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From Intellectual Property Law Daily, December 4, 2017

Capital One barred from rechallenging patent troll’s litigation conduct under antitrust laws

By E. Darius Sturmer, J.D.

Antitrust counterclaims asserted by Capital One Financial Corp. in response to an alleged patent troll’s infringement suit were barred under the doctrines of Noerr-Pennington immunity and defensive collateral estoppel, the federal district court in Greenbelt, Maryland, has ruled. Because the litigation brought by the patent-holding plaintiffs/counter-defendants, Intellectual Ventures I LLC (IV) and several related entities, was not objectively baseless and was integral to Capital One’s antitrust counterclaims, it was petitioning activity protected from antitrust scrutiny by Noerr-Pennington, the court found. Moreover, because the sufficiency of Capital One’s market definition had been fully and fairly litigated (and found lacking) for "very similar" claims filed against IV in a different district the previous year, it was estopped from arguing that the materially identical relevant market it pleaded in the instant suit was not the relevant market for antitrust purposes. IV’s motion for summary judgment was therefore granted (Intellectual Ventures I LLC v. Capital One Financial Corp., November 30, 2017, Grimm, P.).

Dispute history, parties’ contentions. The dispute between IV and Capital One began with a patent infringement suit IV filed in federal court in Virginia in 2013, claiming infringement of a handful of the many banking technology patents to which it held the rights. It continued with the substantially similar present suit, which IV filed in January 2014. In each case, Capital One countersued for violations of the Sherman and Clayton Acts, alleging that IV’s repeated claims against it constituted illegal monopolization, attempted monopolization, and unlawful asset acquisition.

According to Capital One, IV’s business practice consists of acquiring "a vast portfolio of thousands of patents that purportedly deal with technology essential to the types of services offered by commercial banks"—like mobile and on-line banking, as well as credit card and ATM transactions—and then convincing banks to license its entire portfolio "at a jaw-droppingly high price." Capital One charged that when banks ask for detail about the patents covered, IV refuses to disclose enough information for them to make an intelligent decision about whether to agree to the license. However, banks refusing the license are threatened or hit by IV with infringement litigation regarding a few of the patents in its portfolio, along with IV’s pledge that if the suit should fail, IV will simply file another regarding different patents "until the prospect of endless high-cost litigation forces the bank to capitulate and license the entire portfolio."

IV countered "indignantly" that Capital One amounted to an "efficient infringer" that can and did "play the odds, infringing patents with near impunity until the rare patent holder with the resources to sue does so, and then negotiat[ing] a favorable license fee." Its patents were presumptively valid, IV noted, giving it an absolute right to file litigation to enforce them. Thus, even if enforcing them through litigation had any monopoly effect, it had immunity under the Noerr-Pennington doctrine for that conduct. Moreover, IV argued, Capital One was barred by both claim and issue preclusion from asserting its antitrust counterclaims because it brought virtually identical claims in the Virginia suit, lost, and elected not to appeal. Finally, IV contended that Capital One’s definition of the relevant market for purposes of antitrust analysis was flawed because its portfolio consisted of numerous distinct technology markets rather than the "monolithic ‘financial services portfolio’ " claimed by Capital One, a definition which had previously been deemed inadequate by the court in Virginia.

Relevant market. To begin with, the court agreed that the market definition proposed by Capital One was problematic, but not itself fatal. Applying the prevailing standard for using cluster markets to define a relevant market would not likely work, as the antitrust theory in the case rested on the notion that Capital One and other banks to which IV pitched its portfolio did not want the cluster of products that IV offered. However, while factfinders ultimately might reject a reliance on cluster markets to justify antitrust market analysis, the court could not conclude that to do so would be unreasonable as a matter of law. "Even if cluster market analysis ultimately [was] not considered the appropriate framework for analyzing the relevant market" in the present case, it was "hard to deny that there is something concerning from an antitrust perspective about the way in which IV engages in its licensing business." If the only issue was whether genuine issues of fact existed entitling IV to summary judgment on the issues of monopoly power in a relevant market and the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen or historic accident, the court remarked, it would have denied the motion and allowed the case to proceed. Nevertheless, summary judgment was necessitated by immunity and estoppel.

Noerr-Pennington immunity. IV was protected from antitrust liability for its patent enforcement efforts against Capital One, the court determined. Even though the two infringement suits IV asserted in Virginia and Maryland both failed, in the court’s view, a reasonable litigant in IV’s position could realistically expect to succeed on the merits of its claims. There were too many indicia of probable cause to assume otherwise, the court observed. Thus, the litigation was not objectively baseless and could not be considered sham litigation excepted from the Noerr-Pennington doctrine. In reaching this conclusion, the court noted that IV had taken extra steps in challenging rulings that "one who did not expect to succeed likely would not bother taking," had not filed any additional suits against Capital One since the appellate ruling, and had withdrawn specific claims when persuaded it would not prevail on them.

Collateral estoppel. Finally, the court decided that under the circumstances of the case, it was appropriate to apply defensive collateral estoppel to estop Capital One from arguing that its relevant market, which had not changed materially from the relevant market alleged in the Virginia litigation, was not a relevant market for antitrust purposes. The court rejected an argument by Capital One that the judge’s conclusion rejecting the proposed market as a relevant market for antitrust purposes was not critical or necessary to the judgment he issued on the antitrust counterclaims.

The case is No. PWG-14-111.

Attorneys: Bryan D. Bolton (Funk and Bolton PA) and Clayton Walter Thompson, II (Feinberg Day Alberti and Thompson LLP) for Intellectual Ventures I LLC and Intellectual Ventures II LLC. Mary Catherine Zinsner (Troutman Sanders LLP) and Andrew Jay Graham (Kramon and Graham PA) for Capital One Financial Corp. and Capital One, National Association.

Companies: Intellectual Ventures I LLC; Intellectual Ventures II LLC; Capital One Financial Corp.; Capital One, National Association

MainStory: TopStory Patent MarylandNews

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