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From Antitrust Law Daily, April 7, 2014

Overt acts to enforce licensing agreement tolled antitrust statute of limitations

By Jody Coultas, J.D.

The U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of antitrust claims filed by Samsung Electronics Co., Ltd. against Panasonic Corporation and others for anti-competitive conduct and monopolization, holding that the district court erred in finding the claims time-barred (Samsung Electronics Co., Ltd. v. Panasonic Corporation, April 4, 2014, Gould, R.). Two overt acts taken by Panasonic to enforce the licensing agreement during the limitations period tolled the statute of limitation.

Panasonic and its allies developed SD cards, the dominant form of flash memory card on the market, as a modified proprietary format of the flash memory cards then available; formed the SD Group to promote their use; and created SD-3C to license the format to manufacturers. Samsung signed this license agreement, although it did not begin producing SD cards because it was manufacturing a competing version of flash memory cards.

Samsung entered the SD market when it started manufacturing two new forms of SD cards that were not covered by the license. Although it refused to sign an updated license created by the SD Group to cover the new forms of SD cards, Samsung made the requested royalty payments on a quarterly basis beginning in November 2006. In June 2010, Samsung filed Sherman Act claims against Panasonic and the SD Group alleging that the licenses were an anti-competitive agreement in restraint of trade and a monopolization of the relevant markets.

Statute of Limitations

A district court dismissed the claims on the grounds that Samsung’s claims were barred by the relevant four year statute of limitations, that all events that took place within the four years before Samsung’s suit were a mere continuation of the prior actions;, and that the events did not restart the statute of limitations.

Continuing violations. An exception to the statute of limitations applies in cases of continuing violations. To state a continuing violation of the antitrust laws, a plaintiff must allege that a defendant completed an overt act during the limitations period that was a new and independent act, rather than a reaffirmation of a previous act, that caused a new and accumulating injury on the plaintiff. Certain actions taken to enforce contracts made in violation of the antitrust laws and non-legal actions taken pursuant to a pre-limitations period contract can lead a new cause of action to accrue.

Overt acts. Samsung sufficiently alleged that the SD Group committed two overt acts within the limitations period that precluded dismissal based on the statute of limitations, according to the court. The adoption of the 2006 license, which extended the license to cover the second-generation SD cards, was an overt act that caused Samsung’s claims to accrue within the limitations period. The adoption of the 2006 license was a “new and independent act” that caused “new and accumulating injury” because the previous license did not cover second-generation SD cards or the expansion to future technological developments. The application of the licenses to Samsung when it began to make SD cards in 2006 was also an overt act that restarted the limitations period, as it was an overt act to enforce a contract.

Speculative damages. This case also fell within the statute-of-limitations exception for speculative damages, according to the court. In cases where damages are “uncertain” or “speculative” at the time of the antitrust violation, the statute of limitations period begins on the date that the plaintiff’s damages first “accrued and became ascertainable.” Samsung was not in the SD card market at the time of the original license and none of the parties could have known whether Samsung would enter that market. Because the harm to Samsung was speculative at the time of the initial wrong, Samsung was able to file suit once the harm was apparent in 2006.

The case is No. 12-15185.

Attorneys: Kathleen M. Sullivan (Quinn Emanuel Urquhart & Sullivan, LLP) for Samsung Electronics Co., Ltd. Jeffrey L. Kessler (Winston & Strawn LLP) for Panasonic Corporaiton.

Companies: Samsung Electronics Co., Ltd.; Panasonic Corporation

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