Why did physicists refuse to write about the Antitrust Paradox? Because every time they tried to define the relevant market share, the observer effect kicked in, and the monopoly disappeared. (I hope readers who have dual Bork/quark interests enjoyed that.)
Today’s highlighted opinion proceeds from trademark law, crosses into antitrust law, and has implications for patent law. In it, Judge Connolly rejects a plaintiff's attempt to argue that the defendants' prior filing of trademark litigation against competitor gave rise to anti-trust and unfair competition claims.
Noerr-Pennington Precludes Some Tort and Anti-Trust Claims Based on Litigation—Unless It Was Sham Litigation
Judge Connolly explained that the Noerr-Pennington doctrine provides immunity from certain types of claims that a plaintiff might try to make based on a defendant's effort to enforce its IP:
[The Noerr-Pennington] doctrine “provides broad immunity from liability [for anti-trust claims and business torts] to those who petition the government, including administrative agencies and courts, for redress of their grievances.” In other words, “[a] good faith effort to enforce intellectual property rights, including trademark rights, through the courts falls within the protection of Noerr-Pennington.”
Scott Florsck v. Unstoppable Domains, Inc., C.A. No. 22-1230-CFC, at 5 (D. Del. Feb. 8, 2024).
Thus, an IP lawsuit will not normally result in antitrust liability for the act of bringing that lawsuit . . . unless your litigation is a sham.
A sham litigation is one that is:
- objectively baseless in the sense that no reasonable litigant could reasonably expect success on the merits, and
- conceals an attempt to interfere directly with the business relationships of a competitor through the use of the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon.
Intent Doesn't Matter If the Litigation Wasn't a Sham in the First Place
Plaintiff here brought unfair competition and anti-trust claims based on a prior trademark infringement lawsuit defendant had brought against another competitor that ultimately went out of business.
The fatal flaw for the plaintiff in today’s opinion was “jump[ing] the gun” by focusing on the second factor, the defendant's intent to interfere with the plaintiff's business, without first establishing that the defendant’s prior trademark litigation against another competitor was objectively baseless.
Plaintiff claimed that the defendant should have known, in the prior trademark litigation, that the defendant did not have an enforceable trademark, because it had tried and failed to acquire federal registration for the trademarks at issue for many years.
But Judge Connolly found that a common law trademark claim is not necessarily objectively baseless where the party has tried and failed to federally register it, because a mark—even without federal registration—may be eligible for protection under both the Lanham Act and other sources of law. (One citation to Matal v. Tam caught my attention, because I once had the privilege to hear Simon Tam speak at my law school.)
Thus, Judge Connolly granted Unstoppable's motion to dismiss plaintiff's unfair competition and antitrust claims, because the claims didn't meet the first part of the test (that the first lawsuit was objectively baseless).
"Only if challenged litigation is objectively meritless may a court examine the litigant’s subjective motivation."
The Federal Circuit Ressurected This Doctrine Only Recently
Perhaps this case indicates revived interest in the sham litigation exception, which was resurrected only recently in FTC v. AbbVie, based on ill-fated patent litigation. That's a case worth reviewing. In the District Court, the FTC won $448 million disgorgement in ill-gotten profits. The Third Circuit found that the disgorgement remedy was erroneous because there was no provision for it in the FTC Act. However, the Third Circuit affirmed that AbbVie's prior patent litigation against competitor, Perrigo, was actually a sham and an exercise of monopoly power. The U.S. Supreme Court denied certiorari in 2021. Nevertheless, the Third Circuit outcome in AbbVie disincentivizes using the courts for outcomes other than success on the merits, even though the sham litigation exception was not successful in the instant Delaware case.
If you enjoyed this post, consider subscribing to receive free e-mail updates about new posts.
