The Federal Trade Commission's Bureau of Competition enforces U.S. pro-competition laws in tandem — and at times in competition with — the Antitrust Division of the Department of Justice.  Like its DOJ cousin, the Bureau seeks to curb anticompetitive conduct, such as price-fixing and rivalry-reducing mergers.  And, more so than in the recent past, it has taken action to stem harm to consumers.

The latest foray put Intel Corporation under the Bureau's microscope.  The result?  A settlement that aims to prevent Intel for six years from misusing its dominance in the markets for computer chips — central processing units, graphics processing units, and chipsets.

According to the FTC's press release:

Under the settlement, Intel will be prohibited from:

  • conditioning benefits to computer makers in exchange for their promise to buy chips from Intel exclusively or to refuse to buy chips from others; and
  • retaliating against computer makers if they do business with non-Intel suppliers by withholding benefits from them.

In addition, the FTC settlement order will require Intel to:

  • modify its intellectual property agreements with AMD, Nvidia, and Via so that those companies have more freedom to consider mergers or joint ventures with other companies, without the threat of being sued by Intel for patent infringement;
  • offer to extend Via’s x86 licensing agreement for five years beyond the current agreement, which expires in 2013;
  • maintain a key interface, known as the PCI Express Bus, for at least six years in a way that will not limit the performance of graphics processing chips. These assurances will provide incentives to manufacturers of complementary, and potentially competitive, products to Intel’s CPUs to continue to innovate; and
  • disclose to software developers that Intel computer compilers discriminate between Intel chips and non-Intel chips, and that they may not register all the features of non-Intel chips. Intel also will have to reimburse all software vendors who want to recompile their software using a non-Intel compiler.

The announcement follows by a few days a key victory for Intel in a private antitrust case, In re Intel Corporation Microprocessor Antitrust Litig., No. 05-1717 (D. Del. July 28, 2010).  A special master in the case recommended that the district court deny a motion to certify a nationwide class of Intel microprocessor buyers who purchased from a middle-man.

That doesn't get Intel home free, of course — not least because direct purchasers (your Dells, HPs, Sonys, Samsungs, and other PC-makers) may proceed on their own, as may large individual indirect buyers whose claims justify the costs.  Not to mention rival chip-maker Nvidia, among others (but not AMD, which settled with Intel in 2009).

The FTC noted that its statutory authority, under section 5 of the FTC Act, "is broader than the antitrust laws and prohibits unfair methods of competition and deceptive acts and practices in commerce.  Unlike an antitrust violation, a violation of Section 5 cannot be used to establish liability for plaintiffs to seek triple damages in private litigation against the same defendant."  But, unlike the Antitrust Division, the Bureau cannot impose fines.

The American Antitrust Institute praised the pact as "the most important antitrust enforcement victory achieved so far during the Obama Administration".

WSJ item here; WSJ Law Blog post here; Intel statement here; NYT article here; links to FTC Decision and Order and other documents here.

May the operator of oil and gas leases drill and complete a well before it gives notice to other working interest owners of their right to participate in it?

The Fifth Circuit held last week in Bonn Operating Co. v. Devon Energy Production Co., L.P., No. 09-11040 (5th Cir. July 30, 2010) that, under Texas law, the operator may do just that.

The case concerned a Joint Operating Agreement relating to oil and gas leases in Wyoming.  The JOA entitled Devon, the operator, to propose wells to Bonn, which (like Devon) owned 50 percent of the working interest (the right to prospect for, produce, and sell oil and gas) under the leases.  But Devon waited until it almost completed the Marquis Federal 15W-12 well before giving Bonn notice of its right to participate by paying its 50 percent share of the costs.  The JOA allowed Bonn to elect within 30 days after getting the notice.  Bonn chose not to participate (it "went non-consent") despite the fact that the well produced.  But Bonn then claimed that Devon's breach of the JOA's notice provisions barred Devon from charging Bonn for any of the drilling, completion, and operating costs.

[The JOA penalized Bonn for going non-consent by entitling Devon to receive from production 100 percent of its operating costs and three times its drilling and completion costs before Bonn would see a penny.  After that, Devon and Bonn would split the proceeds of production 50-50.  Bonn seems to have hoped to get a 50 percent cut without paying any costs, which position would not likely endear it to the bench.]

The district court granted summary judgment to Devon.  The Fifth Circuit affirmed.  Devon's delay in sending notice, the court observed, "actually works in favor of Bonn.  It had the opportunity to decide its participation in the well after the majority of the risk associated with drilling had been determined."  Id., slip op. at 6.  The lack of harm to Bonn plus its election to go non-consent precluded it from avoiding paying its share of costs under the JOA.

Fusion was not deceived, hornswoggled, misled, duped, hoodwinked, bamboozled, or snookered.

Fusion Capital Fund II, LLC v. Ham, No. 09-3723, slip op. at 5 (7th Cir. Aug. 2, 2010) (Easterbrook, C.J.) (applying Nevada law and explaining that Fusion couldn't recover attorneys' fees owing by a corporate "husk without any corn inside" from the husk's owners due to Fusion's knowledge of the corporation's empty huskiosity).

Blawgletter got back this morning (around 3:00 a.m.) from our first-ever trip to Boise.  We saw a Great Many lawyers.

We and they had come to watch, and some of us to present, argument about what the Judicial Panel on Multidistrict Litigation should do with big cases. 

In re Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, MDL No. 2179, headed the list.  In re BP P.L.C. Securities Litigation, MDL No. 2185, ran a distant second.

The Oil Spill case took over an hour.  We lost count of the lawyers who argued, but we think they topped 25.  Nobody had more than six or so minutes.

British Petroleum, Transocean, Halliburton, and the other defendants lined up for Houston, in the Southern District of Texas.

The U.S. government and a bunch of plaintiffs favored New Orleans, in the Eastern District of Lousiana.

Others went for places in Mississippi, Alabama, Florida, and (we think) South Carolina.

Somebody even made a bid for bringing in a judge from somewhere else, such as New York.

The pitches for The Big Easy came in many flavors — proximity to the rig, propinquity of plaintiffs, centrality in the arc of the spill and therefore relative convenience for plaintiffs and non-party witnesses, impact of the spill on the local and state economy and environment, desire and willingness of the federal trial bench to commit the resources necessary to handle sprawling litigation that will take five or more years of full-time work to resolve.  All that made sense. 

The arguments for Houston made sense, too.  Defendants maintan their U.S. headquarters and keep their top U.S. executives there.  Decisions about and documentation regarding Deepwater Horizon emanated from Houston.  The defendants have united in preferring it.  Some plaintiffs favor it.  A "limitation" action has progressed towards resolution there.  And the Houston judges seems every bit as willing as their New Orleans counterparts to do the work.

We listened and looked for clues about which way the Panel leaned.  Before and after, we talked with some of the lawyers about what they thought the Panel would do.

In our view, the decision depends less on objective factors than on how the members of the Panel resolve visceral issues.  Some may sense that, because the offshore oil industry made the mess and wants Houston, sending the cases to Houston would look like rewarding Big Oil.  Some may also feel that the federal bench in New Orleans deserves a chance to show itself capable of fairly litigating disputes over a disaster that rivals Katrina in its devestation to the community.  

The Panel members may, on the other hand, bristle at the idea that they might let sentiment against the oil industry affect their decision while worrying that centralizing cases in New Orleans might appear to favor plaintiffs.

We think the Panel will send the bulk of Oil Spill to New Orleans.  So did the most of our colleagues.  But we'll see.

Well, they did it. 

After months of high tension — 26 of them, in fact – the Supreme Court of California at last ruled this week on whether cities, counties, villages, water districts, wide spots in the road, and other public entities may hire private lawyers to represent them in public nuisance cases on a contingent fee basis.

Yes.  Yes, they can.  County of Santa Clara v. Superior Court, No. 163681 (Cal. July 26, 2010).

Sometimes.  It depends on the type of nuisance case.  If it aims to shut down a dirty movie and book store, the Court's decision in People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), would bar a contingent fee arrangement.  But where the government simply wants to force lead paint manufacturers to scrape the lead paint off all the houses and buildings on which it lingers, the case falls outside the rule of Clancy as it doesn't cast the private lawyers as much in the role of a criminal prosecutor.

The Court did call for controls on the contingent fee lawyers' discretion.  Among other things, the  Court held, the engagement letter must specify that government lawyers shall supervise and direct the private contingent fee lawyers and shall retain authority to make all kinds of decisions, especially including settlement.  Id., slip op. at 28-30 (citing State of Rhode Island v. Lead Industries Ass'n, Inc., 951 A.2d 428 (R.I. 2008)).

Blawgletter saw this coming a mile away.  See Rhode Island Supreme Court Upholds State's Contingent Fee Contract with Private Counsel (July 1, 2008)'; Court Clear Anaheim to Pay Contingent Fee in Tax Case (Jan. 7, 2010); The Public Contingent Fee Option (July 30, 2009).

No one's going to say he's the sharpest knife in the drawer.

Sam Adam, Jr., arguing to the jury in United States v. Rod Blagojevich.

Alternative phrasings:

Not the brightest light on the porch.

One beer short of a six-pack.

Two bricks shy of a load.

A few fries short of a Happy Meal.

One twist short of a slinky.

The gates are down, and the lights are flashing, but the train isn't coming.

[See bottom of post for update on the Fifth Circuit's new opinion in the case.]

The software you use at work came from God knows where.  Perhaps the Internet.  But your copy features something the author didn't intend.  Unlike the version the author sells, this one has somehow disabled the security doodad that controls access to the software application and the underlying code.

Have you violated the Digital Millennium Copyright Act?

Yesterday the Fifth Circuit said no, you didn't.

The case involved a program that MGE UPS Systems created to allow quick calibration of its uninterruptible power supply machines, which keep systems running during power outages.  MGE protected access to and use of the software by means of a "dongle", which upon insertion in your computer's serial, USB, or other port tells the program it can start running.

The defendants got hold of a copy of the MGE program "from an unknown source."  MGE UPS Systems Inc. v. GE Consumer and Industrial Inc., No. 08-10521, slip op. at 3 (5th Cir. July 20, 2010).  They used it.  And MGE sued them for, among other things, violating the DMCA.

Section 1201(a)(1)(A) of the statute provides that "[n]o person shall circumvent a technological measure that effectively controls access to a work protected under this title."  17 U.S.C. 1201(a)(1)(A).

"Because the dongle does not protect against copyright violations," the court held, "the mere fact that the dongle itself is circumvented does not give rise to a circumvention violation within the meaning of the DMCA."  MGE, slip op. at 7 (emphasis in original).  "Moreover, the DMCA's anti-circumvention provision does not apply to the use of copyrighted works after the technological measure has been circumvented."  Id. (emphasis in original).

Blawgletter infers that, under MGE, you don't run afoul of section 1201(a)(1)(A) unless (a) the security measure you circumvent (e.g., encryption of the software code) directly prevents copyright violations (copying, making derivative works of, and displaying or selling the work) and (b) you yourself write the code that you then use to circumvent the security measure.

The dongle didn't directly stop copying and other copyright violations, you see, and anyway GE simply took advantage of someone else's method of getting around the dongle.

[Update:  On September 29, 2010, the Fifth Circuit, without explanation, withdrew its original opinion and substituted one that omitted one of the two grounds for holding that GE didn't violate the DMCA.  New opinion here.  The court had at first agreed with the Federal Circuit's view that the DMCA requires proof that the circumvention resulted in a copyright violation.  The later opinion left that part out, as the Ninth Circuit noted three months afterwards in MDY Industries, LLC v. Blizzard Entertainment, Inc., No. 09-15932, slip op. at 20010 n.11 (9th Cir. Dec. 14, 2010).  Post here.

The Seventh Circuit held last week that "gross amount recovered" in a contingent fee contract didn't include money the client got before hiring the lawyer.  In re Solis, No. 09-4075 (7th Cir. July 6, 2010) (applying Illinois law).

The ruling turned on the principle that "Illinois construes attorney contingent fee agreements strictly in favor of clients in order to protect them from unscrupulous attorneys who might manipulate the agreement terms in their favor."  Id. slip op. at 5.

The problem, alert readers will note, arose from the use of the imperfect past participle (a cousin of passive voice) in "recovered".  "Recovered" when, you ask?  "Recovered" through whose efforts?  For what?  By whom?

The fee agreement didn't say.  And so the money that the client kept in his pocket as a result of the lawyer's successful efforts to defeat claims against the funds didn't count.