Apple and Intel face roadblock in SoftBank antitrust patent dispute
District judge Edward Chen has dismissed a complaint filed by Apple and Intel after finding that their patent-related antitrust lawsuit against a SoftBank-owned investment company has “several shortcomings”.
Chen dismissed the technology companies’ complaint at the US District Court for the Northern District of California on Wednesday, January 6.
Apple and Intel filed an antitrust lawsuit against SoftBank Group-owned Fortress Investment Group and its affiliated entities in November 2019.
The companies alleged that Fortress has engaged in conduct which resulted in “actual anticompetitive effects”, such as “supracompetitive pricing” through inflated licensing royalties.
The court dismissed the case at Fortress’s request but allowed Apple and Intel leave to amend their complaint. After they filed an amended complaint, Fortress again asked the court to dismiss the matter.
In the amended complaint, Apple and Intel claimed that Fortress aggregated patents and then asserted or threatened to assert those patents against Apple and Intel. Fortress has allegedly aggregated more than one thousand patents covering high-tech consumer devices and software.
Certain entities “aggressively” pursue meritless patent litigation and Fortress is a firm which invests in these entities to fund their litigation, the technology companies said.
They also claimed that third parties, including Nokia, Huawei, Panasonic, and Philips, transferred their standard essential patents (SEPs) to Fortress. These SEPs were then asserted or threatened with being asserted against Apple and Intel.
By asserting those SEPs, Fortress can obtain royalties which are higher than they otherwise would be, because the original owners of the SEPs (Nokia, Huawei, Panasonic, and Philips) would have been required to offer use of the SEPs on FRAND (fair, reasonable, and non-discriminatory) terms.
On Wednesday, Chen explained that to determine whether Fortress’ conduct has had an anticompetitive impact, he must first consider what the relevant markets are.
However, Apple and Intel did not “adequately establish” the standing to assert antitrust claims in all of the product markets specified in their complaint, which is a “fundamental deficiency” of their case, according to Chen.
Also, although Apple and Intel had alleged that supracompetitive pricing was possible, it must also be plausible for “anticompetitive effects” to be established, he added.
“The plausibility threshold has not been met,” Chen said, as Apple and Intel did not show that Fortress extracted supracompetitive royalties as a result of their patent aggregation.
Finally, Chen dismissed Apple and Intel’s claim that Fortress’s conduct constitutes an unlawful business practice under the Federal Trade Commission Act. The technology companies had argued that Fortress “violates the spirit and policy of the antitrust laws”, but Chen found that this aspect of the claim “lacks merit”.
Chen dismissed all of the claims made by Apple and Intel in their amended complaint, some with prejudice and some without.
The claims dismissed without prejudice were based on nine particular markets, including mobile device-to-device communication and network-based video messaging, which Apple and Intel claimed that Fortress has asserted patents in.
Chen had said that the categories of those markets were not plausibly stated because they were “overbroad”. He also said that Apple and Intel failed to show that Fortress has market power in each of those markets, and that supracompetitive pricing in these markets is plausible as well as possible.
As this segment of the lawsuit was dismissed without prejudice, Apple and Intel can file a second amended complaint based on those nine markets within 30 days.
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