Court Approves 24.3 Million in Attorneys' Fees in Pay-For- Delay Litigation

Transcription

1 WRITTEN BY SHYLAH R. ALFONSO AND LOGAN BREED JUNE 30 -JULY 6, 2014 PATENTS Court Approves 24.3 Million in Attorneys' Fees in Pay-For- Delay Litigation On June 30, a federal judge in Tennessee issued an order awarding $24.3 million in attorneys' fees (or one-third of the settlement amount) to class counsel in In re Skelaxin (Metaxalone) Antitrust Litigation, Case No. 2:12-cv The underlying litigation concerned an arrangement whereby Pfizer's King Pharmaceuticals, Inc. allegedly made more than $200 million in reverse payments to generic drug maker Mutual Pharmaceutical Co. ( Mutual ) so that Mutual would not proceed with plans to develop and market mataxalone, the generic form of the muscle relaxant Skelaxin. The parties ultimately reached a settlement agreement that provided for the following: an immediate and certain payment, divided among a limited national class of direct purchasers, of $73 million in cash, plus accrued interest, less attorneys fees, expenses, administration costs, and awards to the named Plaintiffs. District Court Judge Curtis L. Collier granted class counsel s motion for $24.3 million dollars, providing, inter alia, the following reasons for finding the amount of attorneys fees reasonable under the circumstances: Class Counsel vigorously and effectively pursued Class members' claims before this Court. The percentage-of-the-fund method is the proper method to compensate Class Counsel in this litigation. The Court concurs with the observations made by other courts, such as: the lodestar method is cumbersome; the percentage-of-the-fund approach more accurately reflects the result achieved; and the percentage-of-the-fund approach has the virtue of reducing the incentive for plaintiffs attorneys to over-litigate or churn cases. -1-

2 A one-third fee recovery in this matter would equate to a lodestar multiplier between 2.1 and 2.5. This level [of] multiplier is reasonable in light of what has been routinely accepted as fair and reasonable in complex matters such as this one. Sources: Kurt Orzeck, Judge Oks $24.3 in Attys' Fees in Pfizer Pay-for-Delay Row, Law360 (June 30, 2014), available at Order Granting Class Counsel's Motion for Attorney Fees, Reimbursement of Expenses, and Awards for the Named Plaintiffs, In re Skelaxin (Metaxalone) Antitrust Litigation, Case No. 2:12-cv-00083, MDL No. 2343, June 30, Judge Dismisses Antitrust Suit Regarding Industry Group s Refusal to License Member s Technology Without much explanation, a federal judge recently dismissed a case presenting issues at the intersection of patent licensing practices, industry standards, and antitrust law. The case arose out of Oregon-based SawStop s allegations that manufacturers of table saws including Black & Decker and Bosch had colluded and refused to license SawStop s safety technology. The SawStop technology apparently retracts a saw s blade after detecting contact between the blade and a human. SawStop also alleged that the defendants had conspired to alter the relevant industry standards of Underwriters Laboratories, Inc. to prevent SawStop s technology from being included. In a brief order, Judge Hilton wrote: It appearing to the Court that the case should be dismissed, it is hereby ORDERED that the case is STRICKEN from the docket and a Memorandum Opinion and Order will be forthcoming. It should be noted that the defendants had moved to dismiss SawStop s and SD3 s original and amended complaints for failure to state a claim, arguing that the defendants allegedly conspiratorial actions amounted to nothing more than opposition to SawStop s requests that SawStop technology be the only anti-kickback device used in the industry standards, and also asserting that defendants never prevented the plaintiffs from selling or promoting their own technology. Sources: Memorandum of Points and Authorities in Support of Defendants' Motion to Dismiss Pursuant to Rule 12(b)(6), SD3, LLC v. Black & Decker (U.S.), Inc., Case No. 1:14-cv CMH-IDD, Dkt. No. 112, April 10, 2014, available at Order, SD3, LLC v. Black & Decker (U.S.), Inc., Case No. 1:14-cv CMH-IDD, Dkt. No. 254, June 27,

3 Alissa Wickham, Black & Decker, Bosch Escape Table Saw Antitrust Suit, Law360 (June 30, 2014), available at ITC ALJ Says No FRAND Breach If Respondents Fail to Seek a License or Follow SSO Procedure The U.S. International Trade Commission ( ITC ) recently released the public version of the Initial Determination in Inv. No. 337-TA-868, in which Administrative Law Judge ( ALJ ) Essex offered a highly critical analysis of respondents that assert FRAND defenses without having first followed the relevant SSO procedures for resolving disputes where licenses are not available. The ALJ ultimately found that ZTE and Nokia had not infringed the patents-in-suit and that InterDigital had not violated any FRAND obligation because the patents were found not to be essential to the 3G or 4G LTE standards, but the Initial Determination also addressed the FRAND defense in case the ITC reverses his decision and finds the patents infringed and essential to the wireless standards. ALJ Essex found that the relevant IPR policy requires companies that wish to use the IPR covered by the agreements to contact the owner of the IP, and take a license, but the respondents in this case failed to do that. Essex equated this failure to patent holdout conduct: By skipping this step, the companies that use the IPR in violation of the policy are able to exert a pressure on the negotiations with the IPR holder to try to make the agreement in the lower range of FRAND, or perhaps even lower than a reasonable FRAND rate. They also are able to shift the risk involved in patent negotiation to the patent holder. In short, the obligation to negotiate in good faith rests on the implementer as well as the patent holder. The ALJ also found that respondents failed to show Interdigital did not negotiate in good faith; rather than negotiate for a license, the respondents have attempted to put pressure on InterDigital by using IPR without a license. Moreover, the ALJ effectively rejected the DOJ, FTC, and U.S. Patent & Trademark Office s ( PTO s ) arguments against exclusion orders for standard essential patents. The FTC and PTO/DOJ have made statements arguing that FRAND the threat of an exclusion order creates a risk of patent holdup that allows the patent owner to secure an anticompetitively high royalty rate on SEPs. Essex disagreed: For the Commission to adopt a policy that would favor a speculative and unproven position held by other government agencies, without proof that the harm exists or that the risk of such harm was so great that the Commission should violate its statutory duty would damage the Commission s reputation for integrity, and violate its duties under the law. We should and must determine the public interest, and the correct outcome of each matter based on the facts presented, and by applying the law to those facts. To take a pre-set position, without hearing evidence, would violate every concept of justice we are tasked to enforce. -3-

4 Source: Matt Larson, InterDigital Update: No FRAND breach where respondents failed to first seek a license or follow SSO procedure if license not granted (337-TA-868), Essential Patent Blog (July 2, 2014), available at TECHNOLOGY EU Competition Chief Hints at More Investigations Against Technology Companies European Union Competition Chief Joaquin Almunia hinted that Google s February settlement with the European Commission s antitrust division may not save Google from further investigations about its search practices. Speaking at a competition policy conference on June 30, Almunia said that he had sent prerejection letters to a number of companies that had sparked the probe into Google s practices. After the settlement was entered, these companies complained that Google s offer had not sufficiently addressed Google s allegedly anti-competitive practices. The Commission s prerejection letters disputed those companies complaints, apparently explaining in detail how Google s settlement commitments sufficiently addressed the purported abuse of its market position. Almunia also said that the Commission will carefully review any responses to the prerejection letters and then I will decide whether or not the commitments need to be improved. Importantly and somewhat ominously, Almunia also noted in his Monday speech that the Commission s Google investigation was likely only the beginning of its competition enforcement in the digital sphere, which could spell further trouble for technology companies. Source: Allissa Wickham, EU Antitrust Chief Hints at More Cases Against Digital Companies, Law360, available at Short Term Exclusive Agreements Not Anticompetitive in SanDisk Case On July 2, a California federal judge dismissed two amended claims against SanDisk Corp., holding that short-term exclusive sales agreements that SanDisk struck with retailers did not give rise to actionable monopoly claims under the Sherman Act. PNY a competitor to SanDisk in the flash memory card market alleged that SanDisk had created a de facto monopoly in the retail market for such memory cards by offering short-term exclusive sales agreements to various retailers, including Best Buy and Costco. PNY further alleged that, even though the agreements -4-

5 were short-term, they were laden with incentives for extending the duration for the agreement, such that no rational economic actor would terminate the agreements. Additionally, PNY alleged that SanDisk was the only flash card memory manufacturer that saw its wholesale price per card remain relatively stable, while other manufacturers saw significant declines in wholesale prices to retailers. Judge William H. Orrick, however, found these allegations insufficient to bring antitrust claims under the Sherman Act: While PNY has added over 100 paragraphs to its complaint, the new allegations in no way plausibly show that SanDisk s agreements unlawfully foreclosed competition in the market for SD cards. Judge Orrick stated that PNY does not allege that it failed to win a retailer's business despite offering better terms than SanDisk, nor does it allege that any retailer has said that its relationship with SanDisk prevents the retailer from accepting a better deal offered by another SD card supplier. The court also found the short-term duration of the agreements significant: Since the short duration and easy terminability of SanDisk s agreements negate substantially their potential to foreclose competition... in order for [PNY s] renewed claim of exclusive dealing to succeed, PNY must plead that, despite their terms, the contracts have the practical effect of unreasonably suppressing competition, and PNY could not do that. Sources: Kat Greene, SanDisk Gets Monopoly Claims Pared in SD Card Row, Law360 (July 3, 2014), available at Order Granting Motion to Dismiss Fifth and Sixth Causes of Action in Third Amended Complaint, PNY Techs., Inc. v. SanDisk Corp., Case No. 11-cv WHO, Dkt. 237, July 2, 2014, available at UPCOMING PROGRAMS Recent Developments Regarding SEPs and PAEs July 23, 2014 Noon-1:15 PM Eastern Panelists from the government, in-house, and private practice will discuss recent developments regarding standard-essential patents (SEPs) and patent assertion entity (PAE) activity. Topics will include recent cases on the availability of injunctive relief on FRAND-encumbered SEPs, calculation methodologies for FRAND royalty rates, and the meaning of a "willing licensee," as well as possible implications of the U.S. Supreme Court's recent decisions on fee shifting in patent infringement cases on PAE activity. -5-

6 Moderator Randall Weinsten, Federal Trade Commission Panelists Matt Levy, Computer and Communications Industry Association Erica Mintzer, DOJ, Antitrust Division Frank Vecella, Ericsson Elizabeth Wang, Charles River Associates Location Charles River Associates F Street, NW Suite 700, Washington, DC To register, visit dam.pdf Visit our resources page at: hived.authcheckdam.pdf. -6-

7 -7-