The Noerr-Pennington Problem: How Cartels Enforced Through Patent Litigation Can Escape Antitrust Claims

Abstract

An antitrust exam starts with the following problem: president of A calls the president of B and says, 'Unless you agree to keep prices at $10 a widget we will raise your costs to the point you will no longer be able to stay in business.' If you were a student sitting for the exam you would think this is the easiest question in the world. A is attempting to create a cartel engaging in a conspiracy to restrain trade with an enforcement mechanism. The question goes on: Company B refuses to participate in the price fixing scheme and A makes good on its promise to raise costs. B cannot compete due to its raised costs and subsequently goes out of business. Does B have an antitrust claim against A? Again this sounds simple, B has sustained an injury that antitrust law is meant to protect against. B should have a claim. However, what if the professor adds in one fact: Company A increases the costs of B through patent infringement suits. The Noerr-Pennington Doctrine prevents legal costs from being the basis of an antitrust injury except in certain narrow cases. Without an injury B will even have the standing to make a claim.Unfortunately, this is just a hypo on an antitrust law exam. The above scenario has already happened. In 2007 Steve Jobs, the CEO of Apple, called Ed Colligan, the CEO of Palm, and threatened Palm with patent litigation unless Colligan agreed to make unsolicited calls to Apple employees in order to make job offers. This agreement was an obvious agreement to suppress employee wages. Colligan refused to enter into the agreement in an email to Jobs, citing the fact that the agreement was not only wrong, but likely illegal. In response, Jobs told Colligan I'm sure you realize the asymmetry in the financial resources of our respective companies and to take a look at our patent portfolio before you make a final decision here. This no-poaching agreement was stopped by the FTC and is now the subject of a private antitrust suit by former software engineers who worked at various tech firms that had made this agreement. The question this paper seeks to ask, however, is what legal protections would Palm have had in this situation if Apple (and perhaps other tech companies) made good on its threats. The paper will first examine the current state of the law. Then the paper will analyze how the law applies to the above scenario. Finally the paper will offer potential solutions to Palm's lack of legal protections from Apple.