Report: Bundeskartellamt releases 2-year antitrust enforcement statistics

The Bundeskartellamt (German Federal Cartel Office) has released its “Tätigkeitsbericht 2011/2012” (a summary report of its most recent two-year activity).

What stands out to me is that the BKartA/FCO initiated only 28 second-phase reviews of notified mergers in 2011 and 2012 (out of 1108 and 1127, respectively). That’s merely 1.25% of in-depth reviews. 6 proposed deals were prohibited and 2 allowed with “strict conditions imposed.”

On the cartel front, the agency found infringements in 34 cases, yielding fines of 190m and 360m Euros in 2011 and 2012, respectively.  By far the highest fine was doled out in the rail track cartel, amounting to 124.5m Euros thus far (with further investigation in related markets ongoing).

The Bundeskartellamt also investigated 67 abuse-of-dominance cases and initiated several sectoral inquiries, as well as pushing forward its central “gasoline price transparency” project.

FTC probe of patent troll activity driven by competition concerns

The dual risks of limiting competitiveness and restraining innovation have caused the Federal Trade Commission to announce a probe of patent trolls.

FTC Chairwoman Edith Ramirez is planning to wield the agency’s subpoena power to launch a 6(b) investigation** into the trolls’, or so-called Patent Assertion Entities’ (PAE), litigation strategies and business methods, as they “raise red flags for competition and consumers.”  FOSSpatents reported on the webcast of the announcement here.

This sounds very much like my first post on this blog, in which I discussed affirmative, strategic discovery steps a defendant facing an NPE/PAE/troll should take to defend vigorously against unfounded infringement claims that are designed solely to extract a nuisance-value settlement, as litigation would not be cost-effective.  Maybe Chairwoman Ramirez read my piece?  Maybe not, but FTC staff certainly reviewed the EFF’s public comment on curbing PAE/troll activity, in which the Electronic Frontier Foundation demanded:

“The FTC should consider deploying its investigatory and enforcement powers against PAEs. EFF believes that at least some PAE litigation, especially that brought against end-users, seriously harms consumers and may not be entitled to Noerr-Pennington immunity.”

This enforcement investigative effort (the FTC acknowledges that it may lack proper jurisdiction over the patent-related portions and may leave actual enforcement to other branches of the federal government) comes on top of the legislative initiatives and bills discussed previously on this blog.

** A so-called 6(b) request involves Section 6 of the FTC Act, 15 U.S.C. Sec. 46.  Its sub-section 6(b) empowers the Commission to require the filing of “annual or special … reports or answers in writing to specific questions” for the purpose of obtaining information about “the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals” of the entities to whom the inquiry is addressed.  Recipients of a 6(b) order may file a petition to limit or quash, and the Commission may seek a court order requiring compliance. In addition, the Commission may commence suit in Federal court under Section 10 of the FTC Act, 15 U.S.C. Sec. 50, against any party who fails to comply with a 6(b) order after receiving a notice of default from the Commission. After expiration of a thirty-day grace period, the defaulting party is liable for daily penalties, each day of noncompliance.

Concepcion’s class arbitration prohibition also applies to antitrust cases

The U.S. Supreme Court has ruled that AT&T v. Concepcion wasn’t merely about preemption by the Federal Arbitration Act.  It goes all the way — and as long as a statute does not call for or expressly allow class resolution of claims brought under it (which statute does that anyway?), a class arbitration waiver is in principle enforceable, according to yesterday’s 5-3 decision in American Express Co. et al. v. Italian Colors Restaurant et al., case number 12-133.

Class plaintiffs who attempt to rely on the theory that “effective vindication” of their federal statutory rights would be thwarted by upholding a class waiver in arbitration agreements will likely fail, post-Italian Colors.  Held Justice Scalia curtly: “[T]he antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.”  The judge-made “effective vindication” argument “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable.  But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

The case marks a high point (for some, a low point) in the contra-class trend of the last several years, giving further ammunition to those who had already thought that Concepcion would mark the de facto end of class arbitration of disputes — the expectation there is that every company that had an arbitration clause in its contracts would simply amend it to prohibit class arbitrations, thereby effectively circumventing the often sole affordable mechanism for low-value (but numerous) claims.  Credit cards or debit swipe fees (small, but there are billions of them every day) are but one example.  And since Italian Colors, antitrust is now explicitly in the mix!  In the words of Justice Kagan — whose scorn for the majority opinion is best expressed by her as “a betrayal of our precedents, and of federal statutes like the antitrust laws” for a plaintiff attempting to vindicate his federal Sherman Act rights to proceed in a low-dollar value case on a non-class basis may well have become a “fool’s errand” post-Italian Colors.

 

UPDATE: See also the Paul Hastings client alert on American Colors here.

European Union Competition Report released by EU Commission

EU Commission

EU Commission releases 2012 “Competition Report”

The Commission has released its 43rd Report on Competition, including an instructive Staff Working Paper.  The Report itself is similar in nature to the US DOJ Antitrust Division’s Annual Report.

Worth a read to any competition law practitioner…

Draft E.U. Commission paper on private antitrust damages leaked?

Final Commission guidance on private AT actions imminent?

BusinessWeek’s Stephanie Bodoni reports that Bloomberg has obtained “draft plans” by the European Commission to level the playing field across Europe when it comes to private damages actions (often follow-on cases, but also conceivably stand-alone claims) brought by plaintiffs in the national courts of the E.U. member states.

According to the report, the draft “stop[s] short of forcing nations to allow group lawsuits,” thereby evading the tricky question whether or not to “import” U.S.-style class actions or the less-drastic collective-action mechanism of some E.U. members states (e.g., the UK, NL).

It’s about time.

Any such paper, if real, has been in the making for years, given the history of the E.U. Commission’s (lackluster, because so delayed?) efforts in this regard. The Green Paper came out in 2005, the subsequent White Paper in 2008. We’re now 5 years into … nothing.

Sad times for IP trolls — a multi-front war on NPEs has begun

Sad-Troll

It’s been a sad time for trolls lately.

As we reported here yesterday, a U.S. Congressman has introduced proposed legislation to combat patent trolls, AKA non-practising entities (“NPEs”), from hiding behind multiple layers of shell corporations that, in turn, own the patents-in-issue outright or are exclusive licencees thereof.

That’s not all the trolls’ worries, however.  In Europe, the European Commission recently issued a public tender notice, calling for a study on “the Changing Role of Intellectual Property in the Semiconductor Industry

Call for tenders: The European Commission will launch soon a call for tenders for a service contract of a maximum value of EUR 60 000.

The purpose of this call for tenders is a study which will firstly focus on the expected changes in IP strategies and patenting practises of the semi-conductor industry due to the concentration/specialisation, the emergence of foundries and fabless, technological developments in the sector and the appearance of non-practising entities (NPE). Secondly the study will focus on the effects these developments will have for the further development of the global semiconductor sector in general and the European clusters in particular.

That’s not good troll news, as any two-front war (here, EU and U.S.) is exponentially harder to win than one with a single enemy.  (Ask the Germans, they know.)

“But wait, there’s more!”

If the proud northern state of Vermont can be counted as a “third [and potentially fourth] front,” it just earned that right in the war on patent trolls: the state’s Attorney General stated on 22 May 2013 that Vermont had sued an NPE troll for violating the VT consumer protection laws, a “groundbreaking” one-of-a-kind suit for the state (indeed, for any state to date.  More to come, I’m sure…).

Attorney General Bill Sorrell issued the following press release:

Vermont Attorney General Sues “Patent Troll” in Groundbreaking Lawsuit (May 22, 2013)

In an effort to protect Vermont’s small businesses and non-profit organizations, Attorney General Bill Sorrell filed a first-of-its-kind lawsuit today against MPHJ Technology Investments, LLC. It marks the first time that a state attorney general has filed suit against a so-called “patent troll.” The complaint alleges that MPHJ Technology has engaged in unfair and deceptive acts under Vermont’s Consumer Protection Act.

MPHJ Technology claims to have a patent on the process of scanning documents and attaching them to email via a network. The Attorney General’s complaint alleges that the company has sent letters containing multiple deceptive statements and demanding about $1,000 per employee, to many Vermont small businesses as part of a nationwide campaign. At least two of those businesses are non-profits that assist developmentally disabled Vermonters.

Patent trolling is a national problem. A recent major study out of Boston University estimated the cost of patent trolling on the US economy at $29 billion in 2011 alone. Representative Peter Welch recently co-sponsored the Saving High-Tech Innovators from Egregious Legal Disputes (“SHIELD”) Act of 2013 in Congress to address the problem and the Federal Trade Commission held a workshop to address patent trolling in December 2012.

The Vermont Legislature passed first-in-the-nation legislation creating a new tool for targets of patent trolling and for the Attorney General to address the issue. Governor Peter Shumlin is expected to sign the bill into law today.

Gov. Shumlin indeed signed into law the amendment that permits lawsuits against patent holders making bad-faith IP infringement allegations.

Oh, it’s not over yet…

“If you call within the next 10 minutes, we’ll include yet another U.S. Senate anti-troll bill for free!

This is in addition to the [fifth-front? I’ve stopped counting] simultaneous introduction by U.S. Sen. John Cornyn (R-Tex.) of the “Patent Abuse Reduction, requiring greater levels of claim disclosure by plaintiffs, identification of related entities, and greater cost risks for unsuccessful claimants as well as cost-sharing of extensive U.S.-style patent discovery that goes beyond the “core documentary evidence”.

Call now!

We can’t wait to see the comments of the likes of NTP, Wi-LAN, Ray Niro and other NPE-specialised attorneys on these multi-pronged attacks.  I’m sure they will (quite likely much more quietly, because nobody want to support a ‘troll’ publicly) lobby against the proposed legislative initiatives.  Yet, they will have a tough time arguing that they are being targeted unfairly.  That’s because there’s a difference to “tort reform”, i.e., prior decades’ Republican complaints about personal-injury and product-liability lawsuits.  What’s different this time around about the ‘war’ on plaintiffs’ lawyers and allegedly “frivolous” lawsuits is that the legislative and executive governmental attacks on IP NPEs and their lawyers/lawsuits come from all political stripes & colours, not just Republicans

IP-ID? Identifying patent ownership – a patent troll’s nightmare?

patenttroll

[Our first blog post was on patent trolls.  Here we go again, as it is mildly related to competition issues.]

In an effort to “bring much-needed transparency to our current patents system,” Congressman Ted Deutch (D-Fla.), has introduced proposed legislation that would require any sales or transfers of patents to be disclosed to the Patent and Trademark Office (PTO), including information on the real “party in interest.”

The bill (H.R. 2024), bearing the common name “End Anonymous Patents Act”, would require this “IP-ID” (our moniker) for all new patents and for existing patents upon scheduled maintenance fee payments.

According to Deutch:

“Patent trolls go to great lengths to conceal the relevant ownership and interests involved. This total lack of transparency by people seeking to game the system unfairly disadvantages businesses honestly seeking to license patents and those targeted in frivolous lawsuits brought by trolls.”

An IP professor at Santa Clara Univ. School of Law wrote in her year-old paper, “The Who Owns What Problem in Patent Law, that “the ‘who owns what’ problem frustrates risk management and decision-making about patents, creates arbitrage and hold up opportunities, and forms a major component of patent notice failure.”

While some interest groups, such as the Electronic Frontier Foundation (“EFF”), want even more disclosure than what the pending House bill proposes — including identification of license(e)s — the “IP-ID” proposal would go a long way toward eliminating patent trolls’ ability to hide behind various layers of shell companies.

Class Actions in South Africa? Attend the 12 June 2013 seminar @ Wits Law School

Nortons Inc., together with the South African Chamber of Commerce and Industry (SACCI) and the Mandela Institute at Wits School of Law, have gathered together a panel of experts to discuss the judgment, handed down by Judge Wallis of the Supreme Court of Appeal last year, and the effects it has on South Africa’s jurisprudence.

The seminar is entitled: “A new class – the problems and promises of class action litigation in South African law” and runs from 8:00 am – 4:30 pm on Wednesday, 12 June 2013, in Johannesburg at the Wits School of Law (map).

For more information, a full schedule, and to sign up, please visit the event page here.

Background:

On 29 November 2012, Judge Wallis of the Supreme Court of Appeal (the “SCA”) handed down judgment in The Trustees of The Children’s Resource Centre / Pioneer Foods (Pty) Limited & Others. The case related to the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products (the “Bread class action litigation”).

The appeals were brought by a bread distributor in the Western Cape and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

In its decision the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution required that it would be the most appropriate means of litigating the claims of the members of the class. The SCA then laid down the requirements for such an action, commencing with the need for certification by the court at the outset, before even the issuing of summons. For this purpose, the SCA set out the following criteria before a court could certify a class action:

  • there must be an objectively identifiable class;
  • a cause of action must exist which raises a triable issue;
  • there must be common issues of law and fact that can appropriately be dealt with in the interests of all members of the class;
  • there must be appropriate procedures for distributing damages to the members of the class; and
  • the representatives must be suitable to conduct the litigation on behalf of the class.

The SCA found that the appellants’ case had changed during the course of the litigation; and it held that their definition of the proposed class was over-broad and the relief they sought inappropriate. However, Wallis JA held that their claim was potentially plausible and, as this was the first time that the SCA had laid down the requirements for bringing a class action, it was appropriate to afford the appellants an opportunity to remedy the flaws in their papers in compliance with these new requirements.  Accordingly, the SCA remitted the matter back to the WCHC.

Paul Hastings makes GCR’s “Highly Recommended” list

Quoting from Global Competition Review, here is its assessment of Paul Hastings’ antitrust and competition practice in D.C.:

GCR logo

The Washington practice at Paul Hastings has had a banner year. Led by the highly regarded Michael Cohen, the firm added partner and Who’s Who Legal nominee MJ Moltenbrey from Dewey & LeBoeuf last year, capping off multiple strategic additions to the practice in offices around the country. “The strategy was to build the practice that fit with what we saw happening in the world,” Cohen says, which included adding to the bench in DC, stretching into the vibrant San Francisco market and growing organically in Europe. The practice now includes 23 lawyers in the district handling the full range of antitrust work in courtrooms and before enforcers.

Headline matters have filled the firm’s docket over the past 18 months or so. None loom larger that its work for American Airlines – a long-time client of both the firm and Moltenbrey – in its pending tie-up with rival US Airways that is under review at the DoJ. The group is also acting for eBay in the government’s anti-competitive hiring practice lawsuit against it, and Twin America in the antitrust division’s New York tourist bus case. It advised Dow Chemical in a price-fixing trial in Kansas City; LG in the LCD litigation; Korean Air in the ongoing air cargo class actions, and hosts of other high-profile work.

 

Dutch suit against “paraffin mafia” cartel moves forward

A Dutch district court has set what some believe may be a new landmark precedent in the area of private cartel enforcement in the European Union.

The case is what appears to be a fairly straight-forward “follow-on” civil action, i.e., a complaint brought in civil court by injured parties (or those who acquired those parties’ rights to sue) that is based entirely on a European Union Commission decision condemning illegal cartel activity within the common EU market.

My neighbors on the Avenue Louise here in Brussels, CDC (Cartel Damages Claims), had bought the rights to sue from various purchasers of paraffin wax and lodged the complaint against the “paraffin mafia” (Shell’s words, quoted by Neelie Kroes – also see here)  in September 2011. The 13-year cartel (1992-2005)** may well result in sizeable civil damage awards (Sasol’s reduced EC fine alone was 318 million €) once the procedural and jurisdictional hurdles have been cleared.  And this most recent ruling goes a long way in doing so.  The key “procedural issues” that had to be resolved first were whether all of the cartel members could be sued in the Netherlands, even though not all of them operated in that country, and whether the pending EU court appeals against the 2008 Commission decision effectively stayed the parallel civil proceedings in the Dutch court.

The court ruled in favour of the plaintiff group on both accounts, holding that all cartelists could be sued together for damages in the jurisdiction in which any one of their fellow co-conspirators has its seat [here, that would notably be Royal Dutch Shell, ironically the cartel’s whistle-blower that escaped the EC ruling with a zero-€ fine] . That is, even though purported ring-leader Sasol or any of the other [non-Dutch] alleged cartelists may not have had any operations in the Netherlands, they can still be subject to a full-blown civil lawsuit there. In effect, the ruling says that the European Union’s antitrust decisions, combined with the civil protections afforded EU companies and citizens, creates a de facto long-arm statute, reaching beyond the traditional geographic jurisdictional boundaries.

In addition, it held that a pending appeal against an EC cartel decision should not result in an automatic stay of any civil proceedings, as this would unduly curtail the fundamental right to seek compensation of injured parties under EU law.

While I don’t read Dutch — and therefore cannot analyse the actual decision of the NL royal court — I trust that CDC summarised its findings accurately, even though the company clearly has a stake in this and thus a likely bias.

** According to Neelie Kroes’s speech, the cartelists initially met at the “Blue Salon” at a Hamburg hotel bar (my home town, coincidentally). I have a feeling it was this place — it’s always fun to visualise cartel activity in the flesh, just like “The Informant” did for moviegoers in 2009…:

Blauer Saal Kempinski Hamburg