June 27, 2012

Court Holds Football Players’ Claims Fail To Thread American Needle

Football players’ antitrust claims that the National Football League (“NFL”) and teams conspired to deprive them of their rights to football game footage are being kicked out of court after a federal judge found that the plaintiffs had failed to come within the Supreme Court’s holding in American Needle, Inc. v. National Football League, 130 S. Ct. 2201 (2010).

Judge Paul A. Magnusen of the U.S. District Court for the District of Minnesota has dismissed with prejudice a putative class action antitrust lawsuit brought in Washington v. National Football League by retired NFL players against the NFL, NFL Ventures, L.P., NFL Productions, LLC, NFL Enterprises, LLC, and each of the 32 NFL teams.

The plaintiffs, former professional athletes seeking to represent a class of similarly situated individuals, alleged that the defendants monopolized the market for former players’ images and likenesses in violation of the Sherman Act by not allowing them the rights to films and images from their games.

The court found that the plaintiffs’ claims failed to come within the holding of American Needle that the NFL and its teams might, in some instances, be capable of concerted action in violation of the Sherman Act.

Specifically, Judge Magnusen found that American Needle does not support plaintiffs’ contentions because that Supreme Court decision involved intellectual property that each team owned individually.  By contrast, the intellectual property involved in this case is historical football game footage – something that the individual teams do not separately own.  Judge Magnusen found this distinction dispositive on the ground that the NFL and its teams could not be considered to have conspired with respect to property that the teams and the NFL collectively owned.

The court concluded that the plaintiffs failed to plausibly allege any antitrust violation from defendants’ conduct.  Judge Magnusen stated that “[i]f the NFL is refusing to pay Plaintiffs for the use of their images in its copyrighted material, then Plaintiffs may have a claim for a violation of their right of publicity.… What they have are claims for royalties, not claims for antitrust.  The Complaint is therefore dismissed with prejudice.”

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Categories: Antitrust and Intellectual Property Law, Antitrust Law and Monopolies, Antitrust Litigation

    June 22, 2012

    Pharmacies Allege Antidepressant Manufacturers Depressed Generic Competition

    CVS and Rite Aid pharmacies have filed an antitrust complaint in the U.S. District Court for the District of New Jersey against Wyeth Inc. and Teva Pharmaceuticals for allegedly conspiring to keep generic versions of the popular antidepressant Effexor XR out of the hands of consumers.

    The two pharmacies allege in Rite Aid Corp et al. v. Wyeth Inc. et al, that the anticompetitive conspiracy included fraudulently obtaining patents for Effexor XR and wrongfully using litigation to keep generic manufacturers of that antidepressant from entering the market.

    The pharmacies claim that Wyeth, now part of Pfizer, obtained three patents by falsifying clinical data.  Wyeth’s data showed the extended release version of Effexor XR decreased nausea and vomiting, both side effects of the immediate-release version of the drug.

    According to the complaint, after obtaining the patents through false data, Wyeth listed them in the FDA Orangebook, enabling Wyeth to bring lawsuits against 17 generic manufactures that wanted to produce a cheaper version of the drug.

    Teva Pharmaceuticals was the first company to file suit against Wyeth.  Instead of further litigating, Teva agreed not to market a generic version of extended release Effexor XR until July 2010.

    In exchange, Wyeth agreed to give Teva an “exclusive license” to sell a generic option and settled the other 16 lawsuits, which allowed Teva to control the market for a longer period of time.  For one year, Teva was the only company selling a generic version of the extended release antidepressant.

    CVS and Rite Aid join several other companies in bringing antitrust claims against Wyeth and Teva.  A previous complaint was filed in the same federal court last November.

    Effexor XR, or venlafaxine hydrochloride, is prescribed by doctors to treat major depressive disorder.  The mental health condition affects 6.7 percent of adults in the United States.  Women are 70 percent more likely to experience the disorder than men.

    The plaintiffs in the two cases argue that Wyeth’s and Teva’s actions have inflated prices for their customers.  Reuters has reported that sales for brand name Effexor XR topped $2.5 billion during the period that Wyeth had control of the market.

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    Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

      June 20, 2012

      Seventh Circuit Finds Interlocking Directors Cause No Antitrust Injury To Shareholders

      The U.S. Court of Appeals for the Seventh Circuit has rejected a shareholder derivative action on the ground that that the shareholders suffered no antitrust injury from interlocking directorships even though such accumulation of market power may violate federal antitrust law.

      The Seventh Circuit reached this conclusion in ordering the dismissal of the complaint in Robert F. Booth Trust v. Crowley, a shareholder derivative action that alleged a violation of the rarely-litigated prohibition on interlocking directorships found in § 8 of the Clayton Act, 15 U.S.C. § 19.

      After Sears, Roebuck & Co. merged with Kmart Corp. in 2005, the board of Sears Holdings Corp. inherited directors from both companies.  Two shareholders brought a derivative action claiming a violation of the Clayton Act’s prohibition on interlocking directorships.  William Crowley, a director, also served on the boards of AutoNation, Inc. and AutoZone, Inc, and Ann Reese, another director, also served on the board of Jones Apparel Group, Inc.  The plaintiffs alleged that the consolidated business competes with those other firms in violation of the ban on interlocking directorships. 

      The district court denied a motion to intervene by another shareholder, who sought to dismiss the derivative action.  That shareholder appealed to the Seventh Circuit Court of Appeals, which decided, in an opinion by Chief Judge Easterbrook, that the motion to intervene should have been granted, and the derivative action dismissed.

      Much of the Seventh Circuit’s opinion focuses on the procedural rules of intervention and the corporate law rules of derivative actions.  However, the court’s ruling hinged on its conclusion that shareholders lack standing to bring a derivative suit for interlocking directorates where the shareholders stand to benefit from the interlock.

      The court cites Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) for the antitrust-injury doctrine, stating that “private antitrust litigation is limited to suits by those persons for whose benefit the laws were enacted.”  In the words of Chief Judge Easterbrook, “It seems odd to allow investors, who stand to gain if producers with market power cooperate, to invoke an antitrust doctrine that is designed for strangers’ benefit.” 

      The court concluded that “neither plaintiff nor any other investor (in his role as investor) suffers antitrust injury.”  Lacking the essential element of antitrust injury, the antitrust action could not survive.

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      Categories: Antitrust Litigation

        June 15, 2012

        Cable Companies Facing Antitrust Investigation Of Video Streaming Limits

        The U.S. Department of Justice (“DOJ”) is conducting an investigation to determine whether or not Internet usage caps and subscription perks offered by large cable and Internet providers violate antitrust laws by unreasonably restraining streaming video.

        The Wall Street Journal has reported that the DOJ’s Antitrust Division has spoken about Internet data caps with Comcast, Time Warner Cable, and other cable companies, as well as Netflix and Hulu, two online video streaming services.

        Both Netflix and Hulu argue that Internet data caps on cable company service plans limit the amount of video that can be streamed, and ultimately deter consumers from ditching the traditional channel bundle and switching to online video.

        The DOJ will also examine services offered only to subscribers.  For example, Comcast offers unlimited data usage when a viewer is using the company’s own video streaming app, Xfinity for Xbox or iPad.  Some television programmers offer online video, which Comcast has also made available only to subscribers.

        Comcast and Time Warner have said the limits on data and the subscription perks are in response to consumers’ use of multiple devices.  The data limits are necessary to keep their broadband networks from being too inundated, and the apps and special access allow consumers to view television programming on a game system, tablet or computer.

        Research indicates that consumers are ready to embrace online video.  According to a recent comScore study, 17 percent of the 10,000 participants viewed television programs solely through online platforms.

        A separate study conducted by Nielsen indicates that the largest group of Americans watching online video is between the ages of 18 and 34.  However, with one third of Hulu’s consumers over the age of 50, even older generations have embraced the new technology.

        Government officials have also recognized the change.  This week, Attorney General Eric Holder identified himself as a digital consumer during a committee hearing after Senator Al Franken argued that “consumers want to be able to cut the cord and watch television shows and movies online rather than paying over $100 per month to their cable companies.”

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        Categories: Antitrust Enforcement

          June 11, 2012

          Players Charge NFL Imposed Collusive Salary Cap

          The National Football League Players Association has filed a collusion claim against the NFL, its clubs, and team owners alleging a secret $123 million per-Club salary cap during the 2010 uncapped season. 

          The suit was filed in the U.S. District Court of Minnesota just one day after that court upheld NFL sanctions against the Cowboys and the Redskins for front-loading player contracts in 2010. 

          In appealing the sanctions, Washington and Dallas argued that they violated no rules and, therefore, should not have been punished.  The NFL said that although there was no cap violation, the teams were being punished for improperly gaining a competitive advantage. 

          New York Giants owner John Mara commented that “[w]hat they did was in violation of the spirit of the salary cap.  They attempted to take advantage of a one-year loophole … full well knowing there would be consequences.”  This statement, which raised the question of how one violates the spirit of the salary cap during an uncapped year, was soon followed by the filing of the new collusion complaint.  The allegations in the complaint are based upon testimony and legal briefs from the unsuccessful appeal of the NFL penalty in addition to the John Mara statement. 

          Recently elected NFLPA President Domonique Foxworth said in a statement earlier this month that “[o]ur union recently learned that there was a secret salary cap agreement in an uncapped year.  The complaint today is our effort to fulfill our duty to every NFL player.  They deserve to know, above all, the facts and the truth about this conspiracy.” 

          According to NFL spokesperson Greg Aiello, the NFL’s position is that the collusion claim is prohibited both by the Collective Bargaining Agreement and separately by an agreement signed by the players’ attorneys last year.  Aiello stated, “[t]he claims have absolutely no merit and we fully expect them to be dismissed.  On multiple occasions, the players and their representatives specifically dismissed all claims, known or unknown, whether pending or not, regarding alleged violations of the 2006 CBA and the related settlement agreement.  We continue to look forward to focusing on the future of the game rather than grievances of a prior era that have already been resolved.” 

          However, in its press release on the new case, the NFLPA clarified that this collusion claim was previously unknown to the players, is entirely new, and therefore could not have been asserted in the Brady v. NFL case and is not barred by the Collective Bargaining Agreement. 

          When asked about the collusion claim, NFL commissioner Roger Goodell responded, “[i]t’s more litigation.  I’ve said before, this is not going to get resolved through litigation ….  It will get resolved through negotiation. It’s time to get to the table and negotiate.”

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          Categories: Antitrust Litigation

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