Context: The Northern District of California has become a particularly popular venue for bringing antitrust claims that involve patent litigation and/or licensing. Its judges are considered more receptive to expansive antitrust ideas, and less patentee-friendly, than those in other districts. But since FTC v. Qualcomm, which was overturned on appeal, patent-related antitrust claims have typically failed in that district.
What’s new: On Friday (May 3, 2024), Judge P. Casey Pitts of the United States District Court for the Northern District of California granted a motion by MediaTek, IPValue and its Future Link subsidiary to dismiss an antitrust complaint by Realtek over a $1 million “bounty” in a patent license agreement for either entering into a license agreemen with Realtek or bringing litigation against the company. The decision is primarily based on the Noerr-Pennington doctrine that protects petitioning the government, including the filing of litigation. Furthermore, Judge Pitts appears inclined to believe the complaint is also barred by the anti-SLAPP statute protecting free speech. While the judge appears rather skeptical of whether it will lead to a different result, he did grant leave to amend.
Direct impact: It appears unlikely that an amended complaint will help. Discovery has been stayed as it is doubtful that it will ever happen. The case will most likely be dismissed again, and then (more likely than not) with prejudice. If Realtek appeals a final dismissal to the Ninth Circuit, the most likely outcome is that its antitrust complaint will once again be deemed deficient, though possibly on a more nuanced basis.
Wider ramifications: Similar contractual clauses to the one at issue in this case may become more popular going forward, though some may first await the outcome of a potential appeal.
This is the contract clause at issue:
In addition to the above 3 payments, [MediaTek] shall pay an additional $1.0 million U.S. dollars on 15 February 2022 if [FutureLink], prior to 01 January 2022, either executes a patent license agreement with or institutes litigation against one or more of the following companies: (a) Realtek Semiconductor Corporation, or (b) Amlogic.
What happened was litigation over three U.S. patents as well as (more recently) in Japan by IPValue’s Future Link against Realtek. The U.S. cases have not succeeded so far.
While the above clause looks like paying a “bounty” for going after a MediaTek rival, it is common in patent licensing that companies want to ensure their competitors will also be licensed, or that the patent holder will at least make a serious effort to get them to take a license. In Germany, Deutsche Telekom brought a case against IPCom, a patent licensing firm that by now is also engaging in R&D of its own, despite a contract clause explicitly stating that IPCom was under no obligation to take any action against Deutsche Telekom’s competitors. That case (involving standard-essential patents, which fall under antitrust law in the EU) was thrown out by the Mannheim Regional Court, a decision that the Karlsruhe Higher Regional Court affirmed. Deutsche Telekom filed a petition for review by Germany’s highest court, the Federal Court of Justice.
The contract clause between Mediatek and IPValue/Future Link over which Realtek sued could alternatively have entitled the licensee to a discount if after a certain time any of a list of specified rivals (here, Realtek and Amlogic) had not taken a license or been hit with an infringement lawsuit.
The short version of how Judge Pitts (who by the way succeeded Judge Lucy H. Koh, the FTC v. Qualcomm judge, after her promotion to the Ninth Circuit) arrived at this decision is this:
- Noerr-Pennington protects not only litigation itself, but also litigation-related actions such as funding litigation.
- In order to overcome Noerr-Pennington, there would have to be a clear case of sham litigation. Realtek claims that a “sham series” of lawsuits was brought, but given that the contractual bounty is due based on a single lawsuit, the word “series” appeared misplaced to the judge. And he says the focus must be on whether someone uses the sham litigation process itself for anticompetitive purposes as opposed to the potential outcome of those cases.
- Judge Pitts also feels that even if Noerr-Pennington was overcome, there likely wouldn’t be an antitrust injury, but he didn’t have to reach question.
- He furthermore denied without prejudice (as it’s not an issue for now) IPValue and Future Link’s anti-SLAPP theory for dismissal. The anti-SLAPP statute protects the exercise of First Amendment rights, and Judge Pitts is inclined to consider it to apply to this fact pattern as well, but there is no need to resolve that question, at least for now.
Finally, here’s the order dismissing the complaint with leave to amend: