Avanci secures dismissal of Continental antitrust suit
In a victory for patent pool operator Avanci, a Texas judge dismissed German automotive parts maker Continental’s antitrust claims late last week.
On Thursday, September 10, District Judge Barbara Lynn dismissed the lawsuit brought by Continental—which makes parts for Daimler and Volkswagen—against members of Avanci, including Nokia, Sharp and Conversant Wireless.
Continental had accused the patent pool of violating antitrust laws when it negotiates licence agreements for standard-essential patents (SEPs) with automakers, instead of the component makers.
According to Continental, while the licensing pool is “purportedly intended to allow customers to obtain from a single supplier licences for many necessary 2G, 3G, and 4G SEPs, it is actually an agreement between defendants to require non-Fair, Reasonable and Non-Discriminatory (FRAND) terms for SEP licences”.
Continental argued that these licences are only offered to automakers, who are “better positioned and thus more likely to accept those excessive, unreasonable terms than would component suppliers like plaintiff”, explained Lynn in her opinion.
In its suit, filed in May last year at the US District Court for the Northern District of California, Continental argued that the defendants had “collusively agreed” to only offer licences at the automaker level, in a bid to obtain “elevated royalties that far exceed any measure of FRAND”.
Continental claimed that it had sought a licence from each of the defendants, including Avanci, but had been met with either refusals to offer a direct licence, or no response whatsoever.
Several of the defendants subsequently moved to transfer venue to the US District Court for the Northern District of Texas, and this was ultimately granted. While the motion for venue transfer was pending, Avanci also filed a joint motion to dismiss the suit.
In dismissing the suit, Lynn said: “The court finds that plaintiff’s theories of defendants’ unlawful agreement to price fix through the Avanci platform and unlawful monopolisation through deception of the standard- setting organisations are legally untenable, and it is ordered that these claims are dismissed with prejudice.”
The court partly relied on a US Court of Appeals for the Federal Circuit decision from August this year, which overturned a landmark antitrust ruling against Qualcomm, in a defeat for the US Federal Trade Commission.
Qualcomm licenses its SEPs exclusively to end-product manufacturers of smartphones and smart cars and, according to the Federal Circuit, the company was within its rights to do so.
Lynn noted that the anticompetitive conduct allegedly directed at the downstream automakers doesn’t create an antitrust injury for the upstream component suppliers, like Continental.
“Therefore, plaintiff has not alleged that it has suffered the antitrust injury necessary for it to have antitrust standing,” she said.
Lynn added: “It is not anti-competitive for an SEP holder to violate its FRAND obligations … A patent owner may use price discrimination to maximise the patent’s value without violating antitrust law.”
After dismissing all of Continental’s federal question claims, the court declined to exercise supplemental jurisdiction over the German component maker’s remaining declaratory judgment, breach of contract, promissory estoppel, and unfair competition claims, and dismissed them for lack of subject matter jurisdiction.
Kasim Alfalahi, founder and CEO of Avanci, said that the pool was pleased with the dismissal.
“This decision further confirms that Avanci’s one-stop licensing solution for the auto industry is consistent with US antitrust law. We look forward to building upon our unprecedented success in bringing both the wireless industry and automotive industry together in our collaborative licensing solution,” added Alfalahi.
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