Pharmaceutical patent holders beware: Over the past year, antitrust enforcers have taken a more aggressive approach challenging Orange Book listings as an anticompetitive practice. According to the Federal Trade Commission, improperly listing patents in the Orange Book constitutes an unfair method of competition, among other violations.
In this article, Elai Katz, Lisa Rumin and Betty Zhang discuss the recent heightened scrutiny of Orange Book listings and highlight risks brand manufacturers should be aware of with respect to their Orange Book listing practices. Going forward, brand manufacturers should think proactively and consider carefully documenting their evaluation process and reasoning for listing patents in the Orange Book to satisfy the statutory requirements.
In our super-connected age, we are inundated with information. It can be difficult to select what is really relevant to one’s business. The purpose of this Review is to provide legal counsel and their teams easy reference guidance on essential EU competition law developments covering key areas of law and policy, to help keep you up to date on the latest requirements.
Inside you’ll find:
Cartels and Restrictive Agreements From geo-blocking to pay-for-delay agreements and bid-rigging, find out the latest legal developments in restrictive practices.
Abuse of Dominant Position Excessive pricing in the healthcare sector and a monopoly on online searches are key areas of development.
Merger Control Gun-jumping remains a real focus for the European courts, with additional judgments on the provision of misleading information in merger proceedings.
State Aid Transfer pricing and rules governing subsidiaries are hot topics, with the courts keeping an eye on excess profits and tax rate schemes.
Legislative and Policy Developments Digital markets is the focal point of policy development in Europe, as verticals agreements also come under scrutiny.
The US Court of Appeals for the Federal Circuit ordered the transfer of a case asserting standalone Walker Process antitrust claims involving an unenforceable patent to the regional circuit, in this case the US Court of Appeals for the Fifth Circuit. Chandler v. Phoenix Services LLC, Case No. 20-1848 (Fed Cir. June 10, 2021) (Hughes, J.) originated in the US District Court for the Northern District of Texas, over which the Fifth Circuit has appellate jurisdiction. The decision to transfer was based on a subject matter jurisdiction analysis for Walker Process claims. The Federal Circuit reiterated that its precedent does not mandate exclusive Federal Circuit jurisdiction over all Walker Process cases.
In 2006, Phoenix Services and Mark Fisher (collectively, Phoenix) acquired a company called Heat On-The-Fly and its patent to protect a purported proprietary fracking process. Heat-On-The-Fly, and later Phoenix, sought to enforce the patent against numerous parties. During the patent application process, however, Heat On-The-Fly had failed to disclose numerous public uses of the fracking process prior to the application filing. In 2018, in an unrelated case, Energy Heating, LLC v. Heat On-The-Fly, the Federal Circuit, held that “failure to disclose prior uses of the fracking process rendered the . . . patent unenforceable due to inequitable conduct.” The plaintiffs in the case at hand, Ronald Chandler, Chandler MFG., Newco Enterprises and Supertherm Heating Services (collectively, Chandler), alleged that Phoenix’s continued enforcement of the patent violated Walker Process pursuant to § 2 of the Sherman Act.
Walker Process monopolization claims originate from a 1965 Supreme Court decision that recognized an antitrust cause of action under the Sherman and Clayton Acts when a party fraudulently obtains a patent for the purpose of attempted monopolization. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. To succeed on a Walker Process claim, a plaintiff must satisfy two elements:
The plaintiff must show that the defendant obtained the patent through knowing and willful fraud on the US Patent & Trademark Office and enforced that patent with knowledge of its fraudulent procurement.
The plaintiff must be able to satisfy all other elements for a Sherman Act monopolization claim.
Pursuant to 28 U.S.C. § 1295(a)(1), the Federal Circuit retains jurisdiction over any civil case arising under any act of Congress relating to patents. In this instance, the Federal Circuit stated that Walker Process antitrust claims may relate to patents “in the colloquial use of the term,” but under 1988 Supreme Court precedent, Christianson v. Colt Indus.,the Federal Circuit’s jurisdiction only extends to cases where the cause of action is created under federal patent law, or where the plaintiff’s right to relief “necessarily depends on resolution of a substantial question of federal patent law.”
Here, the Federal Circuit relied on its own 2018 precedent where it analyzed subject matter jurisdiction for Walker Process claims. Xitronix Corp v. KLA-Tencor Corp. (Xitronix I). Xitronix I involved alleged fraud by the defendants to obtain a patent. The Court acknowledged that patent law [...]
The US Court of Appeals for the Second Circuit vacated a final order of the Federal Trade Commission (FTC), which had found that agreements to refrain from bidding on keyword search terms for internet advertisements violated Section 5 of the FTC Act. The Court made clear that although trademark agreements are not necessarily immune from antitrust scrutiny, they are entitled to significant deference. 1-800 Contacts, Inc. v. Federal Trade Commission, Case No. 18-3848 (2d Cir. June 11, 2021) (Per Curium). The Second Circuit held that the FTC applied an incorrect analytical framework and incorrectly concluded that the agreements were an unfair method of competition under the FTC Act.
1-800 Contacts and its competitors advertise online through search advertising. They bid on search engine keywords, which help display their websites in response to consumer searches. They also bid on negative keywords, which prevent their ads from being displayed when consumers search for specified terms.
Between 2004 and 2013, 1-800 Contacts entered into a series of settlement agreements to resolve trademark disputes with competitors, as well as one commercial agreement with a competitor, all of which included terms prohibiting the parties from using each other’s trademarks, URLs and similar terms as search advertising keywords. The agreements also required the parties to use negative keywords so that a search including one party’s trademarks would not trigger a display of the other party’s ads. 1-800 Contacts enforced these agreements when it believed them to be breached.
The FTC challenged the agreements, alleging that they “unreasonably restrain truthful, non-misleading advertising as well as price competition in search advertising auctions,” violating Section 5 of the FTC Act, 15 U.S.C. § 45. An administrative law judge (ALJ) subsequently found the agreements to violate Section 5. 1-800 Contacts appealed to the full Commission, which affirmed the ALJ’s decision. 1-800 Contacts appealed.
The Second Circuit vacated the FTC’s decision but noted that the FTC was correct to reject 1-800 Contacts’ argument that trademark settlement agreements are necessarily immune from antitrust scrutiny. Citing the Supreme Court decision in Actavis, the Second Circuit held, “the mere fact that an agreement implicates intellectual property rights does not immunize an agreement from antitrust attack.”
The Second Circuit disagreed with the FTC’s specific antitrust analysis, however. The Court held that the FTC erred by applying an “inherently suspect” analysis—also known as a “quick-look” analysis—rather than the rule of reason. The Court focused on the fact that “the restraints at issue here could plausibly be thought to have a net procompetitive effect because they are derived from trademark settlement agreements,” and the fact that the FTC acknowledged as much by finding that the company’s justifications were “cognizable and, at least, facially plausible.” The Second Circuit also noted that courts have limited experience with these types of agreements. The Court concluded that “[w]hen, as here, not only are there cognizable procompetitive justifications but also the type of restraint has not been widely condemned in our judicial experience . . . . [w]e are bound . . [...]
Under the administration of President Donald Trump, the US Department of Justice’s Antitrust Division has significantly ramped up its private litigation amicus program.
The Antitrust Division has filed an increasing number of amicus briefs and statements of interest at the appellate and district court levels in an effort to influence the development of antitrust law. In this articles, featured in Law 360, our authors explore how analysis of this advocacy may give us the shape of antitrust policy.
McDermott’s Annual European Competition Review summarizes key developments in European competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.
In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.
This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.
On 10 September 2019, European Commission President-elect Ursula von der Leyen nominated Margrethe Vestager as Competition Commissioner for a second consecutive term. As part of a structural shake-up of the Commission, involving the institution of eight Vice-Presidents, three of whom will be “Executive Vice Presidents”, she will additionally serve as “Executive Vice President for a Europe fit for the Digital Age”. As head of the competition portfolio Ms. Vestager will be supported by DG-Comp. As chief coordinator of the digital portfolio she will be supported by the Commission’s Secretariat-General. With respect to the latter role in particular, Ms. Vestager will be charged with ensuring that “Europe fully grasps the potential of the digital age and strengthens its industry and innovation capacity” and will be responsible for specific initiatives including new laws governing digital platforms and a potential tax on digital companies. Subject to European Parliament consent, which is expected to be given, she will carry out this dual rule until 2024.
What This Means:
Ms. Vestager’s mission as Competition Commissioner will be based on the following priority actions:
Strengthening competition enforcement in all sectors: this tenet focuses on improving case detection, expediting investigations and facilitating cooperation with and between EU national competition authorities, including global cooperation among competition authorities.
Evaluate and review Europe’s competition rules: this will cover antitrust regulations that are due to expire during her mandate (e.g. the Verticals Block Exemption Regulation (Reg. 330/2010), the ongoing review of the merger control rules and the review of State aid rules and guidance.
Use of the sector inquiry instrument in new and emerging markets: in the context of new and emerging markets, sector inquiries will be carried out in markets that the Commission believes are not working as well as they should, and that breaches of the antitrust rules might be a contributory factor. Ms. Vestager already presided over the Commission’s sector inquiry into the e-commerce sector in 2015.
Develop tools and policies to address the distortive effects linked to state-owned companies or subsidized companies from outside the EU but operating in the EU.
While it is somewhat unusual for a Competition Commissioner to be re-elected for a second term, her re-nomination serves as a testament to widespread appreciation for her unwavering commitment to ensuring consumer welfare. That being said, and against the Commissioner’s mandate to secure enhanced global cooperation amongst competition authorities, the move will likely raise eyebrows on Capitol Hill. This is principally because of Ms. Vestager’s alleged crusade against many of the biggest U.S. tech companies, a path likely to be pursued during the Commissioner’s second term in office. Indeed, her mandate over rule-making related to the digital economy could also give her increased influence over global tech regulation. Furthermore, her mission appears to be heavily influenced by the fall-out of the failed Alstom/Siemens railway merger. It will be interesting to see, for example, what role, if any, industrial policy will play under the EU Merger Regulation going forward. With Ms. Vestager’s focus [...]
Standard-essential patent holders and implementers may face uncertainty regarding licensing practices following a May 23 Texas court ruling. In the ruling, a Texas federal judge reached a conclusion different from a recent California court decision—FTC v. Qualcomm—on the question of whether an SEP holder must base its royalty rates on the “smallest salable patent-practicing unit” in order to comply with a fair, reasonable and non-discriminatory royalty commitment.
On May 21, a California federal judge ruled in favor of the Federal Trade Commission (FTC) in its suit against Qualcomm in a much-anticipated decision, concluding that Qualcomm violated the FTC Act by maintaining its monopoly position as a modem chip supplier through a number of exclusionary practices, including refusing to license standard essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. Qualcomm likely will appeal the decision to the US Court of Appeals for the Ninth Circuit, but in the meantime, the court’s sweeping decision is likely to affect the course of dealing between SEP-holders and licensees. The decision is likely to substantially affect the ways in which SEP-holders take their technology and associated components that they manufacture to market.
On February 15, a Texas federal jury found that Ericsson did not breach its obligation to offer HTC licenses to its standard-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. The verdict ended a nearly two-year dispute as to whether FRAND obligations preclude a licensing offer based on end products rather than components. Ericsson succeeded in convincing the jury that its FRAND commitment does not require it to base royalty rates for its SEPs on the value of smartphone chips rather than the phones themselves. The jury verdict suggests that other SEP holders may be able to successfully argue that basing royalty rates on end products rather than components does not violate their FRAND obligations.
Ericsson holds patents that the parties agreed are essential to the 2G, 3G, 4G and WLAN wireless communication standards, and made a commitment to several standard setting organizations to license those SEPs on FRAND terms. HTC makes smartphones that implement Ericsson’s SEPs and brought suit against Ericsson in April 2017, alleging that Ericsson overcharges for its SEPs.
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