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Motorola, HTC, Samsung and Others Face Antitrust Suit

A company that controls 100 patents has filed an antitrust complaint against Motorola, LG, Samsung, Dell, and HTC, saying that they have conspired to refuse to negotiate with the company.

"Defendants have contracted, combined and conspired to restrain trade by jointly refusing to negotiate or accept licenses under the Cascades patents," patent owner Cascades Computer Innovation alleged in the suit. "Defendants' goal is to force either a drastically reduced royalty for rights under the Cascades patents or no royalty payment at all."

Cascades has a difficult battle ahead, but if it succeeds, it could make joint defense agreements, which are increasingly used by technology companies, illegal, said Jay Levine, an antitrust litigator with Bradley Arant Boult Cummings LLP.

Cascades has previously separately sued some of the companies, alleging that they infringe one of its patents that enables the installation of apps on Android devices.

But in its newest suit, filed in the U.S. District Court for the Northern District of California last week, it claims that through RPX, a company that protects customers from patent infringement claims by nonpracticing entities, the defendants have broken antitrust laws. RPX is also named in the suit.

In 2010, RPX approached Cascades about acquiring license rights to some of its patents, making a "substantial offer on behalf of its members," Cascades alleges. For the deal to happen, companies including Motorola, HTC and others would have been required to contribute to the settlement, which would have been a "high seven-figure payment to Cascades," it said.

However, RPX ended negotiations with Cascades and withdrew its offer when one or more of its members wouldn't fund the deal, Cascades said.

"The individual manufacturing defendants all agreed among themselves and with RPX not to negotiate independently with Cascades and to present a unified, concerted effort to oppose licensing and enforcement of the Cascades patents, with the objective of causing Cascades to abandon its efforts, accept a below-market-value offer by RPX or go out of business by virtue of the expense of litigation," the suit reads.

Tough to Prove

Cascades will likely have a hard time proving that the companies decided together not to negotiate with Cascades, Levine said. Cascades offers up that all the companies are RPX customers, two of them are represented by the same law firm and that they all irrationally refused an offer from Cascades that would potentially cost them very little money.

"All of that is going to be circumstantial evidence, there are no hard facts," Levine said. "That's going to be one of the biggest obstacles they'll have to overcome in a motion to dismiss."

The defendants are likely to argue that they did act independently, deciding that there was no reason to take a license, he said. They'll likely say that even though RPX started and ended negotiations with Cascades, that's no indication that there was a conspiracy, he said.

In addition, Cascades will have a hard time convincing a judge that competition in general has been harmed, as required by law, rather than simply that Cascades was harmed, he said.

If Cascades does manage to move forward and win the case, it would have a significant impact on a growing industry made up of companies like RPX trying to protect vendors from patent suits. "It would be saying that these joint defense agreements in which companies take a common stance may be illegal under antitrust laws," Levine said.

"If this case has legs to it, this could present difficulties in a number of litigation contexts where defendants try to ensure that they keep a united front," he said.

Motivation Questioned

Cascades may have specific reasons for filing this suit after previously suing Dell, HTC and Motorola for patent infringement. "If they have any qualms about either the validity of the patents or whether device makers are possibly making the devices in always that don't infringe, then this may be an easier target in their eyes," Levine said. "One additional explanation would be to gain leverage in the infringement suit and try to bring the defendants to the table to negotiate a license."

Motorola declined comment on the suit. RPX said it is aware of the suit but doesn't comment on pending litigation. HTC is reviewing the complaint and doesn't expect to comment further on it, a spokesperson said.

Dell said it plans to defend itself against the allegations. "Cascades is alleging that by refusing to settle its unfounded patent infringement claims, Dell is engaging an unlawful conspiratorial refusal to deal with Cascades," it said in a statement. "Dell denies these new allegations, will defend the new case, and seek judicial relief against Cascades."

LG and Samsung did not reply to a request for comment.

Nancy Gohring covers mobile phones and cloud computing for The IDG News Service. Follow Nancy on Twitter at @idgnancy. Nancy's e-mail address is Nancy_Gohring@idg.com

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