attorneys: Alison Roberta Watkins (Gibson Dunn & Crutcher LLP) for Fitbit, Inc. Kalpana Srinivasan (Susman Godfrey L.L.P.) for AliphCom and BodyMedia, Inc.

Companies: Fitbit, Inc.; AliphCom; BodyMedia, Inc.

Cases: Antitrust CaliforniaNews