NicSand and 3M made sandpaper for do-it-yourself body repair folk.  They sold the abrasive paper through big retailers, including Wal-Mart, KMart, and and Pep Boys, under exclusive single or multiple year contracts. 

But then 3M started forking over millions of dollars in up-front cash to lock up the retailers’ business.  NicSand tanked.  Retailers raised their prices for the product 70 percent.  And NicSand’s bankruptcy estate sued 3M for monopolizing the market.

The district court tossed the case on the ground that NicSand lacked "antitrust standing".  The Sixth Circuit, by a 10-4 en banc vote, affirmed.  It noted that NicSand’s status as competitor made standing less likely than if it sued as a consumer.  The majority also pointed out that real power in the market lay not in the manufacturers’ hands but with the large retailers, which together sold 80 percent of the sandpaper.  And 3M’s up-front payments, multi-year contracts, and exclusivity provisions didn’t offend Their Honors, not least because NicSand did pretty much the same thing.  The court also emphasized that NicSand did not allege "predatory pricing" or any of the other typical categories of predatory conduct.  NicSand Inc. v. 3M Co., No. 05-3431 (6th Cir. Oct. 17, 2007).

The dissent begged to differ.

Blawgletter can see both sides.  The troubling thing to us concerns the sharp jump in retail prices after NicSand exited.  The majority urges that a retail price leap says nothing about whether wholesale prices likewise rose.  We respectfully disagree.  It says something about wholesale prices — specifically that high retail prices give the wholesaler more room to raise its prices, lower quality, and lessen choice.  Doesn’t every wholesaler want those things?  And doesn’t obtaining them through conduct that produces a monopoly violate section 2 of the Sherman Act?

Barry Barnett

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Attorney General nominee and ex-federal judge Michael Mukasey testified before the Senate Judiciary Committee today.  Blawgletter hasn’t studied the articles yet — yes, we had a busy day — but the headlines and blurbs all sound positive.  See WSJ’s take here; Washington Post here; NYT here; and LA Time here.

Call us crazy, but we still like Mukasey.

Barry Barnett

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The Third Circuit today upheld a Federal Communications Commission order that allows incumbent local exchange carriers — nowadays primarily AT&T and Verizon — to discriminate against competiting providers of Internet service.  The court concluded that the FCC didn’t exceed its authority in treating ILECs as purveyors of "information services" when they furnish access to the Internet.  The classification, which cable providers already enjoy, frees the ILECs from lots of the regulations that apply (to them and others) when they supply "telecommunications services".  Time Warner Telecom, Inc. v. FCC, Nos. 05-4769, 05-5153, 06-1466 & 06-1467 (3d Cir. Oct. 16, 2007).

Barry Barnett

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The Eighth Circuit today affirmed a summary judgment favoring an outfit that sells fantasy baseball services.  The enterprise, C.B.C. Distribution and Marketing, licensed the information about big league players — including their "nicknames" — from The Major League Baseball Players Association until 2005.  Then it started using the national pastime data without a license.  CBC sued the new licensee, Major League Baseball Advanced Media, for a declaratory judgment and got one on summary judgment.  The court of appeals affirmed in a 2-1 decision.  The majority concluded that the first amendment guarantees People with Nothing Better to Do to fantasize about People Who’ve Made It to the Bigs — including, apparently, their nicknames.  C.B.C. Dist. & Mktg., Inc. v. Major League Baseball Advanced Media, L.P., Nos. 06-3357 & 06-3358 (8th Cir. Oct. 16, 2007) (applying Missouri law and National League rules).

Barry Barnett

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Hewlett-Packard agreed to settle, for $117.5 million, a securities fraud case arising out of options backdating at Mercury Interactive, which H-P acquired in 2006.  WSJ article here. 

Partner Joel Bernstein at Labaton Sucharow praised the settlement as dwarfing the previous largest one, in which Rambus paid $18 million.

The pact requires court approval.

Barry Barnett

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The Fourth Circuit today upheld denial of part of Microsoft’s motion to dismiss an antitrust complaint by Novell.  The complaint alleged that Microsoft harmed competition not only in the market for personal computer operating systems but also in the market for applications software.  The district court concluded, and the Fourth Circuit agreed, that Novell had standing to assert harm in the operating systems market but that it waited too long to assert the other claims.  Novell, Inc. v. Microsoft Corp., Nos. 06-1134 & 06-1238 (4th Cir. Oct. 15, 2007).

Barry Barnett

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Blawgletter recalls a story about people who got tickets from a police officer for committing a variation on vagrancy — in the officer’s words, "standing around and talking big".

Ask most lawyers if principles of prudential standing require you to join the patent owner to an infringement case if the plaintiff owns an exclusive field of use license, and they’ll say . . . hey, I told you to stop coming up to my office.  I’ll call security on you, I will!

Start again.  Pose that question to that Rarest of Legal Breeds — the Patent Lawyer — and she will pause, look you in the eye, and say . . . have you read the Federal Circuit’s opinion today in Int’l Gamco, Inc. v.Multimedia Games, Inc., No. 07-1034 (Fed. Cir. Oct. 15, 2007)?  Because they answered that very question.  Their Honors said yes.  Thank you for asking!  Now get out of my reception area, or I’ll have to call security!!

Er.  As near as Blawgletter can discern, one must join the patentee if one doesn’t have an exclusive enough license because otherwise bad things could happen.  For example, one may lose the case (which the patentee who Still Has Some Rights won’t like) or one may file a whole bunch of duplicative and wasteful cases (which federal judges who Already Work Too Hard won’t like).  So you need a Really, Really Exclusive License to have standing.

We’ll say bye-bye now.

Barry Barnett

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Does the Trademark Trial and Appeal Board hold primary jurisdiction over trademark disputes?  No, the Ninth Circuit held today.  Rhoades v. Avon Products, Inc., No. 05-56407 (9th Cir. Oct. 15, 2007).

Avon Products challenged several trademark registrations and applications relating to microabrasion devices and skin care products.  Settlement discussions failed, and after they did Dean Rhodes and his company, DermaNew, sued for a declaration that their trademarks didn’t infringe any of Avon’s.  The district court dismissed.  The Ninth Circuit reversed.  It disagreed that suing after settlement talks break off amounts to "bad faith".  It also concluded that Rhoades and DermaNew alleged a sufficient threat of suit to support a declaratory action, that the TTAB didn’t have "primary jurisdiction", and that a new judge should hear the case on remand.

Barry Barnett

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The Supreme Court rocked the patent litigation world with its decision in KSR Int’l Co. v. Teleflex, Inc., 127 S. Ct. 1727 (2007).  The ruling rejected any rigid test for figuring out whether existing knowledge makes a device, process, or method "obvious" and therefore not patentable.

KSR aimed to correct the work primarily of the Federal Circuit, which has exclusive jurisdiction over appeals in most patent cases.  But that court has kept largely mum about KSR.  That changed last Friday.

The case involved a multiplexer patent.  Translogic sued Hitachi for infringement and won an $86.5 million award plus a permanent injunction.  Hitachi meanwhile initiated proceedings in the U.S. Patent and Trademark Office to "reexamine" Translogic’s patent.  The PTO’s Board of Patent Appeals and Interferences upheld a conclusion of obviousness.  So did the Federal Circuit.

In doing so, the court confessed to making "a rather straightforward error" in KSR — something to do with overlooking the fact that obvious variants of prior art count as prior art.  In re Translogic Technology, Inc., No. 06-1192, slip op. at 15 (Fed. Cir. Oct. 12, 2007).  The court also tries on the hair shirt of conceding that its old obviousness test suffered from "rigid" application.  The garb hurts.

Barry Barnett

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