Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: SRAM standards might be product of conspiracy to restrain trade, (Jan 28, 2015)

By Greg Hammond, J.D.

A Static Random Access Memory (SRAM) products developer stated sufficient conspiracy claims against a competitor for engaging in a consortium that created exclusive product standards for new SRAM products, allowing the competitor to lock in already limited customers and impede entry into the SRAM market. The federal district court in San Jose denied the competitor’s motion for summary judgment, finding that the developer sufficiently alleged a conspiracy to restrain trade (GSI Technology, Inc. v. Cypress Semiconductor Corp., January 27, 2015, Davila, E.).

Background. GSI Technology Inc. and Cypress Semiconductor Corp. are developers of SRAM products. The SRAM market consists of a small number of customers, making early market entry critical to a vendor’s success. In 1999, Cypress and two of its competitors entered into a combination, which they named the QDR Consortium, to develop standards for higher performance networking SRAM products. The consortium allegedly shared information and combined their market power to define and promote a family of SRAMs that would address the new market demand. Although the consortium announced that it would publish the data sheets for its designs, it did so after a time delay, allowing the consortium to obtain a “time-to-market” competitive advantage over all SRAM vendors outside the group.

GSI alleged that the consortium created exclusive but de facto product standards that allowed it to lock in customers and impede entry into the SRAM market, thereby harming competition and consumers. Consequently, GSI brought claims against Cypress under the Sherman Act, California’s Cartwright Act, and California’s Unfair Competition Law. Cypress moved for summary judgment.

Sherman Act. In support of its motion for summary judgment, Cypress argued that there was insufficient evidence to establish a claim under Section 1 of the Sherman Act, because GSI failed to: (1) identify evidence demonstrating an agreement intended to harm or restrain trade; (2) prove a relevant product market encompassing all reasonably interchangeable products, demonstrate that it had market power, and show an anticompetitive effect on competition in a relevant product market; and (3) present competent evidence to establish injury in fact.

The court disagreed with all three arguments, first finding that GSI submitted circumstantial evidence tending to show that a conspiracy between Cypress and the consortium members was more probable than an inference of independent action, creating a triable issue of fact. Second, the court determined that a triable issue of fact existed in whether Cypress unreasonably or unduly restrained trade, as both parties’ experts disagreed on whether a relevant product market exists, and GSI produced sufficient circumstantial evidence to create material questions of fact as to whether the Consortium had market power, whether significant barriers to entry and expansion existed in the relevant market, and whether Cypress and the consortium members intended to harm competition.

Lastly, GSI provided sufficient evidence showing that Cypress caused antitrust injury, the court found. Although Cypress argued that the GSI expert’s damages calculations were based on faulty analytical methods or mere guesswork, the court found that the credibility and persuasiveness of GSI’s expert witnesses are issues best left to a fact finder. The motion for summary judgment was therefore denied.

The case number is 5:11-CV-03613-EJD.

Attorneys: Arthur Joel Shartsis (Shartsis Friese LLP) for GSI Technology, Inc. Lee H. Rubin (Mayer Brown LLP) for Cypress Semiconductor Corp.

Companies: GSI Technology, Inc.; Cypress Semiconductor Corp.

Cases: Antitrust CaliforniaNews