September 29, 2010

EU Top Court Says No Attorney-Client Privilege For In-House Counsel

The Court of Justice, the highest court in the European Union (‘EU’), has ruled that communications between corporations and their in-house counsel are not protected by the Legal Professional Privilege (‘LPP’), the European version of the attorney-client privilege.

The Court’s decision in Case C-550/07 P, Akzo Nobel Chemicals and Akcros Chemicals v. Commission, means that in-house counsel will not be able to assert the attorney-client privilege in  investigations by the European Commission.  The competition authorities of individual EU Member States will still apply their national rules on LPP, which may recognize communications with in-house counsel as privileged.       

The case arose from the European Commission’s Directorate General for Competition’s dawn raid of Dutch chemicals group Akzo Nobel NV in February 2003.  The officials were investigating alleged price-fixing among producers of heat stabilizers, an additive used in the manufacturing of certain plastics.

Among the documents seized in the raid were two emails between a company general manager and an in-house lawyer admitted to the Netherlands Bar.  Akzo claimed that these documents were covered by LPP.  In May 2003, the Commission adopted a decision rejecting this claim.

After an unsuccessful appeal to the General Court, Akzo appealed to the Court of Justice in November 2007.

Akzo argued that the General Court had incorrectly interpreted the decision of the Court of Justice in Case 155/79 AM&S Europe v. Commission [1982] ECR 1575.  In AM&S, the Court of Justice held that one of the conditions for LPP to attach to an exchange between a client and a lawyer is that the lawyer must be “independent,” that is to say “not bound to the client by a relationship of employment.”  The General Court, Akzo claimed, had interpreted this language too literally.  The condition that a lawyer must be independent could not exclude in-house lawyers.  An in-house lawyer enrolled at a Bar or Law Society was subject to rules of professional ethics and discipline that made that lawyer as independent as an external lawyer.

The Court of Justice rejected this argument.  The requirement that written communications be exchanged with an independent lawyer in order to be protected by LPP was “based on a conception of the lawyer’s role as collaborating in the administration of justice and as being required to provide, in full independence and in the overriding interests of that cause, such legal assistance as the client needs.”  This, according to the Court, necessitates the absence of any employment relationship between the lawyer and his client. 

In addition, the Court noted, in-house lawyers may be required by their employers to perform other tasks which may have an effect on the corporation’s commercial policy.  In this case, the Akzo lawyer was the company’s competition law coordinator.  The Court stated that such functions reinforce the ties between the lawyer and his employer to such an extent that he does not enjoy a level of professional independence comparable to that of an external lawyer. click here for more »

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Categories: International Competition Issues

    September 27, 2010

    Federal Circuit Holds Antitrust Violation Is Not Per Se Patent Misuse In Princo Case

    An antitrust violation involving a patent is not necessarily a defense in a patent infringement suit, the U.S. Court of Appeals for the Federal Circuit has ruled in Princo v. ITC.

    In its third opinion in the long-running Princo case, the court rejected recordable CD manufacturer Princo’s argument that an agreement between two firms to market one firm’s patent and suppress the other renders the patent that was marketed unenforceable under the “patent misuse” defense – even if the agreement violates the Sherman Act.

    Both Sony and Philips, key members of the consortium that developed the recordable CD (CD-R) standard, own patents on a method of encoding position information on a CD-R. Both patents are included in the bundle licensed by the consortium, but only Philips’s patent is actually used.

    When Philips sued Princo for infringement of various patents, Princo raised the patent misuse defense, which can block the enforcement of a patent when the patent holder uses its patent in an anticompetitive way.

    The classic examples of patent misuse are where a patent holder ties licenses to use a patented product to a promise to use unpatented supplies, or where a patent holder makes licensees promise to honor the patent beyond its expiration date.  Princo’s theory was different.  It claimed that if Sony and Philips agreed to market Philips’s patent as part of the CD-R standard and keep Sony’s patent on the shelf – an illegal agreement not to compete – Philips’s patent became unenforceable because of patent misuse.

    In a review by 10 judges of the Federal Circuit, a majority of six found that Sony and Philips’s agreement, if proven, would not be patent misuse, even if it constituted a Sherman Act violation.

    Judge Bryson, writing for the majority, said that misuse is limited to situations where a patent holder leverages his patent rights against licensees to gain additional benefits that the patent doesn’t guarantee – analogous to a tying claim.  An agreement between two patent holders not to compete, said the court, is not the same as leveraging a patent.  It may be the basis for an antitrust counterclaim, but it is no defense against patent infringement.

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    Categories: Antitrust and Intellectual Property Law

      September 24, 2010

      Online Gambling Companies Win Big As EU Throws Out Germany’s Gambling Monopoly

      Online and other private gambling companies are looking forward to their winnings as a result of the ruling by the European Court of Justice in Luxembourg (ECJ) that Germany’s state-run gambling monopoly violates European Union law.

      The EU’s highest court has ruled that Germany’s justification for the state monopoly on gambling rang hollow and struck down the law in a landmark decision that opens the door to the German market for private betting companies, including online companies.

      Under a 2008 bill, Germany allows only state lotteries – a gambling monopoly that Germany sought to justify by arguing that it protects consumers from the harm of gambling and prevents gambling addictions.

      However, the ECJ labeled this justification “unjustifiable” in light of the “intensive advertising campaigns” undertaken by the state-run gambling companies and the addictive automated gambling machines also allowed under Germany’s monopolistic rules.  The ECJ opined that, “[i]n such circumstances, the preventive objective of that monopoly can no longer be pursued, so that the monopoly ceases to be justifiable.” In addition, the ECJ noted that Germany’s gambling legislations is “contrary to the fundamental freedoms of the EU.”

      This ruling comes after the German legislation was challenged in regional courts by online gambling companies; the regional courts then asked the ECJ for a ruling on the legality of the German monopoly.  This ruling is in stark contrast to previous ECJ rulings deeming state lotteries in other EU states legal because of their goal of limiting the negative consequences of gambling on society.

      The consequences of this ruling could be far-reaching in Germany, where the state-run lottery and betting companies have earned billions in euros.  In addition to staunching the flow of gambling income to the state, this ruling could redirect those billions to private gambling companies and allow private gambling companies to flourish in a market previously closed to them.

      Although the full consequences of the ruling are yet to be seen, the European Gaming and Betting Association welcomed the ruling as part of “much-needed reform” in Germany.   “Other member states have opened or are opening their markets. They show that consumers can be better protected in a market that is both regulated and open to competition,” it said.

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      Categories: Antitrust Enforcement, International Competition Issues

        September 22, 2010

        Skyhook Sues Google Over Location Positioning Technology

        The competitive battle between Google and Skyhook Wireless to provide cutting-edge location positioning technology for such devices as mobile phones and laptops has found a new location for conflict – the courtroom.
        Skyhook, a company that provides mobile software for determining location using nearby Wi-Fi signals, has filed a lawsuit against in Massachusetts Superior Court alleging that Google unfairly pressured Motorola and other Skyhook partners to stop using Skyhook’s location-based mobile software.  The Boston-based firm has also filed a second lawsuit against Google saying the company infringed on Skyhook’s patents for software that allows advertising based on a user’s precise location.
        In the lawsuit alleging intentional interference with contractual and business relations, as well as unfair and deceptive trade practices, Skyhook alleges Google’s business practices were anticompetitive because the firm used its influence on the (allegedly open source) Android mobile software platform – created by Google – to pressure Motorola into breaking its contract with Skyhook. Android is an open-sourced software platform created by Google.
        Skyhook claims that after it announced a partnership with Motorola in April 2010, in which Motorola would replace Google’s location-based software on its Android phones with Skyhook’s location engine, Google’s vice president for engineering called Motorola’s chief executive and asked him multiple times to impose a “stop ship” order on Motorola devices loaded with Skyhook’s software.  According to the Complaint, Google called for the halt in shipments because it claimed Skyhook’s software was not compatible with the Android platform.
        Skyhook claims that it lost millions of dollars in royalties provided under the Motorola Contract and that “Google’s interference also harmed Skyhook by preventing enhancements to Skyhook’s database that would have occurred but for the deprivation of data from these phones.” 

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        Categories: Antitrust Litigation

          September 20, 2010

          Dairy Farmers Milk Class Certification In Antitrust Suit

          A class of more than 4,500 dairy farmers spread across 11 southeastern states in two geographic markets has been certified by Judge J. Ronnie Greer of the U. S. District Court for the Eastern District of Tennessee in a case alleging a conspiracy to monopolize the production, marketing and processing of milk.

          The dairy farmers allege multiple claims of antitrust conspiracy against Dean Foods Company (the nation’s largest dairy processor), National Dairy Holdings, L.P., Dairy Farmers of America, Inc., and other defendants.

          The class is divided into two subclasses.  One is comprised of roughly 3,000 farmers who are members of the Dairy Farmers of America and the other consists of independent and cooperative dairy farmers.  All class members sold grade A milk to the defendants from January 1, 2001, to the present.

          In opposing class certification, the defendants argued that the two subclasses have a “fundamental and irremediable conflict of interest” because the Dairy Farmers Association subclass members benefited from the alleged unlawful behavior at the expense of the independent farmers.  While Judge Greer found this aspect of the case “troubling,” he granted certification because the defendants failed to provide any testimony supporting their argument, rendering it “somewhat hypothetical.”  Judge Greer noted, however, that he may decertify or modify the class if evidence supporting the defendants’ argument can be established.

          Judge Greer rejected class certification for a breach of contract claim brought on behalf of farmer-members of the Dairy Farmers Association because the claim necessarily would require each class member to individually demonstrate membership in the association at the time of the alleged breach, making the contract claim “not susceptible to class action treatment.”

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          Categories: Antitrust Law and Monopolies

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