Can a group of defendants refuse to settle with a non-practicing entity (NPE)? Can they collectively refuse to license patents from a “troll”? Or does that refusal subject them to antitrust scrutiny? These are the issues at the heart of a Northern District of California case: Cascades Computer Innovation LLC v. RPX Corp.
Cascades manages a portfolio of patents and filed suit against a number of large technology companies for infringement. Those companies are members of RPX Corporation (RPX), a defensive patent aggregator formed to protect its members from NPEs who file infringement claims. When RPX, on behalf of its members, failed to reach a licensing agreement with Cascade, Cascade sued RPX and its members — including Dell, HTC, LG, Motorola and Samsung — claiming that defendants’ alleged collective refusal to deal with it constituted an antitrust violation.
Not only is this case unique in that an NPE, or “patent troll” in some circles, is striking out at alleged infringers with an antitrust attack, but the case was dismissed with what many thought was no hope of revival. Alas, Cascades’ amended complaint included enough additional facts to allow the case to move forward.…
In the second of this two part series, we dig a bit deeper on the FTC’s recently proposed study on patent assertion entity (PAE) activity. In Part 1, we covered some background on PAEs and why they are singled out separately from other types of patent holders. Here in part 2, we discuss potential antitrust concerns with PAE activity, what information the FTC is seeking from PAEs and others, and — importantly — what the study means for you.
Potential antitrust issues
To place into context the entire concern with PAEs, as well as to better understand why the Federal Trade Commission is seeking the type of information it is requesting, we delineate briefly the potential antitrust concerns with PAE activity. It must be understood that a valid patent holder unquestionably has the right to exercise his/her patent, or to sit back and sue for infringement should another entity utilize the patent without permission. The mere assertion or enforcement of a PAE patent cannot, without more, constitute an antitrust violation. Nevertheless, a number of different antitrust concerns are implicated with PAE activity, the most prominent of which are presented below.
1. Acquisition and licensing of patents
A patent is an asset and, like any other asset, the more one acquires within a given market, the greater the concern that the acquirer will eventually garner market power and the ability to price its products/services above competitive levels. Or, in the patent context, license the patents above competitive levels. Though not …
Almost half of all infringement actions brought these days are brought by patentholders that do not practice the invention, but rather by holders who seek to capitalize on the value of the patent through either licensing fees or via damage awards in infringement actions. While simply asserting patent rights cannot be an antitrust violation, the manner in which these patent holders — referred to Patent Assertion Entities (PAEs) or sometimes, pejoratively, as “patent trolls” — amass their portfolios and assert their patents can raise antitrust concerns. Given the enormous toll that patent litigation takes on our innovation economy, the Federal Trade Commission has proposed a study “to understand how PAE behavior compares with patent assertion activity by other patent owners.” This post provides background on the issue and why PAEs are singled out separately from other types of patent holders. A subsequent post will discuss potential antitrust concerns with PAE activity, what information the FTC is seeking from PAEs and others, and what the study means for you.
For years, patent law and antitrust law have butted heads because patent law, which grants the patentee the right to exclude, is the antithesis of antitrust law, which seeks to increase output and maximize consumer welfare. Although the Sherman Act, the federal government’s basic antitrust law, has been hailed as the “magna carta of free enterprise,” patent law is rooted in the Constitution and accordingly has emerged victorious when the two have come into conflict. Over the past decade, …