Federal, but not State, Patent Troll Claims Out

OAKLAND, Calif. (CN) - A so-called patent troll "utterly failed" to allege federal antitrust claims against Motorola, Samsung, Dell and a patent aggregator, a federal judge ruled, but allowed its state claims to proceed.

Cascades Computer Innovation filed federal antitrust claims against the tech companies in March 2012, and against the patent aggregator, RPX Corp., to which they belong.

Chicago-based Cascades claimed the aggregator conspired with defendants HTC, LG Electronics, Motorola, Samsung and Dell to fix prices on licenses for patents that optimize applications in Android and other smartphones.

RPX acquires patents for 110 member companies, and "has accumulated more than 1,600 patents in various fields, not counting the 29,000 patents for which it recently acquired exclusive licensing rights," according to U.S. District Judge Yvonne Gonzalez Rogers' Feb. 23 order granting motion for judgment on the pleadings.

Cascades disputed claims that it and other "non-manufacturing entities" are patent trolls.

"The troll label has been extended to non-manufacturing entities (called 'NPEs') who are companies like Cascades that do not manufacture or sell products covered by patents they own or control," Cascades said in its complaint. "Of course, each of the defendants also owns or controls numerous patents that cover products they neither manufacture or sell."

Cascades said the patents at issue assist Android phones to install applications "through dependency trees, which permits the optimization of the bytes code used in an application, thus, increasing the speed and value of the application."

It claimed that RPX and its members engaged in a group boycott of Cascades and refused to negotiate its patent claims, in violation of federal antitrust law.

Motorola, HTC, LG, Samsung and Dell sell more than 95 percent of the mobile phones and tablets that use Android operating systems in the United States, Cascades said, "and are an important part of the Android market, and related, relevant sub-markets (including products that require a license from Cascades under its patented technology)."

"The manufacturing defendants constitute nearly the total demand for the licensing of Cascades' patented technology and collectively enjoy substantial market power in that market and, together with others in the industry, have exercised their power to control the acceptance and terms and conditions of licenses from Cascades," Cascades added. "The power is augmented by the willingness and agreement of the manufacturing defendants to infringe Cascades' patents until such time as Cascades capitulates by either going out of business, declining to enforce the patents or offering defendants patent license terms below fair market value."

Judge Gonzalez Rogers in dismissed Cascades' claims in January 2013, with leave to amend, finding Cascades had failed to allege group boycott with enough specificity.

In December 2013, Rogers ruled that Cascades' amended complaint successfully pleaded specific allegations of a plausible conspiracy in a relevant market.

The amended complaint, "unlike its initial complaint, alleges specific facts raising a reasonable inference that the manufacturing defendants and RPX engaged in a so-called 'hub and spoke' conspiracy to force sub-competitive pricing for Cascades' patent licenses by monopsonizing the market therefor," Rogers wrote at the time.

A monopsony is a market with a single buyer.

The defendant companies cited a September 2015 jury decision that Samsung did not infringe on the primary patent at issue in Cascades' case. They said Cascades therefore lacked antitrust standing to maintain its lawsuit.

Gonzalez Rogers agreed on Tuesday, finding that Cascades had failed to state "any viable federal antitrust claim."

"The court previously articulated the elements of these federal antitrust claims in connection with its order denying defendants' motions to dismiss," Gonzalez Rogers wrote. "After supplementing the picture with the patent jury's finding of non-infringement of the 'primary' '750 patent, the FAC [first amended complaint] utterly fails to satisfy the elements necessary to state federal antitrust claims."

RPX and Dell declined comment.

Cascades, Motorola, Samsung, LG and HTC did not immediately respond to requests for comment.

Cascades' remaining state laws claims, for violation of the Cartwright Act, California business code and unfair competition laws, may proceed, Rogers ruled.

She gave the parties until March 4 to file opening briefs, and until March 11 to file replies.

A stipulation to dismiss state law claims may be filed by March 4.

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