Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Monopoly counterclaims in patent infringement suit dismissed, (Oct 30, 2014)

By Jeffrey May, J.D.

Cisco Systems, Inc. and Hewlett-Packard Company(HP) failed to adequately allege that patent holder ChriMar Systems Inc. engaged in monopolistic conduct by not complying with the rules of the Institute of Electrical and Electronics Engineers (IEEE) standard setting organization (SSO), the federal district court in Oakland has ruled. Cisco and HP were given until December 1 to file amended antitrust counterclaims in ChriMar's patent infringement suit against them. The defendants would be required to amend their allegations regarding ChriMar’s purported misconduct before the SSO and the alleged anti-competitive effect of such conduct (ChriMar Systems Inc. v. Cisco Systems, Inc., October 29, 2014, White, J.).

In 2011, ChriMar filed a patent infringement action against Cisco, HP, and others, accusing them of infringing United States Patent No. 7,457,250 (“’250 Patent”). The defendants asserted in their counterclaims that ChriMar abused its monopoly power by failing to comply with IEEE's patent disclosure policy. The policy required participants in the standards setting process to disclose patents or patent applications they believed to be infringed by the practice of the proposed standard. The defendants alleged that ChriMar was required to--but knowingly failed to—disclose to the IEEE its belief that its ’250 Patent was essential to certain proposed standards and that ChriMar was not willing to license the ’250 Patent on reasonable terms.

The defendants failed to sufficiently allege the relevant market, monopoly power, or antitrust injury to support the monopolization counterclaim, the court ruled. The defendants argued that they defined the market as comprising the technologies that competed to perform the functions in the “Power over Ethernet standards” allegedly covered by the ’250 Patent. However, their counterclaims did not actually contain such allegations, in the court's view.

Moreover, an allegation that ChriMar acquired monopoly power could not be supported merely by alleging that the ’250 Patent was essential. The defendants failed to clearly allege that the IEEE would have adopted an alternative standard had it known about the ’250 Patent and ChriMar’s position with respect to its ’250 Patent, according to the court. Lastly, the defendants' mere allegation, in conclusory fashion, that ChriMar’s alleged conduct “has caused and will directly and proximately cause antitrust liability to [Defendants] within the Power over Ethernet Technology Market” would not support antitrust injury.

Attempted monopolization counterclaim. HP’s attempted monopolization counterclaim also was dismissed. Dismissal was warranted in light of the defects in pleading causal antitrust injury and the relevant market. In addition, although a lower market share percentage was required for an attempted monopoly claim, as opposed to an actual monopoly claim, HP still failed to allege sufficient market power.

The case is No. C 13-01300 JSW.

Attorneys: Brandon M. Jordan (McKool Smith PC), and Steven J. Balick (Ashby & Geddes) for ChriMar Systems Inc. Steven Carl Cherny (Kirkland & Ellis LLP) for Cisco Systems Inc. Brian Paul Gearing (Morrison & Foerster LLP) for Cisco Consumer Products LLC. David Dolkas (McDermott, Will & Emery), and Kenneth Laurence Dorsney (Morris James LLP) for Hewlett-Packard Co. Jack B. Blumenfeld (Morris, Nichols, Arsht and Tunnell LLP) for Cisco-Linksys LLC.

Companies: ChriMar Systems Inc.; Cisco Systems Inc.; Hewlett-Packard Co.

Cases: Antitrust CaliforniaNews