Opinion ID: 2677019
Heading Depth: 2
Heading Rank: 3

Heading: “Gives Rise to a Claim” under the FTAIA

Text: It is well settled that this Court “may affirm on any basis for which there is sufficient support in the record, including grounds not relied on by the district court.” Bruh v. Bessemer Venture Partners III L.P., 464 F.3d 202, 205 (2d Cir. 2006). Although the issue was not raised or ruled upon below, amici urge us to affirm the district court’s judgment on the alternative ground that any domestic effect caused by the defendants’ foreign anticompetitive conduct did not “give[] rise to” Lotes’s claims. 15 U.S.C. § 6a(2). We agree. To review the statutory framework, the FTAIA generally excludes wholly foreign conduct from the reach of the Sherman Act, but brings such conduct back within the statute’s scope where two requirements are met: (1) the foreign 45 conduct has a “direct, substantial, and reasonably foreseeable effect” on U.S. domestic, import, or certain export commerce, id. § 6a(1); and (2) that effect “gives rise to a claim under” the Sherman Act, id. § 6a(2). In Empagran, the Supreme Court held that the statutory phrase “gives rise to a claim” means “gives rise to the plaintiff’s claim.” See Empagran, 542 U.S. at 173. After considering the legislative history and principles of international comity, the Court concluded that “Congress would not have intended the FTAIA’s exception to bring independently caused foreign injury within the Sherman Act’s reach.” Id. The FTAIA thus includes two distinct causation inquiries, one asking whether the defendants’ foreign conduct caused a cognizable domestic effect, and the other asking whether that effect caused the plaintiff’s injury. Under this second inquiry, in the wake of Empagran, three courts of appeals have considered what kind of causal connection is necessary for a domestic effect to “give[] rise to” a plaintiff’s claim. Consistent with the comity canon and general antitrust principles, these courts have held that the domestic effect must proximately cause the plaintiff’s injury. See In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 546 F.3d 981, 987 (9th Cir. 2008) (“Like 46 the D.C. Circuit and the Eighth Circuit, we . . . adopt a proximate causation standard.”); In re Monosodium Glutamate Antitrust Litig., 477 F.3d 535, 538 (8th Cir. 2007) (“[T]he statutory ‘gives rise to’ language requires a direct or proximate causal relationship . . . .”); Empagran S.A. v. F. Hoffmann‐LaRoche, Ltd., 417 F.3d 1267, 1271 (D.C. Cir. 2005) (“The statutory language—‘gives rise to’—indicates a direct causal relationship, that is, proximate causation . . . .”). Agreeing with our sister circuits, we adopt that standard here. We thus must determine whether any domestic effect resulting from the defendants’ anticompetitive conduct proximately caused Lotes’s injury. We conclude that it did not. Lotes alleges that the defendants’ foreign conduct had the effect of driving up the prices of consumer electronics devices incorporating USB 3.0 connectors in the United States. But those higher prices did not cause Lotes’s injury of being excluded from the market for USB 3.0 connectors—that injury flowed directly from the defendant’s exclusionary foreign conduct. Lotes’s complaint thus seeks redress for precisely the type of “independently caused foreign injury” that Empagran held falls outside of Congress’s intent. Empagran, 542 U.S. at 173. 47 Indeed, to the extent there is any causal connection between Lotes’s injury and an effect on U.S. commerce, the direction of causation runs the wrong way. Lotes alleges that the defendants’ patent hold‐up has excluded Lotes from the market, which reduces competition and raises prices, which are then passed on to U.S. consumers. Lotes’s injury thus precedes any domestic effect in the causal chain. And “[a]n effect never precedes its cause.” Am. Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760, 765 (2d Cir. 1984). Attempting to evade this problem, Lotes argues that higher prices for U.S. consumers are not the only domestic effect of the defendants’ conduct. According to Lotes, while higher U.S. prices may be the only domestic effect resulting from the defendants’ patent infringement suits in China, the defendants’ scheme is broader than that. Lotes contends that the defendants have also failed to license the necessary claims of certain U.S. patents, which has had the effect of foreclosing competition in the United States. That domestic effect, Lotes maintains, has proximately caused Lotes’s injury. This creative argument runs into several difficulties. As an initial matter, we are skeptical that the defendants’ refusal to license their U.S. patents has 48 resulted in any domestic foreclosure of competition. Lotes has not alleged that it manufactures products in the United States, imports products into this country, or otherwise does business here. It is thus unclear why Lotes believes it even needs a U.S. license from the defendants in order to operate. See 35 U.S.C. § 271(a) (providing that a person infringes a patent if, “without authority,” the person “makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor” (emphasis added)). And even to the extent a license is in fact necessary, Lotes alleges that, by virtue of the Contributors Agreement, it “either already has . . . or has an irrevocable right to a RAND‐Zero license” for all patent claims and other intellectual property necessary to practice the USB 3.0 standard. J.A. 51. The alternative domestic effect Lotes relies upon is thus illusory. In any event, any domestic effect resulting from the defendants’ failure to license their U.S. patents did not proximately cause Lotes’s injury. Indeed, any such effect is not even a factual, “but for” cause of Lotes’s injury. Even if the defendants had granted Lotes a U.S. license, Lotes would still be excluded from 49 the USB 3.0 market by virtue of the defendants’ independent infringement suits in China. But for the failure to license, Lotes would have suffered the same harm. Nor is this one of those rare cases in which an injurious event is “overdetermined” by multiple sufficient causes. See Restatement (Third) of Torts: Phys. & Emot. Harm § 27 (2010) (“If multiple acts occur, each of which . . . alone would have been a factual cause of the physical harm at the same time in the absence of the other act(s), each act is regarded as a factual cause of the harm.”). Nothing in the complaint suggests that the defendants’ failure to license U.S. patents, standing alone, would have been sufficient to exclude Lotes from the market. Indeed, the U.S. patents are so incidental to the alleged scheme that the complaint does not even bother to mention them except as part of the background of the relevant Chinese patents. See J.A. at 51 (explaining that the Chinese patents “claim priority to” the U.S. patents, and thus “the specifications of these U.S. patents must support all claims in the corresponding Chinese patents”); J.A. 54 (similarly discussing the U.S. patents as background). Read as a whole, the complaint makes perfectly clear that the true source of Lotes’s injury 50 is the “[d]efendants’ willingness to bring suit against Lotes in contravention of the USB‐IF RAND‐Zero terms.” J.A. 58.8 Accordingly, even assuming that the defendants’ anticompetitive conduct caused a “direct, substantial, and reasonably foreseeable effect” in the United States, any such effect did not “give[] rise to” Lotes’s claim. We therefore affirm the decision below on alternative grounds.