Antitrust Law Daily Wrap Up, ANTITRUST—NDCal: Alleged Boycott, Refusal to Deal with “Patent Troll” Was Not Unlawful, (Jan 28, 2013)

By E. Darius Sturmer, J.D.

A company complaining it was unable to license its technology patents because of a boycott among manufacturers of computers or various other electronic devices that allegedly infringed on those patents and several non-practicing entities (defensive patent aggregators, or “anti-trolls”) failed to state antitrust claims against the manufacturers, the federal district court in Oakland, California, has held (Cascades Computer Innovation LLC v. RPX Corp., January 24, 2013, Rogers, Y.). Cascades had not pled a plausible conspiracy, a valid relevant market, harm to such a market, or antitrust injury, the court found. The claims were therefore dismissed without prejudice, and leave to amend was granted.

The company, Cascade Computer Innovation LLC, which was accused by the defendants of being a “patent troll,” charged that the defendants—RPX Corp.; Dell, Inc.; LG Electronics, Inc.; HTC Corp.; Motorola Mobility, Inc.; and Samsung Electronics Co.—conspired not to license its patents, and entered into joint patent infringement defense agreements and information exchanges in furtherance of this conspiracy.

However, the court said, the allegations in the complaint consisted “primarily of threadbare recitals of conspiracy.” They did not answer any of the basic questions concerning a conspiracy: “who, did what, to whom (or with whom), where, and when?” Other than the allegation that negotiations with RPX broke down when one or more RPX members would not agree to fund the deal, all that Cascades had alleged was “parallel behavior,” the court stated. Such generic pleading was exactly the sort “that was rejected by Twombly.” Therefore, dismissal of the claims against HTC, LG, Motorola, and Samsung was granted.

Dell was entitled to dismissal of the claims against it on a separate basis—failure to allege its participation in the conspiracy. The court found that Cascade had effectively pled itself out of court by alleging that Dell negotiated with it, even though it was purportedly doing so in bad faith. Central to Cascades’ alleged boycott and concerted refusal to deal was the claim that they had agreed not to negotiate with it. An argument by Cascades that its complaint asserted only a ban on “independent” negotiations was rejected. Any offer to license Cascades patents, even a spurious and bad faith offer, was not conduct consistent with participation in the conspiracy as pled, in the court’s view. The complaint contained no indication that Dell only pretended to negotiate independently to make it seem as if it was not involved in a conspiracy. The conduct more plausibly suggested that Dell considered paying a “nuisance fee” to avoid litigation than it did that Dell pretended to negotiate independently.

The court granted RPX’s motion for dismissal on the ground that Cascades failed to identify specifically what it considered to be the relevant market. Without a coherent market definition, the complaint necessarily failed to allege an actionable contract, combination, or conspiracy in restraint of trade or monopolization. Rather than asserting a single relevant product market, throughout the complaint appeared descriptions of the market as broad as “licenses,” “the Android market,” and “mobile phones and tablets that use the Android operating system”—and as narrow as “Cascades’ patents,” “licenses for Cascades’ patents,” and “products that use Cascades’ patented technology.

The court additionally noted that Cascades’ failure to allege harm to competition and antitrust injury, or to plead a conspiracy that made economic sense, provided independent bases upon which to grant dismissal of the claims.

The case is No.: 12-CV-01143 YGR.

Attorneys: Ashley E. LaValley (Niro Haller Niro) for Cascades Computer Innovation LLC. Alfred Carroll Pfeiffer, Jr. (Latham & Watkins LLP) for RPX Corp. Daniel Paul Weick (Wilson Sonsini Goodrich and Rosati) for HTC Corp.

Companies: Cascades Computer Innovation LLC; RPX Corp.; Dell, Inc.; LG Electronics, Inc.; HTC Corp.; Motorola Mobility, Inc.; Samsung Electronics Co.

Cases: Antitrust CaliforniaNews