Magistrate Judge Fallon recently Recommended Dismissing competition law counterclaims brought by TCT Mobile (TCT) against Godo Kaisha IP Bridge 1 (IP Bridge) and Panasonic and Judge Bataillon has now Adopted that ruling. Those counterclaims were based on alleged improper conduct relating to standard essential patents (SEPs) on European Telecommunications Standards Institute (ETSI) 2G, 3G and 4G wireless standards that IP Bridge acquired from Panasonic after those standards were adopted. While the standards were under development, Panasonic had committed to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms. TCT’s competition law counterclaims generally concerned allegations that:
- Panasonic made FRAND commitments it did not intend to keep in order to induce the standards body to keep Panasonic’s technology in the standards;
- After the standards were adopted, Panasonic transferred the patents to IP Bridge which offered to license the patents on terms that were not FRAND and
- There was some type of improper concerted action between Panasonic and IP Bridge (this aspect is fairly redacted and unclear).
This case presents an interesting nuance of competition claims against a party (IP Bridge) that acquired SEPs from an original owner (Panasonic) who made a FRAND commitment. In this case, TCT alleged that something about the transfer of the patents to IP Bridge was meant to circumvent Panasonic’s FRAND commitment (but the details of those allegations are redacted in the public court documents).
This case also indicates that an antitrust injury-in-fact cannot arise solely from a patent owner filing an infringement lawsuit on FRAND-committed SEPs. That’s because a successful FRAND defense by the accused infringer will lead to remedies consistent with the FRAND commitment and, in any event, any relief ultimately granted by the court would be lawful.
The decision also has a unique procedural posture. This is a decision by a magistrate judge that recommends to the presiding district court judge how to rule on the issue. Such magistrate judge recommendations are common in patent cases. The presiding district court judge usually adopts a magistrate judge’s recommendation, but is not required to do so. So we will await the district court judge’s decision whether to adopt Judge Fallon’s recommendation here.
Further, this decision concerns a Rule 12(b)(6) motion to dismiss causes of action based on the initial pleadings. Such motions are difficult to win because of the tremendous deference the court must give to the challenged pleading — e.g., the court considers whether TCT states a “plausible” claim if the court assumes (without deciding) that all factual allegations TCT raises are true and draws all reasonable inferences in TCT’s favor. And courts are even more reluctant to grant a Rule 12(b)(6) motion against competition law claims, which may be factually complex and require information in the hands of the alleged wrong-doer that can be obtained only in discovery. In this case, however, TCT apparently had almost a year of discovery and two attempts to plead its competition law claims, which may have provided the court more comfort in its dispositive ruling here.