Beverly A. Berneman
Sex predicting technology for bovines is an extremely lucrative business. The revenues are $200 million industry worldwide with about $50 million of that in the USA.
Inguran, Inc. d/b/a Sexing Technologies owns patents that sort bovine semen as it is prepared for artificial insemination. This helps breeders control how many bulls and how many cows will be born. Obviously, the technology is very valuable in the dairy industry and in the cattle breeding business.
ABS Global Inc. filed an antitrust suit against Sexing Technologies. ABS alleged that Sexing Technologies used anti-competitive contracts and acquired about 60 patents in order to corner the market on sexed bovine semen.
Sexing Technologies filed a counterclaim against Sexing Technologies for infringing on about 6 patents.
The matter went to trial in 2016. The jury returned a mixed verdict finding that Sexing Technologies did improperly corner the market but that ABS was not entitled to damages because it didn’t prove anti-competitive harm. The jury found in Sexing Technologies’ favor on the counterclaim and awarded it $2 million.
The decision was appealed. The Seventh Circuit Court of Appeals reversed the decision. The Seventh Circuit found the jury verdict “somewhat puzzling” and contradictory. The verdict had invalidated a claim that was dependent on a validated claim. So the Seventh Circuit remanded the matter back to the trial court for a new trial.
At the conclusion of the new trial, the jury found in Sexing Technologies’ favor again and also found that two other patents were infringed. The jury added another $8.5 million to the original judgment raising the total award to Sexing Technologies to almost $11 million.
WHY YOU SHOULD KNOW THIS. Patent infringement litigation can be long, arduous and expensive. Sometimes, there are rewards at the end. Sometimes there aren’t. The outcome of patent litigation is not as easy to predict as breeding livestock with sexed bovine semen. ABS took a huge risk when it pursued antitrust litigation. Patents, by their nature, are anti-competitive. A patent gives the owner a monopoly on the use of the invention for 20 years. The owner can use the invention pretty much any way they want during the life of a patent. That doesn’t mean that a patent forecloses antitrust litigation. It just means that the anti-completive activity has to be more than practicing the patent.
Beverly A. Berneman
Qualcomm is a leader in the market of wireless chip connectivity that every cell phone needs. Qualcomm holds patents related to 3G, 4G and 5G networking technology as well as other software. Qualcomm demanded a license fee for every device that connects to a cellular network. In other words, all cell phones. It forced its customers, like Apple, to enter into patent license agreements for Qualcomm’s technology; even if the customer was using a chip manufactured by someone else, like Intel.
Enter the Federal Trade Commission (FTC). The FTC investigated Qualcomm and concluded that it was violating antitrust law. Antitrust law prohibits anticompetitive trade practices, i.e. monopolies. The FTC asserted that Qualcomm violated antitrust laws by forcing its customers to enter into patent license agreements for Qualcomm’s technology in order to purchase its chips. After a bench trial, the court entered judgment in the FTC’s favor. The court held that Qualcomm had a “no license, no chip” policy. Because of this policy, Qualcomm charged excessively high royalties. Not to get too complicated, but when a software company owns and licenses a standard essential patent (SEP), there are reasonable terms for licensing the software or Fair, Reasonable and Non-Discriminatory (FRAND) terms. Qualcomm’s excessive license fees violated FRAND. This resulted in injury to the consumer by increasing the cost of cell phones. The court came down hard on Qualcomm. Among other things, it required Qualcomm to end the “no license, no chip” policy. Qualcomm has to renegotiate its licenses in accordance with FRAND terms. Qualcomm is going to have to submit to compliance and monitoring procedures for seven years.
WHY YOU SHOULD KNOW THIS. What Qualcomm did is often described as “tying”. Qualcomm tied the licensing of the software to purchase the hardware. And it looks like Qualcomm also tied its software to the hardware of its competitors. This is called “horizontal” tying. Most businesses are rarely going to be in Qualcomm’s position. But if a business has a “golden ticket” type of technology, it can’t lock customers in and cut out competitors by tying its technology. Most businesses are more likely to find themselves in the position of Qualcomm’s customers. When presented with a “tied” product and licensing situation, it’s best to seek advice of counsel.
Beverly A. Berneman
Premier Comp Solutions LLC develops customized panel listings of healthcare providers for workers’ compensation claims. The technology allows employers to contain workers’ compensation costs by ensuring that a chosen healthcare provider complies with local workers’ compensation laws with respect to qualifications, licensing and quality of care. The beauty of the system is that it can be localized by the state where the employee is located. The system was protected as a trade secret.
Sounds great for an employer with lots of employees in different states who have lots of workers’ compensation claims, right?
Premier Comp alleged that its competitors, UPMC Benefit Management Services, Inc. and MCMC, LLC, thought it was great too. So, Premier Comp says, they conspired to misappropriate Premier Comp’s trade secrets. Premier Comp sued UPMC and MCMC for trade secret misappropriation and for antitrust violations. Antitrust laws protect trade and consumers from companies who work together on anti-competitive practices such as price-fixing, restraints on trade, price discrimination and monopolies. A plaintiff must prove: (1) concerted action by the defendants in furtherance of restraint of trade; (2) that concerted action produced anti-competitive effects within the relevant product and geographic markets; (3) that the concerted action was illegal; and (4) that the plaintiff was injured as a proximate result of the concerted action.
The district court granted the defendants’ motion to dismiss the antitrust claims. The court rejected Premier Comp’s argument that UPMC and MCMC working together created a per se antitrust violation. The misappropriation may have violated trade secrets laws. But circumstantial evidence that the defendants worked together doesn’t automatically create an antitrust violation. The court didn’t reject the idea of using antitrust in a trade secret misappropriation case; just that Premier Comp didn’t have enough facts to prove it. Premier Comp failed to demonstrate that: (1) it is a competitor of the defendants; (2) its injury stems from a competition-reducing aspect or effect of the defendants' behavior; (3) it was shut out of the relevant market; and (4) there was harm to competition in the relevant market.
WHY YOU SHOULD KNOW THIS. Antitrust violations can result in treble damage and an award of attorneys’ fees. So Premier Comp understandably wanted to increase the potential recovery for UPMC and MCMC’s behavior. But, Premier Comp didn’t have facts to support its antitrust claims.
Happy Anniversary to IP News for Business. Today’s blog marks the 5th anniversary of this blog. Thank you to all who have read, enjoyed and maybe learned something from this blog over the years.