Settlement in Massive Anti-Trust Lawsuit Could Lower PC Prices

SAN FRANCISCO -- The Federal Trade Commission is trumpeting its settlement with Intel Corp. as a victory for consumers who have overpaid for computer chips for a decade, though computer buyers shouldn't expect a sudden drop in prices.

The deal announced Wednesday represents the end to the harshest antitrust lawsuit Intel has faced yet from government regulators, and it imposes the strictest set of changes onto the way Intel does business.

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AMERICAN NEEDLE, INC. v. NATIONAL FOOTBALL LEAGUE et al.

Respondent National Football League (NFL) is an unincorporated association of 32 separately owned professional football teams, also respondents here. The teams, each of which owns its own name, colors, logo, trademarks, and related intellectual property, formed respondent National Football League Properties (NFLP) to develop, license, and market that property. At first, NFLP granted nonexclusive licenses to petitioner and other vendors to manufacture and sell team-labeled apparel. In December 2000, however, the teams authorized NFLP to grant exclusive licenses. NFLP granted an exclusive license to respondent Reebok International Ltd. to produce and sell trademarked headwear for all 32 teams. When petitioner’s license was not renewed, it filed this action alleging that the agreements between respondents violated the Sherman Act, §1 of which makes “[e]very contract, combination … or, conspiracy, in restraint of trade” illegal. Respondents answered that they were incapable of conspiring within §1’s meaning because the NFL and its teams are, in antitrust law jargon, a single entity with respect to the conduct challenged. The District Court granted respondents summary judgment, and the Seventh Circuit affirmed.

Held:  The alleged conduct related to licensing of intellectual property constitutes concerted action that is not categorically beyond §1’s coverage. Pp. 4–20.

     (a) The meaning of “contract, combination … , or, conspiracy” in §1 of the Sherman Act is informed by the Act’s “ ‘basic distinction between concerted and independent action.’ ” Copperweld Corp. v. Independence Tube Corp. , 467 U. S. 752 . Section 1 “treat[s] concerted behavior more strictly than unilateral behavior,” id. , at 768, because, unlike independent action, “[c]oncerted activity inherently is fraught with anticompetitive risk” insofar as it “deprives the marketplace of independent centers of decisionmaking that competition assumes and demands,” id. , at 768–769. And because concerted action is discrete and distinct, a limit on such activity leaves untouched a vast amount of business conduct. That creates less risk of deterring a firm’s necessary conduct and leaves courts to examine only discrete agreements. An arrangement must therefore embody concerted action in order to be a “contract, combination … or, conspiracy” under §1. Pp. 4–6.

     (b) In determining whether there is concerted action under §1, the Court has eschewed formalistic distinctions, such as whether the alleged conspirators are legally distinct entities, in favor of a functional consideration of how they actually operate. The Court has repeatedly found instances in which members of a legally single entity violated §1 when the entity was controlled by a group of competitors and served, in essence, as a vehicle for ongoing concerted activity. See, e.g., United States v. Sealy, Inc. , 388 U. S. 350 . Conversely, the Court has found that although the entities may be “separate” for purposes of incorporation or formal title, if they are controlled by a single center of decisionmaking and they control a single aggregation of economic power, an agreement between them does not constitute a “contract, combination … or, conspiracy.” Copperweld, 467 U. S., at 769. Pp. 6–10.

     (c) The relevant inquiry is therefore one of substance, not form, which does not turn on whether the alleged parties to contract, combination, or conspiracy are part of a legally single entity or seem like one firm or multiple firms in any metaphysical sense. The inquiry is whether the agreement in question joins together “separate economic actors pursuing separate economic interests,” Copperweld, 467 U. S., at 768, such that it “deprives the marketplace of independent centers of decisionmaking,” id. , at 769, and therefore of diversity of entrepreneurial interests and thus of actual or potential competition. If it does, then there is concerted action covered by §1, and the court must decide whether the restraint of trade is unreasonable and therefore illegal. Pp. 10–11.

     (d) The NFL teams do not possess either the unitary decisionmaking quality or the single aggregation of economic power characteristic of independent action. Each of them is a substantial, independently owned, independently managed business, whose “general corporate actions are guided or determined” by “separate corporate consciousnesses,” and whose “objectives are” not “common.” Copperweld , 467 U. S., at 771. They compete with one another, not only on the playing field, but to attract fans, for gate receipts, and for contracts with managerial and playing personnel. See, e.g., Brown v. Pro Football, Inc. , 518 U. S. 231 . Directly relevant here, the teams are potentially competing suppliers in the market for intellectual property. When teams license such property, they are not pursuing the “common interests of the whole” league, but, instead, the interests of each “corporation itself.” Copperweld , 467 U. S., at 770. It is not dispositive, as respondents argue, that, by forming NFLP, they have formed a single entity, akin to a merger, and market their NFL brands through a single outlet. Although the NFL respondents may be similar in some sense to a single enterprise, they are not similar in the relevant functional sense. While teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned. Nor does it matter that the teams may find the alleged cooperation necessary to compete against other forms of entertainment. Although decisions made by NFLP are not as easily classified as concerted activity, the NFLP’s decisions about licensing the teams’ separately owned intellectual property are concerted activity and thus covered by §1 for the same reason that decisions made directly by the 32 teams are covered by §1. In making the relevant licensing decisions, NFLP is “an instrumentality” of the teams. Sealy, 388 U. S., at 352–354. Pp. 11–17.

     (e) Football teams that need to cooperate are not trapped by antitrust law. The fact that the NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate to produce games, provides a perfectly sensible justification for making a host of collective decisions. Because some of these restraints on competition are necessary to produce the NFL’s product, the Rule of Reason generally should apply, and teams’ cooperation is likely to be permissible. And depending upon the activity in question, the Rule of Reason can at times be applied without detailed analysis. But the activity at issue in this case is still concerted activity covered for §1 purposes. Pp. 18–19.

538 F. 3d 736, reversed and remanded.

     Stevens, J., delivered the opinion for a unanimous Court.

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In re: Ciprofloxacin Hydrochloride Antitrust Litigation

Plaintiffs appeal from a judgment of the United States District Court for the Eastern District of New York (Trager, J.) granting summary judgment for defendants, manufacturers of the antibiotic ciprofloxacin hydrochloride (“Cipro”) or generic bioequivalents of Cipro. Plaintiffs argue that defendants violated Section 1 of the Sherman Act when they settled their dispute concerning the validity of Bayer’s Cipro patent by agreeing to a reverse exclusionary payment settlement. Bayer agreed to pay the generic challengers, and in exchange the generic firms conceded the validity of the Cipro patent.

After the district court entered judgment below, a panel of this Court held that reverse payment settlements of patent lawsuits do not violate antitrust laws. See Joblove v. Barr Labs., Inc., (In re Tamoxifen Citrate Antitrust Litig.), 466 F.3d 187, 208-12 (2d Cir. 2005). Because Tamoxifen is dispositive of plaintiffs’ claims, we AFFIRM. However, because of the “exceptional importance” of the antitrust implications of reverse exclusionary payment settlements of patent infringement suits, we invite plaintiffs-appellants to petition for rehearing in banc. See Fed. R. App. P. 35(a)(2).

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Allied Orthopedic Apps. Inc. v. Tyco Health Care Group LP

Plaintiffs in this antitrust suit are a group of hospitals and other health care providers that purchased pulse oximetry sensors from Tyco Healthcare Group LP after November 2003. They allege that they overpaid for the sensors because Tyco used two kinds of marketing agreements to foreclose competition from generic sensor manufacturers in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. They also allege that by introducing OxiMax, a patented pulse oximetry system that is incompatible with generic sensors, Tyco unlawfully maintained its monopoly over the sensor market in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.

The district court denied Plaintiffs’ motion for class certification and later granted Tyco’s motion for summary judgment on the Section 1 and 2 claims. We agree with the district court that Tyco’s agreements do not violate Section 1; there is no evidence that they foreclosed competition in a substantial share of the sensor market. We also agree that there is no Section 2 violation; the undisputed evidence shows that the patented OxiMax design is an improvement over the previous design. Innovation does not violate the antitrust laws on its own, and there is no evidence that Tyco used its monopoly power to force customers to adopt its new product. Accordingly, we affirm the district court’s judgment on the merits and have no need to reach the class certification issue.

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Kaiser Found. Health Plan Inc. v. Abbott Labs., Inc.

Plaintiff-Appellant Kaiser Foundation Health Plan, Inc. (“Kaiser”) sued Defendants-Appellees Abbott Laboratories (“Abbott”) and Geneva Pharmaceuticals (“Geneva”) for violations of the Sherman Antitrust Act and analogous provisions of California law. Kaiser brought a claim under Section One of the Sherman Act against both Abbott and Geneva, and a claim under Section Two against only Abbott. A multidistrict litigation federal district court in Florida allowed Kaiser’s Section One claim to go to trial. The suit was transferred to a federal district court in California for trial on that claim. The jury returned a verdict against Kaiser. The district court in Florida granted summary judgment against Kaiser on its Section Two claim.

We affirm the judgment entered on the jury’s verdict on Kaiser’s Section One claim. We reverse summary judgment on Kaiser’s Section Two claim and remand for further proceedings.

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In Re Ciprofloxacin Hydrochloride Antitrust Litigation

This case under the Hatch-Waxman Act presents the issue of whether a settlement agreement between a patent holder and a generic manufacturer violates the antitrust laws. The agreements here involve a reverse payment from the patent holder to the generic manufacturer, but do not implicate the 180-day exclusivity period. Indirect purchasers of Cipro and several advocacy groups (“appellants”) appeal the grant of summary judgment of their federal antitrust claims and dismissal of their state antitrust claims against the patent holders and brand-name manufacturers, Bayer AG and Bayer Corp. (collectively “Bayer”), and the generic manufacturers, Barr Labs., Inc. (“Barr”), Hoechst Marion Roussel, Inc. (“HMR”), The Rugby Group, Inc. (“Rugby”), and Watson Pharmaceuticals, Inc. (“Watson”) (collectively “generic defendants”). The United States District Court for the Eastern District of New York granted Bayer’s and the generic defendants’ motion for summary judgment, holding that any anti-competitive effects caused by the settlement agreements between Bayer and the generic defendants were within the exclusionary zone of the patent, and thus could not be redressed by federal antitrust law. In re Ciprofloxacin Hydrochloride Antitrust Litigation, 363 F. Supp. 2d 514 (E.D.N.Y. 2005) (“Cipro II”). The court further granted Bayer’s motion to dismiss the state antitrust claims. For the reasons set forth below, we affirm.

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Am. Needle, Inc. v. Nat'l Football League

American Needle Inc. sued the National Football League (NFL), its member football teams, and NFL Properties LLC (to whom we will collectively refer as “the NFL defendants”), along with Reebok International Ltd. (“Reebok”), alleging that the teams’ exclusive licensing agreement with Reebok violated the Sherman Antitrust Act. See 15 U.S.C. §§ 1-2. The district court granted summary judgment to the NFL defendants.

We affirm.

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Meijer, Inc. v. Biovail Corp.

The plaintiff-appellants in these four antitrust class actions are wholesale purchasers of Tiazac (extended-release Diltiazem Hydrochloride, hereinafter Diltiazem HCl), a controlled-release drug for hypertension and angina. They alleged that Biovail Corporation, which manufactures Tiazac, misused a patent to keep off the market a generic equivalent manufactured by Andrx Pharmaceuticals, Inc., in violation of federal and state antitrust laws. The district court entered summary judgment for Biovail, which we affirm.

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Broadcom Corp. v. Qualcomm Inc.

This appeal presents important questions regarding whether a patent holder’s deceptive conduct before a private standards-determining organization may be condemned under antitrust laws and, if so, what facts must be pled to survive a motion to dismiss. Broadcom Corporation (“Broadcom”) alleged that Qualcomm Inc. (“Qualcomm”), by its intentional deception of private standards-determining organizations and its predatory acquisition of a potential rival, has monopolized certain markets for cellular telephone technology and components, primarily in violation of Sections 1 and 2 of the Sherman Act and Sections 3 and 7 of the Clayton Act. The District Court dismissed the Complaint, and Broadcom appeals. For the reasons that follow, we conclude that Broadcom has stated claims for monopolization and attempted monopolization under § 2 of the Sherman Act – Claims 1 and 2 of the Complaint. We also conclude, however, that Broadcom lacks standing to assert a claim for unlawful monopoly maintenance in
a market in which it neither competes nor seeks to compete – Claim 7 – and that it has failed to allege an antitrust injury sufficient to state a claim under § 7 of the Clayton Act – Claim 8. We will, accordingly, affirm in part, reverse in part, and will order the reinstatement of Broadcom’s state and common-law
claims.

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Dippin' Dots, Inc. v. Mosey

This is a patent infringement and antitrust case dealing with a unique ice cream product. Plaintiffs Dippin’ Dots, Inc. and Curt D. Jones (collectively “DDI”) appeal from the district court’s claim construction and summary judgment of noninfringement of U.S. Patent No. 5,126,156 (“the ’156 patent”) and from the judgment following jury trial that all claims of that patent are obvious, that the patent is unenforceable due to inequitable conduct during prosecution, and that DDI violated the antitrust laws by asserting a patent that had been procured through fraud on the Patent Office. We affirm the judgments of noninfringement, obviousness, and unenforceability, but reverse as to the antitrust counterclaim.

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