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LITIGATION AS A PREDATORY PRACTICE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FEBRUARY 17, 2012 

Serial No. 112–79 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JARED POLIS, Colorado 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

BEN QUAYLE, Arizona, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

MARK AMODEI, Nevada 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

FEBRUARY 17, 2012 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 3 

WITNESSES 

The Honorable Christopher B. Saxman, former Delegate, Virginia House of 

Delegates 

Oral Testimony ..................................................................................................... 5 

Prepared Statement ............................................................................................. 7 

J. Douglas Richards, Partner, Cohen Milstein 

Oral Testimony ..................................................................................................... 9 

Prepared Statement ............................................................................................. 11 

Marina Lao, Professor of Law, Seton Hall University School of Law 

Oral Testimony ..................................................................................................... 20 

Prepared Statement ............................................................................................. 21 

(1) 

LITIGATION AS A PREDATORY PRACTICE 

FRIDAY, FEBRUARY 17, 2012 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 9:36 a.m., in room 

2141, Rayburn House Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Quayle, Chabot, Watt, and 

Jackson Lee. 

Staff present: (Majority) Holt Lackey, Counsel; Olivia Lee, Clerk; 

and (Minority) Stephanie Moore, Subcommittee Chief Counsel. 

Mr. GOODLATTE. Good morning and welcome to this hearing of 

the Subcommittee on Intellectual Property, Competition, and the 

Internet. Today’s hearing is on litigation as a predatory practice. 

The Judiciary Committee has heard ample evidence this Congress about the excesses and abuses of America’s lawsuit system. 

We have heard how runaway litigation distorts our health care and 

patent systems. The Constitution Subcommittee has received testimony showing that our system of discovery in litigation is unduly 

costly and that even frivolous lawsuits too often go unsanctioned. 

We have reported several bills to rein in litigation abuses, including the HEALTH Act, the Smith-Leahy America Invents Act, and 

the Lawsuit Abuse Reduction Act. 

Today’s hearing examines a different aspect of America’s lawsuit 

problem, the strategic abuse of litigation system as an anti-competitive tactic. Precisely because our civil justice system is so expensive and tolerant of tenuous claims, litigation can be a deadly 

weapon in the hands of a cartel or an aspiring monopolist. Litigation can be used to drive up a competitor’s costs, to gain access to 

a competitor’s otherwise confidential information, and to divert a 

competitor’s resources away from offering competitive goods and 

services. 

Large companies can impose ruinous legal costs on their smaller 

competitors by forcing them to defend against a lawsuit. The median case in Federal court costs about $20,000 to defend, and, in 

many cases, the cost is much higher. 

A predatory plaintiff controls the scope of the claims in the suit, 

and so has the ability to structure its claims and discovery requests 

in a way that maximizes costs for the defendant. And the costs of 

2 

litigation weigh much heavier on a small business than a large corporation. 

If the claim is merely plausible, then a predatory plaintiff is entitled to discovery of any matter relevant to the claims or defenses 

in the case. A defendant may be forced to turn over e-mails, business plans, customer lists, and other sensitive information. The 

more documents the defendant is forced to turn over, the higher 

the costs of the lawsuit. And the lawsuit forces the defendant to 

spend time and money on litigation rather than competing in the 

marketplace. 

For all of these reasons, litigation can be a particularly effective 

predatory strategy. Deployed strategically, litigation can put a competitor out of business, prevent a competitor from ever entering the 

market, or force a competitor to reduce its output. 

If a big company succeeds in using litigation to limit competition, 

then there is a dangerous probability that it could profit by raising 

prices on consumers. 

Indeed, strategic litigation can be a more effective means of 

eliminating a competitor than tactics like predatory pricing that 

have long been banned by the antitrust laws. Predatory pricing requires a dominant party to sell its products at below its costs, lowering its profits in the short term in the hope of realizing monopoly 

profits after the competitor is eliminated. With litigation, on the 

other hand, a party can seek a monopoly or to eliminate a competitor without having to lower its own prices. 

While a litigation strategy imposes litigation costs on a predatory 

plaintiff, it imposes equivalent costs on a target defendant. The defendant, often a smaller business than the predatory plaintiff, may 

be less equipped to bear these costs. 

As a predatory tactic, abusive litigation is relatively cost-effective 

for the predatory plaintiff and expensive for the defendant. This is 

why some commentators have dubbed abusive litigation a form of 

‘‘cheap exclusion.’’ 

But the Supreme Court has created an exemption that protects 

abusive anti-competitive litigation from the antitrust laws. The 

Noerr-Pennington doctrine was originally formulated to create an 

antitrust immunity for citizens exercising their First Amendment 

right to petition the legislature. Because government actions are 

beyond the scope of antitrust laws, and because citizens have a 

right to petition the government to adopt policies they favor, the 

Court held that the political petitioning activities do not violate the 

antitrust laws. 

The Court has since extended this holding to protect all forms of 

petitioning the Government, including the filing of a lawsuit. But 

the analogy between petitioning the legislature and petitioning a 

court is flawed. 

Threatening to restrict a frivolous or abusive political argument 

could chill free speech and the flow of information, and raises serious First Amendment questions. But courts have long put reasonable limits on the types of arguments that a litigant can make and 

have long-sanctioned frivolous and abusive arguments made for improper purposes. 

Abuse of process was a tort at common law. Rule 10 of the Federal Rules of Civil Procedure provides for dismissal of meritless 

3 

and implausible claims. Rule 11 provides sanctions for filings made 

with an improper purpose. The rules of evidence prohibit the introduction of evidence based on hearsay, conjecture, or unreliable 

methods of expert analysis. 

Applying the antitrust laws to prohibit litigation filed with the 

anticompetitive intent to monopolize a market or to unreasonably 

restrain trade would not harm the public’s right to access the 

courts for legitimate purposes. Unfortunately, the courts have liberally applied Noerr-Pennington antitrust immunity to litigation 

and have construed the sham litigation exception to that doctrine 

very narrowly. 

As a result, abusive litigation persists as a predatory anticompetitive tactic. Today’s hearing will explore this problem and 

how to address it. 

I want to welcome and recognize the Ranking Member of the 

Subcommittee, the gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. And I appreciate the 

Chairman convening this hearing. 

The First Amendment holds a hallowed place in our Constitution, guaranteeing the right of people to petition the government. 

Antitrust laws are also of fundamental importance in our society. 

As Justice Thurgood Marshall observed years ago, ‘‘Antitrust laws 

are the Magna Carta of free enterprise. They are as important to 

the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our fundamental 

personal freedoms.’’ 

The question here seems to me to be, what happens when a fundamental personal right conflicts with a fundamental free enterprise right? Which right is more fundamental and should take precedence in that event? 

Early tensions between these two principles brought into focus 

the need for doctrinal adjustments and led to the Noerr-Pennington 

immunity. 

As we have heard, the Noerr-Pennington doctrine provides immunity from antitrust liability, the guardian of free enterprise 

rights, to individuals and corporations who exercise their personal 

rights to petition the Federal or State Government to take official 

actions that may impose a restraint on trade. 

As Members of Congress, we often think about the right to petition the government as protecting lobbying, but Noerr applies to 

other areas of First Amendment expression as well. 

In litigation, I think we can all imagine the dominant players in 

an industry reacting with hostility against a small player who 

dares to enter that market. Attempting to drive out rivals from the 

opportunity to compete is clearly an abuse of process and antitrust 

principles. But it is also too easy to respond to competitive lawsuits 

by claiming that the suit is merely a means to eliminate competition. 

If dominant players, the rich and well-represented who can afford the best legal minds, walked into court on an equal footing 

with small players, the poor, the indigent, and the underrepresented, wouldn’t our system of justice in general be eminently 

more fair? Or to state the converse, if the small players, the poor, 

indigent litigants, walked into court on an equal footing with domiVerDate Aug 31 2005 11:56 Mar 27, 2012 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6601 H:\WORK\IP\021712\72906.000 HJUD1 PsN: DOUGA
4 

nant players, the rich and well-represented, wouldn’t justice be 

done a lot more often? 

In an effort to constrain dominant players, the Supreme Court in 

a 1993 case, Professional Real Estate Investors v. Columbia Pictures Industries, the so-called PRE case, made an attempt to constrain the Noerr doctrine to prevent a perversion of the First 

Amendment by giving structure to the so-called sham exception to 

Noerr immunity. 

In subsequent years, however, the PRE test for determining 

whether a petition in the litigation context is a sham has shown 

signs of ineffectiveness. 

I believe it is important to consumers, the economy, and businesses—small and big—to know how to distinguish legitimate petition from an anti-competitive effort to undermine competition. In 

many ways, unfortunately, this Judiciary Committee has preoccupied itself with protecting dominant players from frivolous litigation. So in a sense, this hearing seems to me to represent a welcome role reversal for the Committee. 

I am particularly interested in hearing from witnesses their 

views on the breadth of Noerr-Pennington in the litigation context, 

as well as the scope of the sham litigation exception. Are they currently working in a compatible fashion? Does one make the other 

meaningless? Further, should Noerr-Pennington immunity have 

parallel application across the methods available to petition the 

government? Or is litigation decisively different? 

I appreciate that we have a businessman, a law professor, and 

a litigator on our panel, and I believe that we will be enriched by 

the diversity of perspectives reflected here today. 

The Chairman spoke quite a bit in his opening statement about 

abusive litigation. I guess I come kind of from a different perspective. I have seen a lot of abusive defense of litigation: stonewalling, 

failing to give up documents, failing to allow the justice system. So 

perhaps our next hearing will be about that disparity between rich 

and poor, dominant and small, and we will get to really trying to 

level the playing field in the litigation context, which is really 

where the problem exists, in my opinion. 

I yield back, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman for his comments. And 

I think he will find that this hearing will, indeed, touch on some 

of those issues that you describe. 

And we welcome all of our witnesses and the contributions they 

will make. 

But before I introduce them, I would like them, as is the custom 

of this Committee, to stand and be sworn. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you very much, and please be seated. 

Our first witness is Chris Saxman, a former member of the Virginia House of Delegates. Mr. Saxman’s family founded and runs 

the Shenandoah Valley Water Company. Mr. Saxman has been involved in issues facing that industry as a former chairman and current board member of the International Bottled Water Association. 

I look forward to hearing his perspective on this issue as a policymaker and as a small-business man. And I am proud to call Mr. 

Saxman a constituent and friend. 

5 

Our second witness, Doug Richards, practices antitrust class action law and is the managing partner at the New York office of 

Cohen Milstein. Before entering private practice, Mr. Richards 

served as deputy general counsel of the Commodity Futures Trading Commission, where he received a special service award for exemplary accomplishment. 

Our third and final witness is Professor Marina Lao of Seton 

Hall University School of Law. Professor Lao is a former attorney 

with the Department of Justice Antitrust Division, a member of the 

advisory board of American Antitrust Institute, and the former 

Chair of the section of antitrust and economic regulation of the Association of American Law Schools. Professor Lao’s article ‘‘Reforming the Noerr-Pennington Antitrust Immunity Doctrine’’ examines 

the scope of Noerr-Pennington immunity and offers helpful suggestions for reform. 

I would point out to each of the witnesses that there is a timer 

on the table in front of you. You have 5 minutes to make your 

statements. Your entire statement, written statement, will be made 

a part of the record. When the yellow light comes on, you will have 

1 minute to complete your statement. When the red light comes on, 

we ask that you wrap up your remarks. 

And we will start with Mr. Saxman. 

Welcome. Glad to have you up from the Shenandoah Valley. 

TESTIMONY OF THE HONORABLE CHRISTOPHER B. SAXMAN, 

FORMER DELEGATE, VIRGINIA HOUSE OF DELEGATES 

Mr. SAXMAN. Thank you, Mr. Chairman, and Members of the 

Committee. 

My name is Chris Saxman. I am a recently retired member of 

the Virginia General Assembly, having served the 20th House District from 2002 to 2010. I grew up in a small family business, the 

Shenandoah Valley Water Company, and we have 45 full-time employees for whom we provide health care for the entire family while 

paying above-average market wages. Additionally, I am a past 

chairman of the International Bottled Water Association, while currently serving on its board of directors and executive committee. 

In short, Mr. Chairman, I have seen the business world as a 

frontline low-skill employee to a bottled water deliveryman to a 

manager to an executive. I have been a legislator who has worked 

on legislation dealing with just about every aspect of business, and 

I have also worked very closely with small mom-and-pop companies 

and large global corporations who employ people in the tens of 

thousands to improve products, services, relationships, and industry standards. 

Over the course of my life in business and politics, I have come 

across a disturbing and pervasive business practice that, in my 

opinion, threatens the very foundations of the American free market capitalist system. In most political debates, I would be considered a free-market, supply-side adherent; however, I also believe 

that, as James Madison said, ‘‘If men were angels, no government 

would be necessary.’’ 

A sound economy is not just what one can do in a market but 

also what one should do. Government should protect people who 

are engaged in commerce just as it should protect the average citVerDate Aug 31 2005 11:56 Mar 27, 2012 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 H:\WORK\IP\021712\72906.000 HJUD1 PsN: DOUGA
6 

izen. One cannot steal property from another just as one cannot 

physically harm or threaten another to gain property or pleasure. 

The issue today before you is predatory litigation or, as I prefer 

to call it, legal extortion. I will give you two examples of which I 

have become aware in my various capacities. 

Number one, a multinational non-American company in my industry willfully, intentionally, and knowingly breached a contract 

with which it had complied for 13 years in order to gain financially 

at the expense of an American company with whom they had had 

a successful, mutually beneficial 20-year business relationship. The 

American company, at the time of the breach, was .4 percent the 

size of the North American subsidiary of a large multinational 

which broke the contract, and one one-hundreth the size of its global parent. 

The evidence through the trial clearly shows a pattern of behavior in which the larger company, and its employees, conspired to 

steal—my term—steal from the smaller firm that which it could 

not gain in the market or would not purchase at fair market value. 

If our biggest competitors decide—I think I am missing part of 

my testimony. It is on the backside, Mr. Chairman. 

Rather than simply pay the company fair market value for the 

business, the larger company figured that it would be cheaper to 

take the business via the American court system. 

So by forcing the American company to defend its own property 

in Federal court and force the American company to spend millions 

of dollars in legal fees, the larger company determined it had nothing to lose. 

What is even more disturbing is that the large multinational 

forced the smaller company to initiate the litigation. It is literally 

a win-win scenario. Even if, after 5 years of expensive and timeconsuming litigation, which is still pending at the appellate level, 

they lose the case, the company will either expense it off their 

books or account it as an asset purchase ending up with the business they initially sought. 

The large multinational went so far as to investigate the American company owner’s personal and corporate debt load before it decided to take pre-emptive legal action. They waited until he was in 

a weakened condition and then made their move. The results for 

the consumer will be a less competitive market. The broader community will see wealth being transferred out of the country, lost 

jobs, lower wages and benefits, and overall economic decline. 

The second case involves the extortion of taxpayer money by the 

use of threat of legal action by companies who have submitted bids 

to local governments under a legal Request for Proposal process. In 

this situation, a company will submit bids that do not entirely comply with an RFP but will have a bid price that is much higher than 

necessary. When that company is not awarded the RFP, the company will threaten legal action unless the bidding process is reconsidered. This causes inordinate delays and, obviously, higher bid 

awards, because most local governments cannot afford protracted 

legal expenses. 

Companies know that they have a distinct advantage in this 

process—again, in a win-win scenario. They will either win the bid 

or get the local government to increase the overall price in the marVerDate Aug 31 2005 11:56 Mar 27, 2012 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6601 H:\WORK\IP\021712\72906.000 HJUD1 PsN: DOUGA
7 

ket, which will naturally be seen in similar bids throughout the 

country, and all at taxpayer expense. 

So a bid that forces up prices in X county in Virginia will transfer to Y city in North Carolina due to market realities. This is a 

very well-thought-out corporate strategy which, in conjunction with 

Federal mandates and accompanying Federal grants, strikes at the 

very heart of the problems that undermines our economy—lack of 

trust in our governing and institutional structures. 

I can provide specifics upon request, but my interest here today 

is to leave you with the impression that there is something very 

wrong in our economy. The court system has been weaponized in 

the market and is being used against smaller, weaker companies 

who cannot withstand the attacks. 

[The prepared statement of Mr. Saxman follows:] 

Prepared Statement of the Honorable Christopher B. Saxman, 

former Delegate, Virginia House of Delegates 

Mr. Chairman and members of the Committee, 

My name is Chris Saxman. I am a recently retired member of the Virginia General Assembly having served the 20th House District from 2002–2010. I grew up in 

a small family business, Shenandoah Valley Water Company and we have 45 full 

time employees for whom we provide health care for the entire family while paying 

above average market wages. Additionally, I am a past Chairman of the International Bottled Water Association while currently serving on its Board of Directors 

and Executive Committee. 

In short Mr. Chairman, I have seen the business world as a front line low skill 

employee to a bottled water deliveryman to a manager to an executive. I have been 

a legislator who has worked on legislation dealing with just about every aspect of 

business and I have also worked very closely with small mom and pop companies 

and large global corporations who employ people in the tens of thousands to improve 

products, services, relationships and industry standards. 

Over the course of my life in business and politics, I have come across a disturbing and pervasive business practice that, in my opinion, threatens the very 

foundations of the American Free Market Capitalist system. 

In most political debates I would be considered a free market supply side adherent; however, I also believe that as James Madison said ‘‘If men were angels, no 

government would be necessary.’’ 

A sound economy is not just about what one CAN do in a market but also what 

one SHOULD do. 

Government should protect people who are engaged in commerce just as it should 

protect the average citizen. One cannot steal property from another just as one cannot physically harm or threaten another to gain property or pleasure. 

The issue before you today is ‘‘predatory litigation’’ or as I prefer to call it ‘‘legal 

extortion.’’ 

I will give you two examples of which I have become aware in my various capacities. 

1. A multinational non American company, in my industry, willfully, intentionally 

and knowingly breached a contract with which it had complied for 13 years in order 

to gain financially at the expense of the American company with whom they had 

had a successful mutually beneficial 20 year business relationship. The American 

company, at the time of the breach was .4% the size of the North American subsidiary of the large multinational which broke the contract and .01% the size of its 

global parent. The evidence throughout the trial clearly shows a pattern of behavior 

in which the larger company, and its employees, conspired to steal from the smaller 

firm that which it could not gain in the market or would not purchase at fair market value. Rather than simply pay the company fair market value for the business, 

the larger company figured that it would be cheaper to take the business via the 

American court system. So, by forcing the American company to defend its own 

property in federal court and force the American company to spend millions of dollars in legal fees, the larger company determined it had nothing to lose. What is 

even more disturbing is that the large multinational forced the smaller company to 

initiate the litigation. 

It’s literally a win win scenario. Even if, after 5 years of expensive and time consuming litigation (which is still pending at the appellate level) they lose the case, 

8 

the company will either expense it off their books or account it as an asset purchase 

ending up with the business they sought. 

The large multinational went so far as to investigate the American company’s 

owner’s personal and corporate debt load before it decided to take pre-emptive legal 

action. They waited until he was in a weakened condition and then made their 

move. 

The results for the consumer will be a less competitive market. The broader community will see wealth being transferred out of the country, lost jobs, lower wages 

and benefits, and overall economic decline. 

2. Another case involves the extortion of taxpayer money by the use of threat of 

legal action by companies who have submitted bids to local governments under a 

legal Request For Proposal process. In this situation, a company will submit bids 

that do not comply entirely with an RFP but will have a bid price that is much higher than necessary. When that company is not awarded the RFP, the company will 

threaten legal action unless the bidding process is reconsidered. This causes inordinate delays and obviously higher bid awards because most local governments cannot 

afford protracted legal expenses. Companies know that they have a distinct advantage in this process again, in a win win scenario. They either win the bid or get 

the local government to increase the overall price in the market which will naturally 

be seen in similar bids throughout the country and all at taxpayer expense. So, a 

bid that forces prices up in X County in Virginia will transfer to Y City in Pennsylvania due to market realities. This is a very well thought corporate strategy which, 

in conjunction with federal mandates and accompanying federal grants, strikes to 

heart of the problem that undermines our economy—lack of trust in our governing 

and institutional structures. 

I can provide specifics upon request but my interest here today is to leave you 

with the impression that there is something very wrong in our economy. The court 

system has been weaponized in the market and is being used against smaller, weaker companies who cannot withstand the attacks. 

We are a small family business who is constantly competing with large multinational corporations for every customer. We live under the constant threat of predatory litigation. If our biggest competitors decide to train the full resources of their 

legal divisions on us, how can we compete? We just want to be in business to deliver 

good, safe and great tasting bottled water to our customers at the best price in the 

market. We employ 45 Virginians who share that goal and work hard every day to 

make it a reality. But we don’t have a team of lawyers on retainer ready to engage 

in trench warfare. We want to win in the marketplace, not the courtroom. I think 

every small businessman in America feels the same way. 

Imagine my surprise when I learned that the law creates a special exemption 

from antitrust, the Noerr-Pennington Doctrine, that protects these big companies’ 

right to sue my family’s business and fellow small businesses in an attempt to drive 

us from the market. I don’t think it is right that one of the most effective strategies 

that our competitors can adopt to exclude us from the market is also one of the few 

exclusionary strategies that enjoys near blanket immunity from the antitrust law. 

We’re not afraid of predatory pricing by my rivals. We’re not afraid of anything 

our competitors can do to us in the market. If the game is delivering water to our 

customers at the best price with the best service, I know we can beat them. We have 

the best and hardest working drivers, customer service reps, and sales team in the 

Shenandoah Valley. But if the game is a protracted lawsuit, well, we just can’t compete with their lawyers. 

The impacts are felt all across society in a subtle but serious way—people lose 

health care, jobs are lost and corporate profits are concentrated and in many cases 

sent overseas. Unless the law sanctions this behavior severely, big corporations will 

continue to engage in it. Unfortunately, experience teaches that they will not do 

what they should do, but what they can get away with. Right now they can abuse 

the legal system to weaken smaller competitors like us, and so they do. The antitrust law should be clarified so that abusive litigation is punished just as severely 

as other anticompetitive, predatory strategies—including by treble damages and, 

where appropriate, criminal sanctions. 

Thank you Mr. Chairman. 

Mr. GOODLATTE. Thank you, Mr. Saxman. 

Mr. Richards, welcome. You might want to turn on your microphone there. Thank you. 

9 

TESTIMONY OF J. DOUGLAS RICHARDS, PARTNER, 

COHEN MILSTEIN 

Mr. RICHARDS. Good morning, Chairman Goodlatte, Ranking 

Members Watt and Conyers, and Members of the Subcommittee. I 

am Doug Richards, and I am managing partner of the New York 

office of the law firm of Cohen Milstein Sellers & Toll. My legal 

practice focuses mainly on antitrust claims, largely including antitrust claims arising from unfounded patent litigation. 

I have been asked to testify today to share my perspectives concerning the scope of immunity that one should have from antitrust 

liability stemming from use of litigation as a predatory practice. 

My perspectives on that question stem from my experience in having represented plaintiffs in several antitrust claims during the 

last 10 years that asserted claims of sham litigation, arising mainly 

from defective patents. 

I am testifying on my own behalf, and the opinions expressed are 

my own. 

Thank you for giving me the opportunity to testify about current 

legal standards governing antitrust liability stemming from sham 

litigation. It is important that the law governing Noerr-Pennington 

immunity strike a correct balance between the need to reward invention by allowing intellectual property owners to obtain and protect their intellectual property through litigation, on one hand, and 

the need to preserve competition in the face of unfounded intellectual property claims, on the other. 

These antitrust issues often arise when a patent-holder sues a 

company alleging patent infringement, such as when a brand-name 

pharmaceutical company sues a generic drug company for infringing its patents and wins or settles the case. Purchasers of the drug 

at issue then sometimes bring an antitrust suit against the brandname pharmaceutical company, claiming that the patent litigation 

was sham litigation, because the patent was invalid due to fraud 

on the part of the patent-holder in obtaining the patent. 

I believe that the law is currently out of balance and effectively 

immunizes unfounded litigation to too great a degree from challenge under antitrust law. In several key respects, legal hurdles 

that an antitrust plaintiff must clear in order to pursue antitrust 

claims based on predatory litigation have been set too high by the 

courts. The result is that dominant corporations are often not held 

duly accountable when they bring unfounded intellectual property 

claims for the purpose of excluding competitors from the marketplace. 

In resolving the tension between goals of antitrust and of intellectual property, the courts have stacked the deck in favor of intellectual property rights, even when they are legally unfounded, and 

to the detriment of the public’s right to protect itself under antitrust law against unjustified monopoly prices. 

Under the Professional Real Estate Investors case, the core requirement for antitrust liability arising from a claim of sham litigation is that the claim must be both objectively and subjectively 

baseless. Even from the outset of the analysis in actual cases, this 

dichotomy between objective baselessness and subjective baselessness is often unclear. 

10 

Suppose, for example, as is often true in these cases, that the 

antitrust plaintiff has uncovered evidence that a patent-holder actually conducted its own tests, prior to obtaining a patent, that 

showed in one way or another that the patent should not be granted. Does that evidence go to objective baselessness, subjective baselessness, or both? 

If those tests weren’t part of the published literature, defendants 

often argue they are irrelevant to objective baselessness, because 

all they show is what the defendant knew subjectively, and not 

what some sort of objective reasonable person would know. But 

shouldn’t a test of baselessness address what the defendant actually knew? 

There is no sensible reason to divorce the objective reasonableness inquiry from facts actually known at the time by the antitrust 

defendant, if the goal is to deter groundless claims. 

In actual cases, to focus on what was actually known by a defendant often provides a richer and more reliable guide to what 

someone in the position of the antitrust defendant should have 

known, than to limit one’s focus in the first instance only to what 

some purely hypothetical reasonable person would have known in 

some hypothetical context. 

Even if objective baselessness is required, therefore, what the defendant actually knew should be one of the most reliable guides to 

whether a case was baseless in light of known facts. 

Nevertheless, the court in the Professional Real Estate wrote 

that only if challenged litigation is objectively meritless may a 

court examine the litigant’s subjective motivation. One can reasonably argue that this statement relates only to evidence of the defendants’ subjective motivation, and not to the defendant’s subjective knowledge of facts. 

But the Federal Circuit has not recognized that distinction, holding instead that facts that only the defendant itself was aware of 

prior to filing suit cannot properly be considered in making the objective reasonableness inquiry. 

In cases where the antitrust defendant clearly knew facts that 

made the patent invalid, confusion about the fuzzy distinction between objective and subjective baselessness can cause courts to 

turn a blind eye to the clearest and most compelling evidence that 

a case had no reasonable basis at all. 

I see my time is out, so I will just sum up by saying that I am 

in agreement with the fact that there is a need to curtail the scope 

of immunity from antitrust liability under the Noerr-Pennington 

doctrine. 

And I thank you for the opportunity to testify today. 

[The prepared statement of Mr. Richards follows:] 

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Mr. GOODLATTE. Thank you, Mr. Richards. 

Professor Lao, welcome. You might want to pull that microphone 

closer and turn it on. 

TESTIMONY OF MARINA LAO, PROFESSOR OF LAW, 

SETON HALL UNIVERSITY SCHOOL OF LAW 

Ms. LAO. Good morning, and I apologize for having been a little 

bit late. I got lost in this cavernous building, believe it or not. 

Thank you so much for inviting me to participate in this hearing. 

I am a law professor at Seton Hall University School of Law. 

My written statement and my testimony today is drawn in part 

from an article I had published, entitled ‘‘Reforming the Noerr-Pennington Antitrust Immunity Doctrine.’’ 

Let me first start out by giving a little bit of context. In a democracy, citizens have the right to petition the government. But efforts 

to influence the government sometimes have an impact on competition. When that happens, then there is a tension between the antitrust law and the First Amendment. The Noerr-Pennington immunity doctrine developed as a result of that, to try to reconcile and 

resolve that tension. 

The Noerr-Pennington doctrine, as it stands, is sweeping. But in 

the early years, it was limited by a sweeping sham exception. The 

Noerr-Pennington immunity doctrine applies to both lobbying the 

legislature, the executive branch, and to the petitioning judiciary. 

And I think therein lies some of the problem, because lobbying 

the legislature is quite different from so-called petitioning the judiciary, because when we talk about petitioning the judiciary, we are 

actually talking about litigation, filing a lawsuit. 

So I am going to start out just by talking a little bit about litigation and the PRE case, which Mr. Watt had referred to quite a bit. 

As I mentioned earlier, the sham exception at first was quite 

broad, and it kept check on the Noerr immunity doctrine. But in 

1993, the Supreme Court decided the PRE case, which severely restricted the sham exception. Basically, it set forth a two-pronged 

test. 

First, the plaintiff will have to show that the underlying case 

was objectively baseless, in the sense that no reasonable litigant 

could have realistically expected success on the merits. It must 

then show that the antitrust defendant brought the lawsuit for the 

purpose of harming the rival through the use of the government 

process, rather than through the outcome of that process. 

Both parts of the test are quite troubling, as I stated perhaps in 

more detail in my written statement. And I don’t really have time 

to go into it at length now. 

But I would say that one of the reasons that the objective test 

is so troubling is that a case can in fact be objectively baseless if 

it is clearly irrational for the person to have brought the litigation 

but for the competitive harm that it could inflict on its rival. But 

if there is a colorable basis in law for the lawsuit, we would still 

say under PRE that this case fails to pass the objective baselessness test. 

In fact, Justices Stevens and O’Connor, who had concurred in the 

judgment, disagreed sharply with this reasoning and with this articulation of the two-pronged test. They raised the point that you 

21 

1Marina Lao, Reforming the Noerr-Pennington Antitrust Immunity Doctrine, 55 RUTGERS L. 

REV. 965 (2003). 

can see how someone could bring a lawsuit, have it run for 10 

years, take two trips to the Court of Appeals and recover a nominal 

sum from the defendant. Yet under this PRE test, this would be 

called a not objectively baseless lawsuit. And that is one of the 

problems. 

The second prong is also slightly problematic, because you would 

have to show that the defendant brought the suit in order—for the 

purpose of harming the competitor through the use of the process 

and not for the outcome. But people often do have mixed motives, 

and often people do bring a lawsuit to get the outcome and as well 

to harm—and to harm the competitor as well. 

So under this definition, it would seem as though the second test 

would also not be met. Without a meaningful doctrinal limit to the 

immunity doctrine, I think there are greater risks that dominant 

firms can bring actions against smaller companies that I think 

would not have been rationally brought, otherwise. 

I think as a matter of policy, it would be desirable to limit Noerr 

and to perhaps expand the sham exception. The question is, does 

the First Amendment allow us to do that? 

Various commentators have noted the distinction between petitioning the legislature and petitioning in the adjudicatory settings. 

And I totally agree with that. 

I think when we are talking about petitioning the judiciary, we 

don’t need that much protection. That is because the judiciary is 

very, very different. Already, the litigants are bound by very strict 

rules when they go into court to litigate. There are Rule 11 sanctions. There are all kinds of penalties for litigants, if they do not 

tell the truth. 

So to the extent that all those sanctions and all those rules are 

considered constitutional, it is very hard for me to see why—if you 

say that you would not allow them to make misrepresentations, 

that somehow that might offend the First Amendment. 

I see that I have run out of time. And I will just stop right here. 

If you have any questions, I would be happy to take them. Thank 

you. 

[The prepared statement of Ms. Lao follows:] 

Prepared Statement of Marina Lao, Professor of Law, 

Seton Hall University School of Law 

Thank you for inviting me to participate in this hearing. I am a law professor at 

Seton Hall University School of Law specializing in antitrust law. I am also a member of the Advisory Board of the American Antitrust Institute (AAI), a former chair 

of the Section of Antitrust and Economic Regulation of the Association of American 

Law Schools (AALS), and a former attorney at the Department of Justice, Antitrust 

Division. My written Statement, and my testimony today, is drawn in part from an 

article that I have published entitled ‘‘Reforming the Noerr-Pennington Antitrust Immunity Doctrine.1

The essence of a representative democracy, protected by the First Amendment 

right to petition, is the citizen’s right to communicate their desires, anticompetitively motivated or otherwise, to government officials. However, when efforts 

to persuade the government produce anticompetitive effects (harm to competition), 

they necessarily impinge upon federal antitrust law, creating tension between that 

law and the First Amendment and related values. The Noerr-Pennington antitrust 

immunity doctrine was developed in an effort to resolve that tension. 

22 

2 365 U.S. 127 (1961). 

3 381 U.S. 657 (1965). 

4 404 U.S. 508 (1972). 

5See, e.g., ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 347– 

78; Grip-Pak v. Illinois Tool Works, Inc., 694 F.2d 466 (7th Cir. 1982), cert. denied, 461 U.S. 

958 (1983). 6 508 U.S. 49 (1993). 

7 Id. at 60–61. 8 Id. (quoting City of Columbia v. Omni Outdoor Adver. Inc., 499 U.S. 365, 380 (1991)). 9 Id. at 60 n.5. 10 Id. at 61 n.6 (‘‘We need not decide here whether and, if so, to what extent Noerr permits 

the imposition of antitrust immunity for a litigant’s fraud or other misrepresentations.’’). 

As originally conceived, the Noerr-Pennington doctrine stood for the principle that 

genuine efforts to persuade the government to adopt a particular course of action 

are not subject to antitrust scrutiny, no matter how anticompetitive the petitioner’s 

motive and the action sought. It originated from two U.S. Supreme Court cases that 

gave the doctrine its name: Eastern Railroad President Conference v. Noerr Motor 

Freight,2 which immunized petitioning the legislature; and United Mine Workers of 

America v. Pennington,3 which immunized petitioning the executive branch of the 

government. About a decade later, in California Motor Transport Co. v. Trucking 

Unlimited,4 the doctrine was further extended to petitions to courts (and administrative agencies acting in an adjudicatory capacity). There is a ‘‘sham’’ exception to 

Noerr: if the petitioning is considered sham, Noerr immunity would have no application. 

My Statement will focus on the current expansive scope of Noerr, and the correspondingly narrow sham exception, as it is applied to judicial petitions. Litigation 

can be a particularly effective method of predation.5 Even if it is unsuccessful, it 

may inflict substantial costs on a competitor and otherwise cause significant competitive harm. I will also address whether such an expansive interpretation of the 

Noerr doctrine, as applied to judicial petitioning, is required under either the First 

Amendment right of petition or a statutory construction of the Sherman Act, and 

conclude that it is not. 

T2Noerr doctrine as applied to judicial petitions, and the ‘‘sham’’ exception. In 

California Motor Transport, while the Supreme Court extended the Noerr antitrust 

immunity doctrine to judicial and quasi-judicial petitions, it applied a ‘‘sham’’ exception for the first time to deny immunity to the antitrust defendants. It held that 

the defendants, who had sought to forestall competition by routinely opposing their 

competitors’ applications for operating rights in administrative and judicial proceedings, regardless of the merits of the cases, were not entitled to Noerr immunity 

because their petitioning was ‘‘sham.’’ The sham exception, then unclearly defined 

and loosely applied to different kinds of improper conduct, served as a doctrinal 

limit to the expansive Noerr immunity principle for decades. 

In 1993, however, the definition of sham was severely restricted by the Supreme 

Court in Professional Real Estate Investors, Inc. v. Columbia Picture Industries, Inc. 

(PRE).6 Writing for the Court, Justice Thomas said that, for an underlying lawsuit 

to be considered sham, it must be ‘‘objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.’’ 7 If this objective test 

is met, it must also be shown that the ‘‘baseless lawsuit conceals ‘an attempt to 

interfere directly with the business relationships of a competitor,’ through the ‘use 

[of] the governmental process—as opposed to the outcome of that process—as an 

anticompetitive weapon.’’ 8 In other words, the antitrust plaintiff must prove not 

only that the earlier lawsuit was objectively baseless but that the antitrust defendant had brought it merely to harm the competitor through the process and not for 

the litigation outcome. 

Both parts of the test are somewhat troubling. As to the objective component, the 

Court also said that success in the earlier lawsuit precludes a finding of objective 

baselessness (while a lawsuit that is unsuccessful at every stage of the proceedings 

is not necessarily baseless).9 This raises the question of how earlier lawsuits that 

succeed because of the antitrust defendant’s misrepresentations or fraud upon the 

court should be treated. Would they be deemed to automatically fail the ‘‘objectively 

baseless’’ test because a successful lawsuit, by definition, is not baseless? Or should 

the misrepresentation take the judicial petitioning outside the scope of Noerr? Unfortunately, the Supreme Court in PRE reserved that question for another day.10

As a result, lower court treatment of this issue has been confusing and inconsistent. 

Most seem to treat intentional misrepresentations as a subset of sham but require 

an additional showing that those misrepresentations ‘‘infected the core’’ of the claim 

23 

11See, e.g., Armstrong Surgical Center, Inc. v. Armstrong County Memorial Hospital, 185 F.3d 

154 (3d Cir. 1999) (declining to carve out a misrepresentation exception); Cheminor Drugs Ltd. 

V. Ethyl Corp., 168 F.3d 118 (3d Cir. 1999) (declining to recognize a fraud or misrepresentation 

exception to Noerr, but treating misrepresentation as a variant of sham and applying a modified 

PRE test that requiring a showing that the misrepresentation ‘‘infected the core’’ of the case); 

Kottle v. N.W. Kidney Ctrs., 146 F.3d 1056 (9th Cir. 1998) (treating misrepresentation as a variant of the sham exception but adding the requirement that the fraud ‘‘deprives litigation of its 

legitimacy’’). 12 508 U.S. at 68. 13See Grip-Pak v. Illinois Tool Works, Inc.,, 694 F.2d 466, 472 (7th Cir. 1982), cert. denied, 

461 U.S. 958 (1983) (‘‘Suppose a monopolist brought a tort action against a single, tiny competitor; the action had a colorable basis in law; but in fact the monopolist would never have brought 

the suit . . . except that it wanted to use pretrial discovery to discover its competitor’s trade 

secrets; or hoped that the competitor would be required to make public disclosure of its potential 

liability in the suit and this disclosure would increase the interest rate that the competitor had 

to pay for bank financing; or just wanted to impose heavy legal costs on the competitor in the 

hope of deterring entry by other firms.’’) 14See, e.g., Bork, supra note lll, at 356; Stephen Calkins, Developments in Antitrust and 

the First Amendment: The Disaggregation of Noerr, 57 Antitrust L.J. 327, 358 (1988). 

and the decision, or ‘‘deprived the litigation of its legitimacy’’ before the suit might 

be considered objectively baseless.11

Even in the absence of misrepresentations in an earlier suit, the Court’s definition 

of an objectively baseless suit as one that no ‘‘reasonable litigant could realistically 

expect success on the merits’’ seems unnecessarily narrow. Under this definition, an 

earlier suit would not be defined as objectively baseless even if it is clearly irrational but for its ability to inflict competitive harm on a rival (the antitrust plaintiff), so long as the suit has a colorable basis in law such that a reasonable litigant 

could expect success on the merits. It should be noted that former Justices Stevens 

and O’Connor, who concurred only on the Court’s judgment but not its reasoning, 

were very critical of this narrow definition of the objective baselessness test. They 

questioned whether a case involving ten years of litigation and two appeals to recover a dollar from a defendant, for example, would qualify as an objectively baseless suit under this test.12

PRE’s second prong—the subjective standard—is also problematic. If the underlying lawsuit is already shown to be objectively baseless (a threshold prerequisite), 

it is unclear why the antitrust plaintiff must further demonstrate that the litigant 

brought the suit to harm the competitor through the process of litigation, and not 

for the outcome. Proof of objective baselessness, especially as the term is currently 

construed, should sufficiently show that the litigant had probably brought the suit 

for an improper purpose. It is difficult to imagine why the litigant would otherwise 

bring an objectively baseless suit. Therefore, at best, the subjective test seems superfluous. Moreover, under a literal reading of this test, if a litigant with an objectively baseless suit actually seeks to win the suit (most likely aided by misrepresentations) and not to simply use the process as an anticompetitve strategy, the subjective test may not be satisfied and the suit may not be considered sham even if the 

litigant loses the underlying suit. Thus, at worst, the subjective test eviscerates the 

sham exception. 

In the absence of a meaningful doctrinal limit to the expansive Noerr immunity 

principle, there are greater risks that dominant firms could bring action against 

smaller competitors that they would not have rationally brought, in order to impose 

heavy costs on a small rival in the hope of excluding it from the market, diminishing its ability to compete on the merits, or deterring entry by other firms.13 From 

a policy perspective, it would be desirable to limit Noerr to a narrower sphere of 

conduct so as to be more responsive to competition concerns. I believe that it can 

be done: the First Amendment right of petition does not call for the expansive interpretation currently given Noerr (and the corresponding narrow reading of its exceptions), particularly in the adjudicatory context. Nor is such a broad reading of the 

doctrine necessary under a statutory construction of the Sherman Act. 

Limits of First Amendment protection for judicial petitioning. There is 

some uncertainty and confusion over whether Noerr is grounded on the First 

Amendment right of petition or on statutory construction. I will treat the doctrine 

as based partly on constitutional principles and partly on statutory interpretation 

and will analyze its appropriate scope under both, starting first with the constitutional right of petition. 

Various commentators have noted the distinction between petitioning in legislative and adjudicatory settings and have argued that Noerr should be more liberally 

construed with respect to the former.14 I agree with the distinction and would further suggest that, for petitioning in the adjudicatory context, the Constitution guarantees the right of access to courts (and other adjudicatory tribunals) but not much 

24 

15See generally Einer Elhauge, Making Sense of Antitrust Petitioning Immunity, 80 CAL. L. 

REV. 1177 (1992). 16Fed. R. Civ. P. 11(b)(3). 17Fed. R. Civ. P. 60(b), 18See, e.g., 18 U.S.C. § 1621 19See 28 U.S.C. § 1927 20See, e.g., Bridges v. California, 314 U.S. 252, 271 (1941). 21See, e.g., Gentile v. State Bar of Nevada, 501 U.S. 1030, 1048–51, 1058 (1991). 22See, e.g., Seattle Times Co. v. Rhinehart, 467 U.S. 20, 37 (194) 23See Parker v. Brown, 317 U.S. 341, 350–51 (‘‘We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers 

or agents from activities directed by its legislature’’). 

more. The traditional constitutional argument for tolerance of some petitioning 

falsehoods and abuses is that penalizing misrepresentations may unduly ‘‘chill’’ the 

flow of information to the government as well as chill the people’s exercise of their 

right to petition the government.15 The concern is that some people may shy away 

from making efforts to influence government for fear that the statements they make 

or the information they provide may inch over the line of truth and result in antitrust exposure. But this argument is more persuasive for petitioning in legislative 

rather than adjudicatory spheres. 

Legislative proceedings are more open and politically oriented than judicial proceedings and are generally expected to provide a forum for uninhibited debate. In 

the legislative process, there is also greater value placed on the free flow of information to the government. Legislative bodies are expected to solicit information and 

hear arguments from a variety of sources and sort through them before making decisions. It is also perhaps understood that political lobbying often involves some 

slanting of the truth and outright misrepresentations. Ideally, the greater input 

from divergent interests will correct, balance, or compensate for any such inaccuracies. For these reasons, more protection for petitioning in the legislative process may 

be justified. 

Our judicial system, in contrast, operates very differently. It is not a free-for-all 

forum for unstructured policy debates or the airing of all grievances; disputes must 

be litigated in accordance with the rules and procedures that govern courts. Thus, 

the concern that less robust First Amendment protection might ‘‘chill’’ debate is arguably not a real issue in the right to petition in the adjudicatory sphere. More importantly, our court system is already subject to many restrictions. They include the 

imposition of Rule 11 sanctions for the filing of meritless complaints 16 and other 

penalties for various litigation abuses. For example, legal judgments obtained 

through fraud and misrepresentation can be set aside;17 perjury is uniformly punished;18 and penalties may be imposed for vexatious judicial filings.19 There are also 

numerous court-imposed rules governing judicial proceedings. They range from rules 

prohibiting or limiting media coverage of certain trials,20 limiting the right of attorneys to speak in some pending cases,21 controlling the use of discovery documents,22

and the like. Unless one is ready to argue that these existing rules and sanctions 

are all unconstitutional, which no one has suggested, it is difficult to see why stripping Noerr immunity off litigation misconduct would somehow be constitutionally 

impermissible. The right of petitioning the courts must, in fact, constitutionally permit substantial control of the adjudicatory processes. 

In short, in terms of petitioning the courts, the First Amendment certainly protects citizens’ right of access to courts and other adjudicatory processes. But it is 

questionable whether constitutional protections extend much beyond that. Those 

using our courts and other adjudicatory processes are already required to abide by 

myriad rules that govern those processes, and misrepresentations and various forms 

of improper litigation conduct are already subject to sanctions. An antitrust rule 

providing that material misrepresentations to courts, for example, would not be protected under Noerr, even if the litigant is genuinely seeking a favorable outcome in 

litigation, can be no more offensive to the Constitution than the existing rules that 

govern court processes. In other words, it is constitutionally permissible to recognize 

a misrepresentation exception to Noerr and to otherwise liberalize the sham exception in order to limit the scope of Noerr, at least in the litigation context. 

Scope of Noerr protection under statutory construction. Of course, even if 

the breadth of the Noerr doctrine is not constitutionally mandated, whether the 

Sherman Act itself should be construed to give the doctrine such an expansive reading (and its exceptions a narrow reading) is a separate issue. Determining the appropriate parameters of Noerr as a matter of statutory interpretation is difficult because the Sherman Act provides no real guidance. 

It is often said that federal antitrust law regulates private, not state, actions that 

are in restraint of trade.23 Therefore, valid actions taken by the state are not subject 

25 

24See City of Columbia v. Omni Outdoor Adver., 499 U.S. 365, 379 (1991) 25 Noerr Motor Freight, 365 U.S. at 144. 26See Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, 690 F.2d 1240, 1261 (9th Cir. 

1982). 

to antitrust scrutiny, no matter how anticompetitive their effect. It then logically follows that, in a representative democracy, if the government can lawfully take action 

that is anticompetitive, private citizens should be free to urge the government to 

take those actions.24 Accordingly, the Sherman Act should not be interpreted in a 

way that would undermine the values of a democratic system of government, independent of First Amendment concerns. 

Defining the statutory scope of Noerr (similar to an analysis under the First 

Amendment) requires distinguishing between legislative and judicial petitioning. 

The reasons for drawing the distinction are largely the same as those discussed for 

the First Amendment, and need not be reiterated here. The norms of acceptable conduct are decidedly different for lobbying in more open political settings than they 

are for litigating in the court system. As the Supreme Court suggested in Noerr, in 

a no-holds-barred fight among competitors in attempting to influence legislation, 

some misrepresentations may be inevitable.25 That is not the case in judicial proceedings, where adjudicators must rely on the parties for the information on which 

a decision will be based and, therefore, expect the information presented to be accurate.26 Presenting false information in judicial settings threatens the proper functioning of the system, and there is no reason to construe the Sherman Act to encourage these acts. 

While the Noerr doctrine should encourage citizen participation in the political 

process, there is another value related to a democratic government that is worth 

protecting as well—the integrity of government. The need to protect the judicial system from corruption or abuse militates against too narrow an interpretation of sham 

and is a counterbalance against the reasons for a broad immunity concept. 

Proposals for limiting the Noerr doctrine. The wide swath that has been cut 

for the petitioning immunity doctrine is unwarranted both constitutionally and as 

a matter of statutory construction. It also poses risks to competition and, ultimately, 

to consumers. Ideally, the PRE definition of sham should be liberalized. With respect to the objective baselessness test, the antitrust plaintiff must usually show, 

under current law, that the theory of the earlier suit was so contrary to existing 

law that no reasonable person could realistically expect to win on the merits. It may 

be better, instead, to require the antitrust plaintiff to merely show that the bringing 

of the earlier suit would not have been brought by a reasonable person were it not 

for the anticipated collateral damage that would be inflicted on the smaller rival 

sued. For example, if a dominant firm incurs large sums of money and spends years 

in litigation, including on appeal, to recover a nominal amount, it seems that the 

lawsuit should be considered objectively baseless despite the fact that the claim 

might have a colorable basis in law and the dominant firm ultimately won. 

As to the subjective test, I propose eliminating it altogether for alleged sham in 

the litigation context. The subjective test is particularly unsuited for use in litigation settings for reasons that were addressed earlier. 

I would also propose carving out a misrepresentation and fraud exception to 

Noerr. 

Narrowing the Noerr doctrine (and liberalizing the sham exception) would promote the competition values that underlie the antitrust laws and yet not encroach 

on the constitutional First Amendment right of petition. 

Mr. GOODLATTE. Thank you very much. 

As time allows, we may do more than one round of questions, 

and that might afford you an opportunity to bring out some of the 

points in your remarks. And I hope that we can talk about some 

of the remedies that might be possible, given the constraints placed 

on all of us by the Supreme Court decision, which, obviously, you 

have to figure out how to deal with. 

And, Mr. Saxman, I have read your testimony, and I know you 

didn’t get through all of it, so let me ask you a question that might 

prompt you to get to some of the points that you had hoped to get 

to. 

26 

Does a small business have a better chance of competing with a 

bigger business in the market or in the courtroom? And why? 

Mr. SAXMAN. Oh, absolutely in the market, Mr. Chairman. And 

thank you for asking us some more questions on that line. 

I can compete in the marketplace. When you get to a certain 

scale, you can compete against just about anyone in the world, depending upon your products, your market, and how well you are 

continually improving your operations. 

But when you are up against a potential multi-year—some litigation will take 5 to 7 years, once you get through the entire process, 

with millions of dollars in legal fees. You are up against a cost parameter that you just never factor into your business operations. 

And with the margins that we deal with anyway, you are likely to 

make 10 percent on your money at the end of the day. So how can 

you calculate that in as expected expense, cost of goods, cost of 

doing business? 

And then when you walk into your office every day and you see 

the people who are adversely impacted don’t even know they are 

being adversely impacted, you know, the single mom with two kids 

who is trying to put them through school and who is relying on 

their health care. If their jobs are gone, their health care is gone. 

What are those kids going to be up against? 

That is the human factor that really happens in the marketplace, 

because I would rather have my money invested in the market, developing our products and services, trying to make more money, 

provide more benefits for our employees. If we lose, if the companies in our industry lose, if small businesses lose, if people lose 

jobs, they lose wages, they lose benefits, they lose hope. It is staggering the amount of decline that can occur. 

It is sort of the expression of, how does bankruptcy happen? 

Gradually, then suddenly. You don’t know how long it is going to 

take to fight these lawsuits. And you are just trying to compete in 

an honest, open manner. 

And these larger companies can conspire, literally conspire, because they have large legal teams—and that is perfectly within 

their rights to do so. But when they weaponize the legal system 

against us, to take what is rightfully ours, they can leverage us— 

if they brought a lawsuit or forced us to bring a lawsuit, most companies would throw their hands up and say, ‘‘I can’t bear that cost. 

It is better for me to just get out, sell at a lower value, pennies on 

the dollar, then lose and lose everything.’’ 

It is quite unfair. 

Mr. GOODLATTE. Let me ask you this: Do small companies who 

are dragged into litigation have to pass those costs onto consumers? And if they do have to pass those costs on, because they 

can be an expensive portion of their profit margin, how do they do 

that when they are competing in a competitive market where other 

people don’t have those costs and, therefore, don’t have to worry 

about raising their price? 

Mr. SAXMAN. That is where you get into a cost structure, Mr. 

Chairman, that is untenable and impossible. There is a point at 

which you can’t. 

There is also a point at which the investment becomes—it is irrelevant to the effort. It is just not worth it. And when a person 

27 

gives up because not—you didn’t lose in the marketplace because 

your products weren’t good, or your services weren’t good, or you 

didn’t train your people, or you didn’t do what you should have 

done, that goes on in the business—we do that every day. We wake 

up with that. We go to bed with that. 

When someone can take it from you, with something you never 

even trained yourself to become, and can take it from you, I consider it a theft and crime. And I think it should be criminally prevented. They should be prosecuted, not just penalized financially. 

Financially, they can absorb that into their operations, if they 

lose. We can’t. The cost is too much. I think, personally, Mr. Chairman, people should go to jail. I think it is felonious. 

Mr. GOODLATTE. Let me ask Professor Lao a question. 

Isn’t litigation fundamentally different from other forms of First 

Amendment petitioning? Should the same doctrine that exempts 

core speech, like citizens petitioning the legislature, really apply to 

litigation? 

Ms. LAO. I personally don’t think so. I think the First Amendment right of petition, with respect to litigation, really only allows 

access. It means that people will have access to the court system. 

You will be able to go and seek redress for your grievances. 

But I don’t think misrepresentations and abuse of process should 

be given that much tolerance. I can see the need to be a little bit 

more tolerant in the lobbying context because the norms are different. It is understood that in the rough-and-tumble world of lobbying that there might be, perhaps, the slanting of the truth or, 

perhaps, even misrepresentation. 

But it doesn’t really matter as much, because as a legislator, you 

have a lot of sources for information. You can reach out to different, diverse interests, and then you can then sort through the 

information and come to a conclusion. 

But in the court system, we have an adversarial system, so the 

court does not, the judge does not go out and find the truth. It has 

to rely on the two parties to give it the truth. So I think in that 

instance, we have to be more careful about falsehoods and misrepresentations and so forth. 

Mr. GOODLATTE. Thank you. 

The gentleman from North Carolina is recognized. 

Mr. WATT. Mr. Chairman, there are so many angles from which 

I could approach this. I am having a little trouble sorting through 

which one takes precedence. 

Mr. GOODLATTE. If the turnout remains you and me, we will be 

able to ask a lot of questions, so fire away. 

Mr. WATT. We will go back and forth, okay. 

Mr. Saxman, I guess the problem I am having with your testimony kind of comes down to this question: Should a court in civil 

litigation take into account the relative power, financial position, or 

representation of the parties that are appearing before it? That is 

the logical extension of what you seem to be saying. 

These people had more power than you. They had more money 

than you. They could stay in litigation a lot longer. And I don’t 

know how a court is going to be able ever to do that. 

I mean, I have been advocating that we level the playing field 

between powerful and non-powerful throughout my legal career, 

28 

but you seem to be taking the court into much, much deeper waters 

then I think we are capable of doing. 

Maybe you can help me understand that. 

Mr. SAXMAN. Yes, sir. Thank you for the question. And I certainly agree with you. 

Do they have the right to bring lawsuits or action against us? 

Absolutely. If it is not legitimate, if it is meant to constrain us in 

the marketplace, if it is meant to tie us up, if they do it in a manner that is not—it is a great question, because how do you defend 

yourself in a marketplace when that is not the market? We are not 

a law firm. We don’t do this. 

So if you are out there just doing your own business, and they 

want to come in and take your business, for marginal P&L and 

quarterly basis, because a regional manager says we got to have 

this business, we will go in and breach contracts. 

Mr. WATT. What if the circumstances were reversed? 

Or maybe I should ask Mr. Richards and Professor Lao, is there 

anything in the law that protects litigants from abusive defense of 

litigation? 

I will give you a couple examples. I mean, I could give you a 

bunch of them, because I practiced law for a lot of time. I mean, 

I have been in a lot of lawsuits where I was the only lawyer on 

the plaintiff’s side, six or seven high-powered lawyers on the other 

side. They will paper you to death, mostly civil rights cases. 

So I have seen a lot more abuse in actuality, I will give you another example, since I am talking about my own personal experience. 

I represented Stevie Wonder when he was in his automobile accident in North Carolina. A simple case, clear liability. No question, 

after they scoured the car and made sure that no drugs or anything 

were involved. I understood that. 

All we were looking for was the insurance company to pay some 

modest amount, because the guy who was driving the car, Stevie, 

was sitting there blind; he obviously wasn’t driving the car. The 

guy who was driving the car drove the car right into the bed of a 

truck in front of them. Clear liability. 

I end up in California taking depositions in the case, just because 

the lawyer wanted to meet Stevie Wonder. 

Is that abusive? 

I mean, this kind of stuff happens all the time in litigation. He 

knew his insurance company client was going to pay him for that 

trip out there. He wanted his kid to have Stevie Wonder’s, my client’s, autograph. And I am saying, why am I sitting in California 

for 3 days, waiting on a deposition in a case where there is clear 

liability? 

This is disparity between the parties. Now how is the court ever 

going to take that into account? I go into court, and the court would 

laugh at me if I said, you know, this guy took me all the way to 

California to take a deposition. He knew he was going to pay the 

claim, at some point. But he was on the clock. He was abusing the 

process. 

People abuse the legal process all the time. And we need some 

kind of constraints around it. But I guess my concern here is I 

29 

don’t—this seems to me to be one of the least of the problems we 

ought to be trying to level the playing field on. 

You know, I acknowledge that it is a problem, but what is the 

solution to it? How do we get past this—I am over my time, and 

then I am going to give you some more examples where there is 

abuse in the process. Disparities between the parties always give 

rise to abuse. 

And that is why I was saying in my opening statement, we have 

preoccupied ourselves with the little people trying to find redress 

in litigation, saying that their class-action lawsuits, their individual lawsuits, are frivolous. This is a welcome reversal of our 

roles, as far as I am concerned. We ought to be looking out for little 

people. But I don’t know how you do it, and I don’t know what the 

standard ought to be. 

That is the question that this Committee has got—and can we 

articulate a different standard that won’t just result in more litigation, more appeals? And if this decision is based on a constitutional 

principle, how do we pass a statute that is going to have any impact on it anyway? 

So, go ahead. 

Mr. SAXMAN. Thank you, Congressman. And I certainly understand, from a non-legal perspective, having not been a lawyer, in 

the case that I was aware of that I brought to the Chairman’s attention last year, you had a company in good faith that brought a 

contract to another—they were in business together. For 13 years, 

they—— 

Mr. WATT. You see, the problem is, Mr. Saxman, is you want to 

individualize this to your case. Our role here, we can’t individualize 

this to your case. We have to come up with an articulable, global 

standard. 

So, I mean, I am very sympathetic to your case. Don’t get me 

wrong. I am not dismissing it. You were probably dealt with unfairly. 

But come on, Mr. Richards, help me. You are in litigation. 

Professor, you teach this stuff all the time, help us out. 

Mr. RICHARDS. Well, if I may, Ranking Member Watt. All of the 

points you are making, I think, are very valid points. I mean, as 

a class-action plaintiff’s lawyer, I am very sympathetic to them. I 

think I try and equalize, level the playing field, every day of my 

working career. I think those kinds of issues are very important. 

To a large extent, they are dealt with through procedural issues, 

like class actions, Rule 23, efforts on the part of the Federal Rules 

Advisory Committee to keep costs down, that kind of thing. I think 

all that is good. All of that is better left in the purview of the Federal Rules Advisory Committee. 

What we are talking about, I think, here is a little bit different. 

I think there is really an agreement, generally, in the case law and 

among all the witnesses, and I think there would be agreement between both parties, that there is nothing to be gained from baseless 

lawsuits. 

Mr. WATT. I agree. 

Mr. RICHARDS. The real challenge is to find out how you do find 

out—— 

Mr. WATT. Let me go on record saying I agree with that. 

30 

Mr. RICHARDS. And I agree with it, too. 

How do you decide whether a lawsuit is baseless? And by what 

legal standard? That is really the hard part of what we have here. 

And what happened in the Professional Real Estate case is that 

the Supreme Court articulated a standard for baselessness, which 

when applied in actual practice raises all kinds of questions and is 

extremely problematic. 

It leaves so much room for debate about what it means that you 

wind up with courts going off and doing really uninformed things, 

because they are guided by standards that they try to take seriously, but they are so unclear that they don’t know what—— 

Mr. WATT. Is it based on the Constitution or is it based on 

other—— 

Mr. RICHARDS. There is certainly a constitutional dimension to 

the right to petition your government, and there should be. But 

should the right to petition your government include the right to 

knowingly lie to your government? Shouldn’t there be an exception 

for that? 

Mr. WATT. If so, I hope you will tell some of the lobbyists that 

come see me. [Laughter.] 

Mr. RICHARDS. I mean, I think there is more consensus, I think, 

about sort of what the exceptions to Noerr-Pennington should be 

than I think perhaps is coming across here. 

There was an effort on the part of the Federal Trade Commission 

a few years ago, which wrote a very fine report relating to enforcements on the Noerr-Pennington doctrine, cataloging what the exceptions to the Noerr-Pennington doctrine are under established 

law. I think it is an excellent report. I think it does a good job of 

sorting through and laying out what the exceptions are. 

One of the exceptions that it provides is an exception for fraud. 

And certainly in the patent cases, there is a Supreme Court case 

called Walker Process which recognized a long time ago that there 

can be an exception for Noerr-Pennington when you are dealing 

with fraud on the Patent Office in obtaining a patent. 

So in the cases I am dealing with, there is really no—you know, 

courts almost never fail to see that there is a separate exception 

to Noerr-Pennington for sham litigation and a separate exception 

for fraud. They see that all the time. 

The problem, really, or one of the big problems, is that the Professional Real Estate definition is very murky. And I think it gives 

rise to all kinds of problems about what it means. And when you 

have a murky standard like that, about something as fundamental—— 

Mr. WATT. Do you solve it legislatively? 

Mr. RICHARDS. I think it could be solved legislatively. 

Mr. GOODLATTE. Let me take back my time. We will come back 

to you, again, because I am doing a second round here. 

Mr. WATT. Go ahead. I yield back. 

Mr. GOODLATTE. I do want to follow up on your question, though, 

because it is right to the point. And that is, what can we do about 

this? 

So I want to ask each of you, and I will start with Professor Lao, 

do any of you believe that there may be room for a compromise 

that holds anti-competitive abusers of litigation accountable while 

31 

remaining mindful of the concerns that led the Supreme Court to 

avoid full Sherman Act liability for litigation? 

For example, could Congress provide for fee shifting if the court 

found that the suit was brought for anti-competitive purposes, not 

just sham purposes, but anti-competitive purposes? Or perhaps 

allow antitrust claims for predatory litigation to proceed only with 

Department of Justice or FTC approval? 

Professor Lao? 

Pull the microphone closer to you. 

Ms. LAO. So that would be a bit of a compromise. You are stripping it of the Noerr immunity where there is sham, but then what 

you are saying is that you would require them, you would require 

the antitrust plaintiff, to get an okay from the government, from 

the FTC or the Department of Justice? 

Mr. GOODLATTE. No, it would be a claim for predatory litigation. 

Ms. LAO. Predatory litigation. So—— 

Mr. GOODLATTE. That would be your antitrust claim—— 

Ms. LAO. Oh, okay. 

Mr. GOODLATTE [continuing]. Would be that the parties engaged 

in predatory litigation, but in order to get around the Supreme 

Court decision, could you put a caveat on it that it has to receive 

some stamp of approval? 

Ms. LAO. That probably goes a little bit beyond what I am comfortable with. What I am suggesting is simply that, to the extent 

that they have gone beyond the bounds of what the First Amendment is protecting, then we should just take away the immunity. 

And when we say we take away the immunity, we are not imposing 

liability on them right away. We are just saying that it is not petitioning. Because it is not petitioning, then you are going to be subject to the antitrust laws. The antitrust plaintiff will still have to 

prove all of the elements of the antitrust violation. 

So in a way, we are not really giving the antitrust plaintiff anything more than what was his due without the Noerr immunity 

doctrine. 

But I guess I am quite conservative in that regard. 

Mr. GOODLATTE. There have been some well-known prominent 

judges, like Judge Posner and Judge Bork, who have been critics 

of this Supreme Court test. And I am wondering if you think that— 

one test is the reasonable litigant test, which you advocated—— 

Ms. LAO. Right. 

Mr. GOODLATTE [continuing]. And a version of which Judge 

Posner articulated in the Grip-Pak case. Could you describe that 

test? 

Ms. LAO. Yes, I like that test very, very much. 

The test is an objective test, and what it asks is, would a rational 

person have brought this lawsuit if you take away the anti-competitive harm that it would inflict on the competitor? So in other 

words, you are taking away that portion of it, and you are asking, 

would a rational person have brought such a lawsuit? 

And if a rational person would not have brought the lawsuit, 

then it doesn’t matter that the antitrust defendant actually won 

that lawsuit. 

Judge Posner gave the example of a major firm, a dominant firm, 

bringing tort action against a tiny, tiny competitor, in order to exVerDate Aug 31 2005 11:56 Mar 27, 2012 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6601 H:\WORK\IP\021712\72906.000 HJUD1 PsN: DOUGA
32 

tract certain things, hoping that they will have to make the disclosure. Once you have to make the disclosure to the SEC, or whatever, then you are going to see your finance charges go up when 

you go to get financing and so forth. So you are imposing costs, you 

are using litigation to impose costs on rivals. 

So if you simply look at it and ask, if it weren’t for all of these 

things, would you spend so much money to litigate, just to receive 

a nominal amount? And I believe that is what Judge Posner was 

describing as the possible test. 

Mr. GOODLATTE. Mr. Richards, what do you think about that 

test? 

Mr. RICHARDS. Well, the problem that I see with that test is that 

in lots of situations—take the intellectual property context that I 

am most familiar with. When someone brings a lawsuit on a patent, of course their objective is to take their competitor out of the 

market. That is why they are suing on the patent. Their contention 

is that that is what that patent entitles them to obtain. 

If you adopt a test that somehow makes that wrongful, you are 

undermining the patent laws. You are undermining the whole purpose of the grant of the patent. So I am not sure that that standard 

would really work very well. 

I need to think about it. I think you need to—— 

Mr. GOODLATTE. Well, let’s ask Professor Lao what she thinks 

about your exception to that. 

Can that be carved out as an exception, or is that a good rebuttal 

to this test? 

Ms. LAO. We are talking about patents, right? 

I think when we are talking about patents, patents are in a different category altogether, for that reason. Because when you do 

bring a lawsuit, you are trying to exclude the competitor. 

But there is an additional problem with the subjective test in the 

PRE case. In the PRE case, the subjective test is that, if someone 

brings a lawsuit for the purpose of trying to win the lawsuit no 

matter how baseless it is, then it would automatically not be sham. 

So you could actually have a very invalid patent that you know is 

very, very shaky, and you would still bring the lawsuit, but it 

would not be considered sham. So I don’t know how you would deal 

with something like that. 

Mr. RICHARDS. Well, no, because of that, in actual patent litigation, it is objective baselessness that becomes the main focus and 

not the subjective baselessness, which is more or less a given. I 

mean, clearly, a subjective intent in a patent case is to take the 

competitor out of the markets. So subjective baselessness becomes 

not part of—— 

Mr. GOODLATTE. What about the patent case where the patent is 

expired but the company has come up with a specious argument 

why their rights should be preserved under the patent law? Or 

they re-patent with a minute change to the patent—— 

Mr. RICHARDS. That happens all the time. 

Mr. GOODLATTE. And they bring litigation against the competitor 

to drive them out on that basis? 

Mr. RICHARDS. And that happens all the time. 

Mr. GOODLATTE. Right. So what do we do to stop that abuse? 

33 

Mr. RICHARDS. Something that is very disappointing, and you see 

over and over and over in these cases, is that people at the end of 

the patent life on the chemical compound will come up with a formulation patent, a patent on a coating that goes on the pill or 

something like that, and will get a patent from the Patent Office 

based on representations to the Patent Office about the uniqueness 

of this coating that are totally bogus. And then the consequence of 

that is that you have years of litigation where the brand-name 

drug manufacturer is able to give the generics off the market based 

on the bogus patent. 

And you really need, desperately, in this country a legal standard 

to identify the situations in which brand-name drug manufacturers 

under those circumstances are held accountable because the patent 

claim is unfounded. That is very important. 

In the PRE standard does not satisfy that need. It is too demanding. It is very, very difficult in practice. The distinction between objective and subjective is very unclear. 

Mr. GOODLATTE. Thank you. 

The Chair recognizes the gentlewoman from Texas, Ms. Jackson 

Lee. 

Ms. JACKSON LEE. I thank the Chairman and the Ranking Member. 

This might be a hearing that we should either have an opportunity to continue or to expand it at another hearing going forward. 

I think it is a very vital question related to the balance of power. 

When you talk about a large company or a company that is making 

its mark on either the industry or the invention, and, of course, up 

against what is a company or a small company with smaller assets. 

So let me just raise an across-the-board question, but start with 

Chris Saxman, as to the breadth and depth of the Noerr-Pennington case. From your perspective, how devastating is that for 

small businesses, startups, to thrive? 

Mr. SAXMAN. Thank you, Congresswoman. 

When I first brought this to the Chairman’s attention—Congressman Goodlatte is my Congressman—I had no idea what Noerr-Pennington was. When counsel called me and said, well, this applies 

to the Noerr-Pennington doctrine, I said, ‘‘Who is Nora Pennington?’’ I have a daughter named Nora, so I went to ‘‘Nora.’’ 

And then I found out what it was, and that there was an exemption for companies to do this, I almost had to put my jaw back on 

head, because I couldn’t understand how you could exempt—there 

could be an exemption for people to basically do what they 

shouldn’t be doing. 

And to Congressman Watt’s original question, it happens all the 

time. People have differing opinions. They go to court. They settle 

it. Litigation occurs. 

But when the market is adversely impacted, the larger company 

moves in and wants to compete, we can compete. If we have to go 

to court to justify our existence or our products or whatever we are 

doing, and they are exempt from antitrust protection, that is the 

problem. That is where the larger community is being harmed, and 

that is why antitrust exists in the first place. 

When I was in the legislature, one of the words you always 

looked for in legislation that was drawn up were exemptions and 

34 

credits. Those are the bells and whistles that said, oh, here is what 

they are going for. 

And exemptions are a problem. When you exempt people and corporations or anything from the law, that is the loophole that creates the problem. That is the bubble that is about to burst. And 

that is where—— 

Ms. JACKSON LEE. That is where you have the lopsided scales of 

justice, is what you are saying. 

Mr. SAXMAN. And we can’t—— 

Ms. JACKSON LEE. You are doing business and in the courtroom 

at the same time, fighting more or less not over an issue or a contractual issue, but fighting over your existence or whether someone 

is defining—whether you are violating some sort of protection that 

the company has. 

Let me go to Professor Lao and just ask: How would you? And 

I know we have had this give-and-take. I assume other Members 

may have approached some of this. 

But how would we reorder that scale of justice with the underlying premise that, in America, the courts are there governed by 

the law to resolve differences. But in this, as I perceive it, as I have 

read some of the materials, it looks as if I am at Wal-Mart and I’m 

shopping and seeing what the best deal would be for my company 

by way of a lawsuit. 

Professor, and with the backdrop of Noerr-Pennington? 

Ms. LAO. I must say, Congresswoman, that antitrust law does 

not take that so much into account. Over the last 20 years or so, 

antitrust has become very much of a price theory discipline. So 

rightly or wrongly, we look at the effect of conduct on price and 

output, rather than on whether it harms a smaller competitor or 

not. The Chicago School of thought has made that change and was 

started in the 1970’s. 

I do not count myself as being in that school of thought. But at 

the same time, I also do believe that perhaps antitrust should be 

guided more by economics, that perhaps we should leave it to some 

other discipline to care of the inequalities. 

Ms. JACKSON LEE. Do you think Noerr-Pennington’s reach is extensive? 

Ms. LAO. I’m sorry? 

Ms. JACKSON LEE. Do you think the Noerr-Pennington case is extensive in its reach? 

Ms. LAO. I think the Noerr-Pennington case is all right when we 

are talking about petitioning the legislature or even the executive 

branch. But I think Noerr is too broad when we are applying it to 

petitioning the judiciary. 

When you talk about petitioning the judiciary, we are really just 

talking about litigation. When we are talking about litigation, we 

are just talking about having the right to have access to the court 

system. 

Ms. JACKSON LEE. Thank you. 

Mr. Chairman, would you allow Mr. Richards to answer that 

question? 

Mr. GOODLATTE. Sure. 

Mr. Richards? 

Ms. JACKSON LEE. Thank you. 

35 

Mr. RICHARDS. I think one of the ways that I see things somewhat differently from Professor Lao is that I think if the standard 

for an objective case were defined more fairly and more clearly, I 

would think that standard could apply to legislation and lobbying 

activity. I think the problem is in the standard. 

I think some of what I think goes on is that it works so poorly 

in the litigation context that people want it fixed very desperately, 

and they think they are more likely to get a fix if they don’t try 

to address the legislative context. And so they draw distinctions between them. 

But I think if you come up with the right standard, it should 

apply to both. 

I also would point out that there aren’t just two contexts. There 

are lots of contexts were Noerr-Pennington applies. It applies to 

getting a patent from the Patent and Trademark Office. It applies 

to administrative contexts. So there is a whole range of situations 

where Noerr-Pennington immunity applies. 

And I personally do not think that the right way to do it is to 

say, well, we are going to have one standard applicable in this context and a different one in this context and a different in this context and a different one in this context. The right thing to do would 

be to try to have a standard that is very clear, very fair, and that 

works in all of the contexts at the same time. 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

Ms. JACKSON LEE. Thank you, Mr. Chairman. 

Mr. GOODLATTE. And I am going to just exercise my prerogative 

to follow-up on that question. I’m going turn to Mr. Chabot in just 

a second, but I want to follow up on that question while we are 

right on it. 

Are you saying that somehow that Congress could come up with 

a protocol or a scheme or a measure that says that when you petition the United States Congress for redress of your grievances, that 

there is going to be some kind of parity, some kind of fairness in 

terms of what different organizations or different companies or different labor unions put into that petition? I mean, I don’t understand how you would accomplish that in the legislative context to 

say you can only do but so much petitioning of your redress of 

grievance and beyond that it becomes an anti-competitive, unfair 

advantage for your arguing point of view. 

Mr. RICHARDS. Well, the notion of that baselessness, I think, 

doesn’t apply as well in the legislative context to begin with. 

Mr. GOODLATTE. Right. Agreed. 

Mr. RICHARDS. But suppose, for example, that someone obtained 

legislation based on absolutely false representations of fact, the 

consequence of which is that they developed a monopoly on a particular product, or something like that. Should nothing be able to 

be done about that? 

That to me would be baseless lobbying activity, which had a terrible consequence of causing Congress to do something unknowingly, because they have been deceived, that has terrible anti-competitive consequences in the marketplace. 

I think I should be actionable. I think if you come up with a good 

standard that applies the litigation context, it could apply in the 

context as well. 

36 

Ms. JACKSON LEE. Mr. Chairman, before you go, can I ask a 

question of you, please? 

Mr. GOODLATTE. Sure. 

Ms. JACKSON LEE. I have additional questions. May I submit 

them into the record? 

Mr. GOODLATTE. Absolutely. 

Ms. JACKSON LEE. And maybe the witnesses will—not maybe, 

but the witnesses will be able to respond in writing? 

Mr. GOODLATTE. We will. In fact, we may have several other 

questions that need an answer. We will submit them all to the witnesses and ask that they respond in writing to anything that you 

provide to us, and we may have some ourselves. 

Ms. JACKSON LEE. I ask unanimous consent, Mr. Chairman. 

Thank you. 

Mr. GOODLATTE. I thank the gentlewoman. And it is so ordered. 

And I am pleased to recognize the gentleman from Ohio, Mr. 

Chabot. 

Mr. CHABOT. Thank you, Mr. Chairman. I will be relatively brief. 

I, actually, have an ambassador in the back waiting for a meeting, 

that they just brought down. 

But my the question is this, from an international perspective, 

to the extent that other countries around the world, either in Europe or in Asia, either have laws which are applicable to this or 

have had situations like this come up, is there any sort of economic 

disadvantage that the current law here has to U.S. companies or 

not? Any of the folks here would be—Ms. Lao? 

Ms. LAO. I am not aware of any. 

Mr. RICHARDS. I think the general perception in most other countries is that they have been behind traditional American antitrust 

law and are trying to catch up. So they are certainly gradually 

adopting American-type antitrust standards. 

And I would suspect that they will, over time, adopt something 

like the Noerr-Pennington doctrine. But because antitrust enforcement has been really not very vibrant, historically, in other countries, there is a lot there is no law about as to antitrust law in the 

other countries. So we are really way out in the forefront on this. 

Ms. LAO. Except the E.C. is becoming extremely aggressive. 

Mr. RICHARDS. They have, but I—— 

Ms. LAO. So then—— 

Mr. CHABOT. Which one was that? 

Mr. RICHARDS. The European Community. 

Ms. LAO. The European Community. 

Mr. CHABOT. The European Community has. 

Mr. RICHARDS. But have to say, I am not an international law 

scholar. I am not sure what the law currently is in the European 

Community on Noerr-Pennington. I just don’t know. 

Mr. CHABOT. Mr. Saxman? 

Mr. SAXMAN. Again, I am not an attorney. I don’t understand 

international law, let alone America law—American law, let alone 

international law. 

The reality is, though, when international companies are behaving in a manner that they are not culturally aware of antitrust is, 

their behavior is outside of that realm of thinking. So what they 

37 

are doing in the marketplace is predicated on what their cultural 

philosophy is and economics. And antitrust is not part of that. 

So that is part of the conditions that we feel in the marketplace 

every day, when you are up against international competition. 

Mr. CHABOT. Okay, thank you very much. 

Mr. Chairman, I will yield back. 

Mr. GOODLATTE. I think the gentleman. 

And the Chair recognizes the gentleman from North Carolina for 

further questions. 

Mr. WATT. Mr. Richards, you have told us a couple times we 

need to get to the right standard that would apply across the board 

to petitioning in the legislative context, to petitioning. What is the 

right standard? I mean, have you articulated a right standard in 

your—— 

Mr. RICHARDS. I have not in my statement. I think it is a very 

complex question. 

I think you go a long way toward that standard by looking at 

what the FTC wrote by way of exceptions to the Noerr-Pennington 

doctrine in its report, which I think was 2006. I think they did a 

really fine job in that. 

I think the problem there, though, is that they really have to 

take as a given clear law, and some of the clear law that they are 

working with is the Professional Real Estate Investors case, so they 

do the best they can with that one, but it is really unclear. 

There are a lot of other contexts though, where they identify, I 

think, very appropriately and clearly areas of law which should not 

be protected and that should be exceptions, like ministerial acts, 

which is also a subject addressed in Professor Lao’s article, and like 

fraud, another subject addressed in Professor Lao’s article, and in 

the patent context in the Walker Process case in the Supreme 

Court. 

There are a lot of places where I think there probably is something like a consensus on what the rule should be here. I think one 

of the biggest problems is not really those areas. It is the Professional Real Estate Investor standard itself and this division, this 

artificial division of objective baselessness and subjective baselessness, and you having to address one before you can look at the 

other, so then you have to try and figure out which category evidence goes into. And it is just a mess. 

Mr. WATT. So should whatever standard—suppose we got to a 

standard, should it apply to not only to the filing of legal claims? 

Should it also apply to counterclaims and cross-claims? 

Mr. RICHARDS. I think if it applies to a claim, it should apply to 

any claim. Certainly, I think there are fewer—there is less likely 

to be an antitrust problem with a counterclaim, because antitrust 

predators—— 

Mr. WATT. Somebody in the audience disagrees with you, because 

they just sent me a question. Well, I will read the second part. 

An antitrust claim is brought only by a defendant in reaction to 

being sued, generally, according to them. If the sham exception is 

made easier, the defense by the original plaintiff to the antitrust 

claim is made harder. Therefore, it is easier to use the antitrust 

counterclaim weapon against the original plaintiff who decided his 

grievance warranted seeking redress in court. 

38 

Do you disagree with that? 

Mr. RICHARDS. You know, I would disagree with that because, 

often, who is the plaintiff and who is the defendant could be a consequence of things like a plaintiff seeking a declaratory judgment. 

If they know there is a controversy coming up, the plaintiff can just 

be trying to resolve the controversy so that it is not a defendant. 

Mr. WATT. But you agree whatever standards are the appropriate standards ought to apply to claim, counterclaim, cross-claim, 

legislature, courts, administrative, the whole gamut? 

Mr. RICHARDS. I think a baseless claim as a baseless claim—— 

Mr. WATT. Yes, okay. 

Mr. RICHARDS. Whether it is a claim or counterclaim. 

Mr. WATT. Professor Lao, the same question, right standard—the 

first question I asked to Mr. Richards—how would you articulate 

the right standard? 

Ms. LAO. The right standard, I think that there are many parts 

of the standard that need to be changed. I don’t know, if—do you 

want me to talk about several of them? 

So, for instance, Mr. Richards talked about petitions. What does 

petition mean? It is something that we haven’t actually talked 

about. 

Well, for instance, I don’t think the immunity should apply to 

someone who submits a petition where it is really nothing than just 

filing a form with the government. And the government simply 

does a ministerial task with—— 

Mr. WATT. Okay, I think I accept your proposition that this is 

much easier if it is applied only to the courts. So, I guess let me 

accept that. 

Ms. LAO. Okay. 

Mr. WATT. Let’s except out that people who petition Congress can 

lie, cheat, steal, beg, borrow, anything. That is fair game, in our 

context. 

Mr. GOODLATTE. Well, let’s say they might face some other consequences, as some lobbyists have, if they engage in—— 

Mr. WATT. Right, if we did all of that. But in the legal context—— 

Ms. LAO. Okay, in the litigation context, okay. 

Mr. WATT. In the litigation context. 

Ms. LAO. Then I would like to see a couple of things. 

First, I would like a fraud and misrepresentation exception to the 

Noerr doctrine carved out, so that if you obtained—if you succeed 

because of misrepresentation, that shouldn’t mean that the lawsuit 

is not objectively baseless simply because you won, because, right 

now, that is what it is. If you win a lawsuit, then, by definition, 

your lawsuit was not objectively baseless. Now, I think that should 

be changed. 

Mr. WATT. You are saying that I could win a lawsuit and lose 

a claim of whether it was—should have been filed? 

Ms. LAO. So if I sue you in the underlying lawsuit, and I make 

misrepresentations to the court and so forth, and as a result—— 

Mr. WATT. I understand the misrepresentations. 

Ms. LAO. Right. 

39 

Mr. WATT. But suppose I don’t misrepresent. I win the lawsuit. 

Is there a circumstance under which I should still be subjected 

to—— 

Ms. LAO. I think so. I think so. This goes back to a—— 

Mr. WATT. What is that circumstance? 

Ms. LAO. The Posner standard, Judge Poser’s standard says that 

we simply look at whether it was a rational thing for the person 

to have done. Would a rational person have brought this lawsuit? 

Mr. WATT. I have represented a lot of irrational clients. [Laughter.] 

Ms. LAO. Excuse me? 

Mr. WATT. No, I’m serious. I have represented a lot of irrational 

clients who would go to substantial expense to right wrongs without financial consequences. That is a pretty ambiguous standard, 

as far as I am concerned. But go ahead. 

Ms. LAO. Well, that being Judge Posner. You know that he is an 

economics person, right? So what he does is—— 

Mr. WATT. Well, you can rationalize it on economic basis—— 

Ms. LAO. Right, right. He does it from—— 

Mr. WATT. But there are a lot of claims that can’t be reduced to 

the economics of the claim. 

Ms. LAO. True. But when we are talking about those claims, 

there probably isn’t an antitrust angle to it, right? I think most 

people who bring lawsuits not for economic reasons but because 

they are angry about it or on principle, usually you are not talking 

about firms fighting over a patent and so forth, right? 

Mr. WATT. But you are not limiting this exception to just an antitrust case. I know that is our jurisdiction here, but whatever standard you come up with, doesn’t it have to apply outside the antitrust 

context? 

Ms. LAO. No, I think I am really just addressing the antitrust 

context, because we are talking about the Noerr exception, right? 

Mr. WATT. And aren’t you implicitly accepting exactly what you 

didn’t accept, which is the Chicago theory, that this is all about the 

economics of it? 

Ms. LAO. Not really, because right now we are really talking 

about whether the antitrust plaintiff can bring an action against an 

antitrust defendant, alleging that he had violated Section 2 of the 

Sherman Act, for instance, right? 

So all we are saying is we are opening the door for the plaintiff 

to do that. The plaintiff would still have to show the defendant has 

market power, that she committed exclusionary—that he committed exclusionary conduct, and that there was an anti-competitive effect, and that there was no business justification. 

So we are not really imposing liability when we remove the 

shield. All we are saying is that, as a result of that, the antitrust 

plaintiff can go ahead as though there was nothing in its place. 

So it is still a very high burden for the plaintiff to meet. 

Mr. WATT. Mr. Chairman, I am well over my time. 

Mr. GOODLATTE. If you would allow me, I would like to follow up 

on what you just said, and my counsel made this point. It is not 

about that irrational plaintiff, which you and I have both had, who 

are in pursuit of moral justice, if you will, and will go to whatever 

lengths to do it. It is about the rational pursuit, and I think this 

40 

would relate back to the case that Mr. Saxman is talking about, 

where another company in the business that he is in face with a 

large competitor, the rational pursuit of anti-competitive gain that 

is the key to the test here. 

In other words, the suit would not be rational but for the anticompetitive motive. 

Is that a fair sum-up of the test that you are trying to apply 

here? And would that give you some more comfort that we might 

have something here? 

I like Mr. Richards’ baseless test. I agree with you, and I agree 

with Professor Lao. I would not try to impose that in other environments than the judicial environment, and here’s why. In the judicial environment, that small business is there whether they like it 

or not. They are fighting for their life, and it is them against a 

large entity that is attempting to use anti-competitive behavior to 

put them in a very, very difficult situation, whereas when you are 

talking about legislation, you have a multitude of different parties 

and players and the likelihood of success. 

It does happen where somebody gets something slipped into a 

bill. I mean, reform of the rules of Congress so you have more 

transparency, less likelihood that an actor could get something put 

into legislation that would give them an anti-competitive advantage, is there. But I think addressing it differently than you address action in a courtroom, to me, makes sense. 

And, therefore, I would like to keep this focused on what happens in the courts. 

I would also like to encourage each of you—we will submit some 

questions in writing—to focus on remedies that we could undertake 

here in the Congress. It might be changes to the Federal Rules of 

Civil Procedure. 

I am very interested in this issue, would like to pursue it further. 

This hearing has helped to, I think, point out the difficulties of any 

broadbrush solution to this. But I do think there are some narrow 

things that could make it less attractive to a business to engage 

in anticompetitive behavior in the nature and conduct of the legal 

proceedings that they undertake, especially if they are baseless and 

especially if they are for the clear purpose of gaining an anti-competitive advantage. 

Anybody want to add anything to that? 

Mr. SAXMAN. No, but I just wanted thank you, Mr. Chairman, for 

allowing us to come to you today and talk about what is going on 

in the marketplace. It is a very injurious to our economy, and hopefully we can find remedies to help save a lot of businesses out 

there. 

Mr. GOODLATTE. I thank you. 

Does the gentleman from North Carolina have anything he 

wants to add? 

Mr. WATT. Just to explore a point that my staff is making with 

me, that Noerr-Pennington developed as an extension of the state 

action doctrine, which says that the state in its sovereignty can 

adopt anti-competitive practices if it wants. So the law should protect one’s right to petition the government to do so. 

And I guess just to explore that a little further, I was reading 

this article about the gentleman who set up across from the Super 

41 

Bowl, or an NFL game. I will just read the facts, then you will get 

the drift of where I am going. 

Last year an anti-bullying advocate teamed with Best Buy on 

what seemed like a promising idea. He would park his bus in Best 

Buy’s parking lot near the Cowboys Stadium before a game, and 

he would host a John Madden videogame tournament. He would 

charge participants of the tournament, would teach children about 

how to detect and stop bullying. 

Arlington police and code enforcement officers asked Williams— 

asked the gentleman if he had a permit to be there. He did not, 

and he saw no reason why he should, since he was on private property of Best Buy with the store’s express invitation. 

Security officers insisted that he move the bus. It was a commercial operation located within a so-called clean zone ordinance, 

right? So that is the government. 

So now a lawsuit has been filed. And the defense is Noerr-Pennington. This is state action. Of course, this is private action, too. 

It is the NFL that he sued that is trying to claim this defense 

under Noerr-Pennington. 

But the point I think is, we shouldn’t lose sight of the reason— 

I mean, I would probably be on the other side of the case with that 

guy, but Noerr-Pennington, as we understood it, was designed to 

allow governments to do certain anti-competitive things. So we 

need to be aware of that—— 

Mr. GOODLATTE. If you would yield? 

Mr. WATT [continuing]. Maybe not private litigants, although the 

NFL is trying to hide behind the city’s Noerr-Pennington defense 

here. 

Mr. GOODLATTE. If you would yield, as has been pointed out with 

patent laws and so on, we do grant monopolies for a number of different purposes. In this case, however, I would see a difference between the city bringing the lawsuit or being sued and raising the 

Noerr-Pennington defense and the NFL, because the city has the 

right to enforce—— 

Mr. WATT. The NFL—— 

Mr. GOODLATTE. Well, the city has the right to raise the ordinance as a defense. And secondly, the individual who has been aggrieved here, the person promoting anti-bullying, and I agree with 

you. I would be very sympathetic to their efforts. But they have a 

whole separate course that they can pursue, and that is to petition 

the local government to change that law, so that it is accepting of 

the time of exception, the use exception, that they were attempting 

to make under those circumstances. 

That is different than two private litigants being stuck in the 

courtroom together and one of them having brought the other in for 

anti-competitive reasons. So if you keep it narrow, I think maybe 

we can look for some solutions here. 

Mr. WATT. As with most things, Mr. Chairman, what we have 

proven today is these issues are a lot more complex than they appear to be on their surface. 

So with that, I will yield back. 

Mr. GOODLATTE. And with that, I have to agree with that observation. And I think the gentleman. 

And I think all of the witnesses today for your testimony. 

42 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witnesses, 

which we will forward and ask the witnesses to respond as promptly as they can so that their answers may be made a part of the 

record. 

And without objection, all Members will have 5 legislative days 

to submit any additional materials for inclusion in the record. 

And with that, I again think the witnesses and declare the hearing to be—now I have a gavel—the hearing adjourned. 

[Whereupon, at 11 a.m., the Subcommittee was adjourned.] 

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