Antitrust Law Daily Wrap Up, ANTITRUST NEWS: High Court asked to consider statute of limitations in patent licensing dispute, (Nov 14, 2014)

By Jeffrey May, J.D.

Panasonic Corporation has asked the U.S. Supreme Court to consider the “continuing conspiracy” and “speculative damages” exceptions to the Clayton Act's four-year statute of limitations in the context of Samsung Electronic Company's antitrust challenge to standard-setting and patent licensing agreements involving SD flash memory card technology. Panasonic is seeking High Court review in an effort to block as untimely Samsung's antitrust suit, which was revived by the U.S. Court of Appeals in San Francisco last April (Panasonic Corp. v. Samsung Electronics Co., Ltd., Dkt. 14-540).

At issue is a Ninth Circuit decision reversing a district court’s dismissal of Samsung's antitrust claims on statute of limitations grounds. The appellate court primarily based its decision on the continuing violation exception to the statute of limitations but also concluded that the claims could proceed based on the exception for speculative damages.

Samsung filed its action against Panasonic and other developers of SD technology, challenging licensing agreements for SD cards. SD cards are the dominant form of flash memory card on the market, and are widely used in cellular phones, digital cameras, audio players, and other forms of mobile electronics. The district court dismissed the claims as time-barred on the grounds that all events that took place within the four years before Samsung’s 2010 suit were a mere continuation of the prior actions, and that the events did not restart the statute of limitations. The Ninth Circuit reversed.

Continuing violation exception. Under Ninth Circuit precedent, in order to state a continuing violation of the antitrust laws to avoid the Clayton Act's four-year statute of limitations, a plaintiff must allege that a defendant completed an “overt act” during the limitations period that: (1) is a new and independent act and not merely a reaffirmation of a previous act and (2) inflicts new and accumulating injury on the plaintiff. The appellate court was satisfied that Samsung met these requirements.

The developers' adoption of a 2006 license, which extended an earlier license to cover second-generation SD cards, was an overt act that caused Samsung’s claims to accrue within the limitations period, in the appellate court’s view. The adoption of the 2006 license was a “new and independent act” that caused “new and accumulating injury” because the previous license did not cover second-generation SD cards or the expansion to future technological developments. The application of the licenses to Samsung when it began to make SD cards in 2006 also was an overt act that restarted the limitations period, as it was an overt act to enforce a contract, according to the court.

Speculative damages. The appellate court also concluded that the case fell within the speculative damages exception to the statute of limitations. In cases where damages are “uncertain” or “speculative” at the time of the antitrust violation, the statute of limitations period begins on the date that the plaintiff’s damages first “accrued and became ascertainable.” Samsung was not in the SD card market at the time of the original license, and none of the parties could have known whether Samsung would enter that market. Because the harm to Samsung was speculative at the time of the initial wrong, Samsung was able to file suit once the harm was apparent in 2006, it was decided.

Question presented. In its petition for certiorari, filed on November 12, Panasonic has asked the Supreme Court to consider the exceptions to the four-year statute of limitations on private antitrust actions under the Court’s 1971 decision in Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 1971 Trade Cases ¶73,484. Specifically, Panasonic asks whether public standard-setting and patent-pool licensing agreements that long predate the Clayton Act's four-year statute of limitations period may be indefinitely subjected to antitrust challenge based on the defendants’ ongoing collection of royalties, where a complaining licensee delayed filing suit challenging those pre-limitations agreements until the market had come to depend upon the licensed technology.

According to Panasonic, the Ninth Circuit's decision conflicts with Supreme Court precedent in three key respects and adds to “entrenched division” among the federal circuits. Specifically, the Ninth Circuit decision was alleged to (1) deepen a six-circuit conflict over whether acts within four years of suit that carry out agreements entered outside that time frame restart the Clayton Act's limitations period; (2) in finding a continuing violation based on licensing obligations that Samsung rejected, conflict with seven other circuits in holding that a plaintiff does not suffer an antitrust injury where it is not personally harmed by, or stands to benefit from, the market impact of the challenged conduct; and (3) conflict with several other circuit decisions that strictly limit the speculative damages exception to cases where a plaintiff can neither project its losses nor seek injunctive relief to avoid future damages.

The petitioners contend that, under the Ninth Circuit's decision, “any standard-setting organization or patent pool that merely updates its standards, reaffirms its royalties, or enforces its long-standing licenses potentially subjects itself and its members to a perpetual risk of antitrust claims.”

Attorneys: Jeffrey L. Kessler (Winston & Strawn LLP) for Panasonic Corp.

Companies: Samsung Electronics Co., Ltd.; Panasonic Corp.

News: Antitrust