Antitrust Claims Against Patent Pool

In a terse non-precedential decision, the U.S. Court of

Appeals for the Federal Circuit affirmed a 2006 district court

order dismissing antitrust claims against participants in an

international patent pool arrangement. The detailed district

court decision concluded that a patent pool for DVD technology

was lawful under the U.S. antitrust laws. Wuxi Multimedia,

Ltd. v. Koninklijke Philips Elecs., Case No. 08-1041 (Fed.

Cir., June 5, 2008) (per curiam).

Two Chinese DVD manufacturers, Wuxi Multimedia and Orient

Power (Wuxi), filed an antitrust class action lawsuit against

the 3C Patent Group (3C), an international patent pool

consisting of technology owned by Phillips, Sony, Pioneer, and

LG Electronics. Wuxi alleged that the defendants violated U.S.

antitrust laws by conspiring through 3C to license patented DVD

technologies at "fixed" prices and conspiring to

monopolize the DVD market.

Prior to the Wuxi proceedings, the Department of

Justice (DOJ) analyzed this specific patent pool in a business

review letter and determined that it would not engage in

enforcement proceedings because the pool did not appear to

violate the antitrust laws and provided substantial competitive

benefits. Offering guidance on the structure of these types of

arrangements, the DOJ business review letter suggested that

patent pools have the following characteristics relevant to the

Wuxi court's analysis of the 3C pool:

include only valid patents (i.e., not expired

patents)

include only essential patents

permit contributors to license technology outside the

pool (i.e., non-exclusive licenses)

Wuxi filed a second amended complaint in 2005 against 3C

alleging various anti-competitive claims such as price fixing,

tying, price discrimination and monopolization. Wuxi sought

damages and a declaratory judgment invalidating the 3C patent

pool. The district court dismissed the complaint with prejudice

in January 2006.

The district court applied the "rule of reason"

analysis to the pool, rejecting Wuxi's contention that the

pool represented a conspiracy unlawful per se under

the antitrust laws. Relying on the Supreme Court's

Broadcast Music decision, the district court held that

the 3C pool creates a new "product" in the form of a

license to pooled technology that has the potential for

substantial benefits. Therefore, the more fact-intensive rule

of reason analysis was the proper framework to address

Wuxi's claims.

Wuxi challenged the pool by asserting, without any

corroborating...