District Court Denies Motion To Dismiss Section 1 And Section 2 Claims Brought By PAE Against Patent Aggregator That Refused To License PAE’s Patents

In one of the latest battles at the nexus between antitrust and patent law, on Dec. 3, 2013, Judge Yvonne Gonzalez Rogers in the U.S. District Court for the Northern District of California allowed antitrust claims by Cascades Computer Innovation LLC to proceed against RPX Corp. and a number of Android device manufacturers. Cascades Computer Innovation LLC v. RPX Corp., No. 12-cv-01143 (N.D. Cal. Dec. 3, 2013). The case has highlighted significant potential implications for the patent aggregation business model, which has been widely adopted in the technology industry as a reaction to increased litigation from patent assertion entities.

Cascades is a "patent assertion entity" or "PAE"—pejoratively but commonly referred to as a "patent troll"—that does not practice patent claims but instead seeks to monetize them through litigation or licensing. Cascades holds a number of patents it claims are infringed by the Android mobile operating system. RPX is a patent aggregator, or "non-practicing entity" (NPE), formed by member manufacturers to aggregate patents and hold them to defend against patent litigation, including claims by PAEs. Cascades brought Section 1 and 2 and California state law claims alleging a hub-and-spoke conspiracy among RPX and its members to restrain trade in, and to monopsonize the market for, Cascades' patents. According to Cascades, RPX stands at the center of the conspiracy (the hub), with agreements between RPX and the manufacturers (including Samsung, HTC and Motorola—which settled after the decision) forming the spokes and an agreement among the manufacturers as the rim of the conspiracy. According to Cascades, the defendants agreed not to deal with Cascades in its licensing efforts, other than through RPX. Cascades claims the goal and effect of the alleged conspiracy was to drive down the price for the Cascades patents.

Judge Rogers had dismissed Cascades' first complaint, holding that its initial allegations of parallel conduct were insufficient to support its antitrust claims. In its amended claims, Cascades alleged that the manufacturers refused to deal with Cascades, insisting that only RPX could negotiate over the patents at issue. Unlike its initial complaint, Cascades' amended complaint provides details regarding negotiations between RPX and Cascades over the patents, and the refusal of the...