Welcome to The Contingency‘s Commercial Roundup for June 28!
Since our last issue, much has happened, not least FeedSpot’s recognition of The Contingency as one of the 30 Best Antitrust Law Blogs and Websites.
Continue Reading Commercial Roundup – June 28, 2023Last month, the American Antitrust Institute and three economists moved to file amicus briefs in favor of an economic model that quantifies what Google describes as “happiness”. AAI and the economists seek to support opinion evidence in antitrust litigation against Google, In re Google Play Store Antitrust Litig., No. 3:21-md-02981-JD (N.D. Cal.), pending before U.S. District Judge James Donato. You can read the amicus briefs here and here and Google’s opposition here.
The opinion evidence comes from a professor, Marc Rysman, who heads the Department of Economics at Boston University. Dr. Rysman created an economic model that the plaintiffs hope to use to quantify the losses they claim consumers sustained due to anticompetitive conduct by Google. The plaintiffs allege that Google misused its monopoly power in the market for apps using the Android operating system for smart phones and tablets. Google moved to exclude the Dr. Rysman’s opinions, and the amici join the plaintiffs in opposing Google’s motion.
The debate, according to Google, boils down to whether Dr. Rysman’s model measures injury to “property” under Section 4 of the Clayton Act or to mere “happiness”. 15 U.S.C. § 15(a). The plaintiffs say the model provides a reasonable estimate of the lower prices consumers would have paid for the apps in a “but-for world” that would have existed if Google had not thwarted development of better apps. Damages, plaintiffs assert, equal the difference between the apps’ lower prices in the but-for world (without Google’s anticompetitive conduct) and the higher actual prices consumers paid (in the less competitive actual world). Google contends that Dr. Rysman attempts to value consumers’ loss of “happiness” rather than of “property” and depends on “abstractions” that lack grounding in real-world observations.
Google’s position strikes me as cute if not twee. Everyone agrees that antitrust laws aim to prevent losses to innovation (e.g., more variety in goods and services) and to quality (greater durability, better functionality, more pleasing appearance, and the like) through injunctive relief. Google claims that antitrust laws don’t provide a damages remedy after the losses have come to pass because consumers who would have paid less in the but-for world (without anticompetitive conduct) lack a “property” interest in what amounts to keeping more of their money.
The idea of quantifying losses to innovation and quality has an unfamiliar feel. Damages experts usually focus on measuring the price effects of price-fixing. But economics and econometrics should enable damages experts to use their long-standing principles and tools to produce reasonable estimates of the dollar value of greater variety and higher quality.
While existing antitrust doctrine has treated demonstration of price effects as almost essential to liability and damages, Dr. Rysman’s model offers a way to quantify those effects in the but-for world, where anticompetitive conduct does not exist. If successful, that kind of innovation will have price effects of its own–on the value of antitrust claims. No wonder Google opposes it.
A golden age of civil antitrust, from the 1960s into the 1980s, enriched the victims of cartels and monopolies but upset corporate America. The high cost of paying treble damages claims eventually provoked a spare-no-expense approach to defense. That in turn influenced the way plaintiffs prosecuted their Sherman Act claims.
Much the same thing has now happened with patent infringement cases, which had their own golden age in the last decade. What, if anything, can patent litigants learn from the antitrust experience? I think they can divine quite a lot. In this post, I will tell you why.
Bigger cases on average
The “millions for defense, but not one cent for tribute” attitude that developed in the antitrust defense bar and their gigantic clients aims to deter the bringing of cases in the first place. It also taxes the resources of the plaintiff, who may thus find out too late that she cannot afford to take a case through trial. Scorching the earth additionally makes a loss on the merits all the more painful for the plaintiff (or her counsel), who will have now lost a great deal of money as well.
Making the prosecution of civil antitrust cases more costly had a predictable demonstration effect over time. It principally resulted in an increase, on average, in the stakes at issue. A higher damages figure made the average Sherman Act case attractive enough to lawyers willing to work on a contingent-fee basis. It also rendered the case a better candidate for a worthwhile settlement, one that more than covered fees and expenses.
A similar dynamic exists in patent litigation. For companies that face a lot of infringement actions, the standard defense budget tops $1 million. The plaintiff needs a case worth more than $10 million in such circumstances to obtain the services of a capable contingent-fee lawyer, who will insist on a chance to earn at least three times his investment.
Aggregation
One way to make antitrust cases large enough to justify their risk and cost involves aggregation. Rule 23 of the Federal Rules of Civil Procedure permits one kind of aggregation — the class action. Rule 23 and its state-law counterparts allow even a single class representative to bring claims on behalf of hundreds, thousands, or millions of claimants who have similar claims. Class treatment could convert a small, hopelessly uneconomic one-off lawsuit into a juggernaut involving many hundreds of millions of dollars and possibly even billions.
The stakes-raising feature of the class action device has turned the class certification process into an extremely expensive battlefield. In a case that I have handled for more than a decade, for example, the parties submitted more than 30 different expert reports and presented live testimony and dozens of exhibits at a five-day evidentiary hearing.
Class members with larger claims may also choose to opt out of a class action. They generally engage lawyers who specialize in handling those sorts of cases, typically on a contingent-fee basis. The lawyers in those instances may serve as aggregators, enhancing their clients’ collective bargaining leverage while reducing average costs by spreading them over more claimants and higher aggregate damages.
Patent cases do not qualify as readily for class treatment. Nor can different patent holders band together to bring infringement claims as a group. The venue and joinder rules under the America Invents Act of 2012 made multiple-party patent cases much harder to bring.
But patent holders aggregate anyway. They do it by acquiring a critical mass of patents in particular fields and even entire portfolios. In May 2023, for instance, BlackBerry sold its 32,000 patents and patent applications, apparently for close to $1 billion.
The aggregation of patents in a single holder makes for a more formidable adversary. That has led the targets of their infringement lawsuits to call them names. A favorite rhymes with goal.
Specialization
The higher cost and greater complexity that came to characterize antitrust cases as defendants counterattacked them led to another device for managing risk on the plaintiff side. Taking a Sherman Act case across the juridical goal line now demanded a high degree of skill, mastery of the subject matter, and staying power. Few plaintiff’s firms could meet those criteria.
In 1980, Steve Susman founded the first litigation boutique, Susman Godfrey (my firm), which served as lead counsel in the largest price-fixing class action then working its way through the courts, Corrugated Container. The case produced a jury verdict for the plaintiff class and more than $360 million in settlements. Other boutiques have followed suit.
Boutiques that specialize in patent cases have likewise sprung up as infringement actions have proliferated. A significant part of my firm’s cases involve infringement claims. These firms’ trial-savviness, knowledge of the peculiarities of patent law and litigation, and financial resources are all but essential for high-stakes infringement actions.
Counterclaim avoidance
A factor that deterred antitrust cases — the possibility of having to defend against a counterclaim — also may limit the appeal of patent infringement cases. Antitrust claimants often avoided the counterclaim problem by taking a low profile in class action cases but then demanding a settlement at an opportune moment, usually after the class reached a resolution of the class claims. Assignment of claims to a trustee may also work.
Patent holders generally have two choices for dealing with the possibility of a counterclaim. Either they can build or buy a patent portfolio that enables them to overawe the defendant in a dueling-patent contest (Apple and Samsung provide an example), or they can limit their business to ownership, licensing, and litigation of patent rights and thus avoid countercharges of infringing conduct.
The second model tends to make repeat infringement defendants say undiplomatic things about patent holders that do not “practice” the inventions by doing or making things or providing services with them. But the non-practicing entities are simply doing what any sensible plaintiff would do if she could — avoiding a costly and complicating counterclaim.
Past as prologue
That an older type of high-stakes commercial cases can provide lessons for a newer kind should not surprise us. The basics of the civil justice system have not changed that much.
What do you think about the way patent infringement cases have followed a pattern similar to what happened with antitrust cases? Do you think the responses of defendants have gone over the top? Have they struck an appropriate balance? Or should they go even further?
Let your fellow readers know what you think.
Welcome back to Commercial Roundup–the best source for the latest appellate decisions on issues that matter in commercial litigation. In this issue, you’ll find four Supreme Court rulings on overseas torts, patent enablement, the reach of the False Claims Act, and limits on the Securities Act of 1933 as well as opinions on a range of topics from all but two of the 13 federal Courts of Appeals and the Supreme Court of Texas. Have a terrific weekend–and don’t forget to subscribe so you’ll get future issues without having to look for them.
Continue Reading Commercial Roundup – June 2, 2023The last week brought losses for antitrust enforcers (“Apple’s concerns over app security” and “Laches and Trinko kill”), for a man who sued to get “co-inventor” status (“Adding option to patent”), for distributors invoking franchise-law protections (“State franchise statute didn’t apply”), for plaintiffs wishing to toll limitations under an 1841 statute (“Defendant’s ‘absence from state”), for some contract deadline enforcers (“Time ‘from’ or ‘after'”), and for some avoiders of collateral estoppel (“Ruling on question of issue preclusion”).
Have a terrific week–Commercial Roundup will see you again next Wednesday morning.
Continue Reading Commercial Roundup – May 3, 2023Commercial Roundup offers a double feature this week–two weeks in one.
We lead off with a memory (“The biggest surprise?”), proceed through a slew of IP rulings, pause on my colleagues’ big win against Fox News (“All it took”), note the Supreme Court has cleared the way for constitutional attacks on the SEC and FTC (“How about now?”) and the Fifth Circuit almost immediately expedited one such attack (“Fifth Circuit looks anxious”), and highlight rulings on choice of law clauses and class certification before ending on a high note (“Need a lift”).
Have a terrific rest of the week.
Continue Reading Commercial Roundup – April 27, 2023
Welcome to this week’s Commercial Roundup—in which you’ll find links to the most significant rulings by the U.S. Supreme Court and the 13 Courts of Appeals plus the highest courts in Delaware, New York, and Texas. You’ll also see other matters of interest to commercial trial lawyers and the firms and business people they represent.
This week a couple of Latin phrases we learned in the first year of law school headline the list. The first—res ipsa loquitur—means something like “the thing (res) speaks (loquitur) for itself (ipsa)” and provides a shortcut for a party wishing to prove a claim of negligence. The other Latin phrase—forum non conveniens—suggests the plaintiff brought a case in a place (forum) whose remoteness to the parties, witnesses, and sources of proof and lack of expertise in governing law (among other factors) render it sufficiently inconvenient (non conveniens) as to justify dismissing the case in favor of, or transferring it to, a much more convenient forum.
We also have an important First Circuit ruling on a pair of issues that arise often in efforts to enforce arbitration clauses and confirm awards, a “tacking” question regarding priority of trademarks, and decisions on when limitations starts to run in securities fraud cases, insurance coverage for COVID-19 losses, damages remedy for fraudulent transfer, and when prior art “anticipates” a claim limitation without mentioning it.
So here we go—Commercial Roundup for the week of April 5-12.
Continue Reading Commercial Roundup – April 12, 2023This week’s Commercial Roundup follows three days of all antitrust, all the time at the ABA Antitrust Law Section’s annual Spring Meeting in our nation’s capital. More than 3,700 government enforcers, private lawyers, judges, economists, econometricians, academics, students, and others assembled to talk about the recent past and future of antitrust in the U.S. and around the world.
The Roundup includes but one post about the Spring Meeting—BIG meets ABA—but it will give you a good sense of the combat that flickered into view amid the nerdy bonhomie. You can find other posts on the Spring Meeting here, here, and here.
Now, let’s get to the Roundup!
Continue Reading Commercial Roundup – April 5, 2023