We previously wrote about the nascent efforts of legislators, regulators, and representatives of technology-dependent industries to use the antitrust laws, such as Section 2 of the Sherman Act or Section 7 of the Clayton Act, to rein in perceived abuses by patent aggregation entities (“PAEs”), more commonly known as patent trolls. One potential difficulty in bringing PAEs’ actions under the antitrust laws is that their activities do not fit neatly into any traditional definition of a relevant product market. The United States District Court of Maryland, however, recently permitted antitrust counterclaims against a PAE to proceed to discovery, even though the United States District Court for the Eastern District of Virginia previously dismissed similar counterclaims involving the same parties based on a failure to allege a proper relevant product market.[1]
In Intellectual Ventures I LLC v. Capital One Financial Corp., Intellectual Ventures I brought a patent infringement suit in the United States District Court of Maryland alleging that Capital One infringed four patents in its portfolio. Capital One asserted a counterclaim and third-party complaint (against shell companies owned and controlled by Intellectual Ventures I), alleging Intellectual Ventures I violated Sherman Act Section 2 and Clayton Act Section 7. Capital One alleged that Intellectual Ventures I owns 3,500 patents purportedly relating to online financial services, but holds those patents through an opaque network of 2,000 shell corporations. Intellectual Ventures I hides those patents to prevent businesses from designing around those patents or, once Intellectual Ventures I brings an infringement action, determining the value of any license to a single patent or group of patents. Further, Capital One alleged that Intellectual Ventures I operates in the ex post market, meaning it intentionally waits until financial institutions have designed and implemented their online banking services. After financial institutions have already invested in the online services, Intellectual Ventures I threatens constant litigation against the financial institution if it does not take a license on a broad portfolio of patents, the vast majority of which are likely invalid or do not cover the financial institution’s online banking system.
This was not the first suit between Intellectual Ventures I and Capital One. Intellectual Ventures I previously asserted patent infringement claims against Capital One in the United States District Court for the Eastern District of Virginia, where Capital One also asserted antitrust counterclaims. In the Eastern District of Virginia, the court dismissed Capital One’s counterclaim. The court found that Capital One’s alleged relevant market—“the market for technology used to provide commercial banking services in the United States”—failed to allege “any of the recognized indicia of a relevant market.”[2] In particular, Capital One failed to identify any area of effective competition between Capital One and Intellectual Ventures I.
Based on the Eastern District of Virginia’s decision, Intellectual Ventures I moved to...
