Distribution, Competition, and Antitrust / IP Law

Archives for December 2012

Top Posts of 2012

Happy new year

Happy New Year (Photo credit: Amodiovalerio Verde)

 

Here’s a quick summary of the top five blog posts from 2012.

 

1. American Express Can’t Enforce Arbitration Agreement Antitrust Class Action Waiver.  Discussing the Second Circuit case refusing to enforce an American Express arbitration agreement with a class action waiver provision.

 

2. Nine Potential Patent Licensing “No-Nos.” Discussing antitrust issues arising from patent licenses.

 

3. iPad Note-taking Apps for Lawyers Reviewed.  Reviewing several note-taking apps for the iPad.

 

4. Can My Supplier Refuse to Sell Products to Me?  Discussing antitrust issues arising from a supplier’s refusal to supply product.

 

5. You Can’t Try to Monopolize a Market In Which You Don’t Compete.  Discussing the Infostream Group case (which dismissed antitrust claims against PayPal).

 

For those interested, in this blog’s first full year of operation, I’m happy to report that it received just shy of 20,000 visits.  If you enjoy reading it, please share a link to it (or to this post); I’d like to see the traffic continue to grow.

 

Happy Holidays and best wishes for the New Year.

 

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Are Bar Associations Anti-Competitive?

English: Title page of Adam Smith's Wealth of ...

Title page of Adam Smith’s Wealth of Nations, 1776. (Photo credit: Wikipedia)

From the abstract of a recent paper (via Antitrust & Competition Policy Blog):

 

The European Commission Report on Competition in Professional Services found that recommended prices by professional bodies have a significant negative effect on competition since they may facilitate the coordination of prices between service providers and/or mislead consumers about reasonable price levels. Professional associations argue, first, that a fee schedule may help their members to properly calculate the cost of services avoiding excessive charges and reducing consumers’ searching costs and, second, that recommended prices are very useful for cost appraisal if a litigant is condemned to pay the legal expenses of the opposing party. Thus, recommended fee schedules could be justified to some extent if they represented the cost of providing the services. We test this hypothesis using cross-section data on a subset of recommended prices by 52 Spanish bar associations and cost data on their territorial jurisdictions. Our empirical results indicate that prices recommended by bar associations are unrelated to the cost of legal services and therefore we conclude that recommended prices have merely an anticompetitive effect.

Aitor Ciarreta (Universidad del Pais Vasco), Maria Paz Espinosa (Universidad del Pais Vasco) and Aitor Zurimendi (Universidad del Pais Vasco), Are Bar Associations Anticompetitive? An Empirical Analysis of Recommended Prices for Legal Services in Spain.  This recalls Adam Smith’s famous statement in The Wealth of Nations: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”  Of course, recommended prices — in a vertical distribution situation — are perfectly lawful.  But where a bar association is involved, there are horizontal (or possibly horizontal) aspects to the arrangement.  Cf. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) (minimum-fee schedule for lawyers published by the Fairfax County Bar Association not immune from the Sherman Act); Arizona v. Maricopa County Medical Soc., 457 U.S. 332 (1982) (maximum physicians’ fee schedule violated the antitrust laws).

 

No doubt there is a current oversupply of lawyers.  However, the better way to address concerns about fees is to (lawfully) reduce the supply.  See this blog post, for example.

 

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Supreme Court Grants Cert in Watson Pay-For-Delay Case

On December 7, 2012, the Supreme Court granted certiorari in FTC v. Watson Pharmaceuticals.  The Supreme Court is now poised to resolve the circuit split on the treatment of so-called “pay for delay” Hatch-Waxman Act patent litigation settlements.

The Second, Eleventh, and Federal Circuits have all allowed such settlements where they do not exceed the duration or scope of the patent (or involve sham litigation or fraudulently-obtained patents).  The Third Circuit has disagreed, finding that payments from patent-holding pharmaceutical manufacturers to generics to stay off the market are prima facie evidence of an antitrust violation.

You can find past blog entries on pay-for-delay issues and the Hatch-Waxman act by using the search feature.

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Direct Purchasers Can Bring Walker Process Claims

In Ritz Camera & Image v. SanDisk Corp., No. 2012-1183 (Fed. Cir. Nov. 20, 2012), the Federal Circuit held that direct purchasers have antitrust standing to bring Walker Process claims.

In a typical Walker Process claim, an alleged patent infringer claims that the patentee fraudulently obtained a patent or patents from the Patent and Trademark Office.  Usually the claim is brought as a type of monopolization claim.

In Ritz Camera, a direct purchaser of SanDisk products (not an alleged patent infringer) brought a Walker Process claim, alleging that by fraudulently obtaining patents, SanDisk was able to raise prices above competitive levels.  The Federal Circuit found that the plaintiff had antitrust standing.  “Ritz’s status as a direct purchaser gives it standing to pursue its Walker Process claim even if it could not have sought a declaratory judgment of patent invalidity or unenforceability.”

The ruling increases patentees’ potential exposure to antitrust claims arising out of patent prosecution and enforcement.

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