Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Optoelectronic component developer allegedly used sham patent litigation to prevent competition, (Dec 30, 2014)

By Linda O’Brien, J.D., LL.M.

A developer of optoelectronic components attempted to gain monopoly power in the market for active optical cables and transceivers by using sham patent infringement litigation to harm competition, according to a complaint filed in the federal district court of the Northern District of California (IPtronics Inc. v. Avago Technologies, U.S. Inc., December 29, 2014).

IPtronics, a subsidiary of Mellanox Technologies Denmark, is a fabless semiconductor company that designs optical interconnect components for digital communications. Its products include multi-channel vertical cavity surface emitting laser (VCSEL) driver /transimpedance amplifier (TIA) chip sets for short reach optical communication. Avago designs and develops analog, mixed signal, and optoelectronic components and subsystems, and sells over a wide range of products in the wireless and wired communications, industrial and automotive electronics, and consumer and computing target markets.

The complaint alleges that in September 2012, Avago filed a complaint with the U.S. International Trade Commission (ITC) against IPtronics, asserting that IPtronics’ VCSEL driver products and evaluation boards infringed certain claims of its U.S. Patent No. 6,947,456 (the “456 patent). VCSEL drivers are components used in transceiver modules and active optical cables (AOCs) to facilitate high speed optical communication of data. The ITC investigation demonstrated that Avago’s reliance on IPtronics product datasheets and technical documents were inadequate to support their infringement allegations. Additionally, an administrative law judge found no infringement of the ‘456 patent.

Avago pursued litigation in the ITC investigation with the intent to harm competition without concern for the outcome of the litigation or with any realistic expectation of success on the merits of the infringement claim. Avago admitted its bad faith use of patent infringement litigation in multiple meetings and conversations with employees of Mellanox. Further, Avago attempted to use settlement negotiations as a cover for anticompetitive statements and conduct. By subjecting IPtronics to costly, frivolous patent infringement litigation, Avago attempted to make it untenable for IPtronics to continue to produce stand-alone VCSEL drivers, the complaint charges.

According to the complaint, Avago asserted patent infringement against nearly every entity with which they had not otherwise collaborated. These suits are representative of Avago’s policy of engaging in vexatious litigation or the threat of litigation for the purpose of injuring or preventing competition.

Substitutes for AOCs allegedly are not readily available, since consumers in finance, health care, education, energy, telecommunications, and defense work with extremely important and sensitive applications that need the security and speed that only AOCs can provide. Moreover, the barriers to entry into the market are high and have become difficult as a result of Avago’s anticompetitive conduct, IPtronics claimed. Technology and financial barriers, as well as barriers to gaining customer contacts, keep any potential entrant out of the market.

The plaintiffs assert claims for attempted monopolization in violation of Section 2 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 5:14-cv-05647.

Attorneys: Steven D. Hemminger, Xavier Brandwajn, and Randall L. Allen (Alston & Bird LLP) for Iptronics Inc. and Mellanox Technologies Denmark APS.

Companies: IPtronics Inc.; Mellanox Technologies Denmark APS; Avago Technologies, U.S. Inc.; Avago Technologies General IP Pte. Ltd.; Avago Technologies Trading Ltd.; Avago Technologies International Sales Pte. Ltd.; Avago Technologies Fiber IP Pte. Ltd.

News: Antitrust CaliforniaNews