Intel, Apple try unusual antitrust complaint again

Intel Corp. and Apple Inc. are trying again in an unusual antitrust complaint against a SoftBank Group Corp.-owned investment firm over its patent infringement lawsuits that was dismissed earlier this year by a San Francisco judge.

The lawsuit accuses San Francisco-based Fortress Investment Group LLC of acquiring a number of patent holding companies, which then filed patent infringement suits against Intel and Apple saying they refused to sell alternative patents to drive up defense costs.

On Tuesday, Wilmer Cutler Pickering Hale and Dorr partner Mark D. Selwyn filed court papers defending his amended complaint filed after U.S. District Judge Edward M. Chen dismissed the technology giants' lawsuit without prejudice in July.

The case pits two Silicon Valley technology companies against a Japanese firm that has bought patent assertion entities, or PAEs, and then divided them into different portfolios to make it more expensive to settle a lawsuit.

Legal experts say the premise has not been accepted in an antitrust complaint.

The U.S. government sided with SoftBank, filing a motion earlier this year arguing the Sherman Act and Clayton Act claims should be dismissed "because [Intel and Apple] have not sufficiently identified any harm to competition here."

In the amended complaint, Selwyn argued Fortress and other defendants are violating antitrust and unfair competition laws. Intel Corp. et al. v. Fortress Investment Group LLC et al., 19-CV07651 (N.D. Cal., filed Nov. 20, 2019).

"By eliminating competition, defendants' aggregation scheme has resulted in product suppliers having very few if any alternatives to defendants to license patents in many of those antitrust markets, resulting in inflated royalties and reduced output in those markets and for licenses to defendants' overall portfolio," Selwyn wrote.

Fortress' attorneys, led by Irell & Manella LLP partners Morgan Chu, Benjamin W. Hattenbach and A. Matthew Ashley, argued in court papers the amended complaint should be dismissed as well.

Ashley argued the technology companies have failed to define an antitrust market, or to establish Fortress and its co-defendants "have market power to force companies to take licenses and pay supracompetitive royalties."

The amended complaint "exacerbates the confusion over the nature of the alleged conspiracy and its supposed scope," he added.

In a response filed Tuesday, Selwyn and WilmerHale partner William F. Fee argued the amended complaint established the defendants collected patent portfolios in a way that has eliminated competition and exploited their newfound market power by making exorbitant demands.

"The amended complaint includes detailed allegations regarding how Apple and Intel suffered antitrust injury from the decreased competition caused by defendants' patent transfers because the aggregations left them with the choice of paying exorbitant royalties or litigating," Selwyn wrote.

The lawsuit has attracted a variety of amicus briefs, but none caught as much attention as the Statement of Interest of the United States, which argued that foreign owned companies such as Fortress play a valuable role in helping compensate inventors whose patents have been infringed.

"Ensuring that such intermediary activity is not unduly constrained by overly expansive application of antitrust law can help ensure that such inventors are properly rewarded for beneficial research and development efforts -- and are incentivized to proceed with them," wrote Andrew N. DeLaney of the U.S. Department of Justice.

President Donald Trump's administration has been more sympathetic than past administrations to patent holding companies, much to the dismay of companies that often derisively refer to them as "trolls."

Fortress' motion to dismiss the amended complaint is tentatively scheduled to be considered Dec. 17.

Hattenbach declined to comment. Selwyn could not be reached. Apple, Intel and Fortress did not return emails seeking comment.