Intellectual Property Owners AssociationIP Chat Channel

November 4, 2009

Strategy for Defendants in Multi-Defendant Patent CasesUnited We Stand?

Joint Defense of IP Claims:Antitrust Considerations

M. Howard MorseDrinker Biddle & Reath LLP

Washington, DC

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Is it OK for Defendants to Cooperate?

Not a problem Agreeing to share costs to finance a court test of validity

Jointly hiring a lawyer to opine on the validity of a patent

Indemnifying and defending a customer sued for infringement

Entering an agreement for counsel to share “joint defense material”

legal memoranda, opinions of counsel, witness statements, interview reports, fact summaries, factual analyses, mental impressions, theories and strategies

EfficienciesReduce legal costs, overcome hold-up, clear patent thickets, overcome “double marginalization”

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Is it OK for Defendants to Cooperate?

ProblematicCompetitors jointly exercising settlement authority,

agreeing on maximum future royalties, or

agreeing not to settle

UncertainAgreeing not to settle without notifying others

Retaining joint counsel to handle settlement negotiations

Sharing competitively sensitive confidential information

Joint conduct before litigation

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The Antitrust Concern

Buyer Cartels

Concerted refusals to buy are no less a violation of the antitrust law than concerted refusals to sell

Buyer cartels, the object of which is to force down the price that suppliers charge, are illegal per se

Defendants who act jointly, at a minimum, must retain independent decision making authority

Even a commitment to communicate with others before negotiating limits individual freedom

May reduce incentives to invest in innovation

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Key Precedents

Jones Knitting Corp. v. Morgan (E.D. Pa. 1965; 3d Cir. 1966)

Defense fund “to challenge the validity” of a patent lawful, but group formed “for purposes of refusing to negotiate with [the patentee] for licenses” is per se illegal group boycott

Gould v. Control Laser Corp. (M.D. Fla. 1978)

Agreement to take license only on terms dictated by group would be judged under rule of reason; summary judgment granted since no evidence “agreement to share costs of litigating the validity” of a patent extended to terms of settlement

Lemelson v. Bendix Corp. (D. Del. 1985)

Antitrust claim rejected where defendants retained common counsel to conduct settlement negotiations and shared information regarding offers, reasoning “as long as there is not evidence that a defendant surrendered its decision-making capacity, there is no basis for antitrust liability”

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Key Precedents

PrimeTime 24 Joint Venture v. NBC (2d Cir. 2000):

“Although coordinated efforts to enforce copyrights against a common infringer may be permissible, copyright holders may not agree to limit their individual freedom of action in licensing future rights to such an infringer before, during, or after the lawsuit”

Sony Elecs. v. Soundview Tech. (D. Conn. 2001)

Motion to dismiss claim that potential licensees engaged in price fixing and group boycott not to accept a license by establishing a maximum price for a license to patents denied

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Noerr- Pennington

Noerr-Pennington doctrine immunizes defendants from antitrust liability for efforts to petition the courts, based in part on the First Amendment

Coordinated efforts to defend against a lawsuit are protected unless a “sham”

There is some uncertainty whether pre-litigation conduct is protected

Globetrotter Software v. Elan Computer Group (Fed. Cir. 2004) (“our sister circuits, almost without exception, have applied the Noerr protections to pre-litigation communications”)

Cardtoons, L.C. v. Major League Baseball Players Ass’n (10th Cir. 2000) (“letter from one private party to another … does not implicate the right to petition, regardless of what the letter threatens ... because there was no petition of the government”)

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Information Sharing

OK to share information “on outside counsel only” basis

OK to share information relating to patent validity

Sharing confidential information with business officials, relating to damages and infringement, may be problematic

Competitively sensitive information should not be shared with competitors if it may facilitate collusion

sales, price, cost and profitability data

technological information

OK to share damages theories and claim construction strategies

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M. Howard MorseDrinker Biddle & Reath LLP

1500 K Street, N.W.Washington, D.C. 20005

202-842-8883howard.morse@dbr.com

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