Opinion ID: 186414
Heading Depth: 3
Heading Rank: 5

Heading: Baseless and bad faith patent suit

Text: 34 Finally, Covad argues its allegation that Bell Atlantic brought a spurious patent case against it states a claim under § 2 of the Sherman Act. See generally Bell Atlantic Network Services, Inc. v. Covad Communications Group, 92 F.Supp.2d 483 (E.D.Va.2000). Specifically, Covad contends that Bell Atlantic's suit was baseless, brought in bad faith, and had an anticompetitive effect. Bell Atlantic counters first, as the district court held, that Covad failed to allege the suit had an anticompetitive effect, see Covad Communications, 201 F.Supp.2d at 135 (quoting Microsoft, 253 F.3d at 58-59), and second, that the suit was not objectively baseless. 35 Regarding anticompetitive effect, Bell Atlantic is mistaken. Covad alleges Bell Atlantic brought the patent suit in order to interfere with competition in the relevant markets. That is sufficient to allege an anticompetitive effect. 36 Alternatively, Bell Atlantic urges us to hold, as a matter of law, that its bringing the patent suit could not have harmed competition. In so doing, Bell Atlantic confuses the function of a motion to dismiss pursuant to Rule 12(b)(6), which tests the sufficiency of the plaintiff's allegations, with a motion for summary judgment pursuant to Rule 56, which tests the sufficiency of the non-moving party's evidence in light of the legal theory it has advanced. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (simplified notice pleading standard [of the Federal Rules of Civil Procedure] relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims). Bell Atlantic's protestation notwithstanding, we have it on good authority that even a single patent suit brought in bad faith against a nascent rival might unlawfully harm competition. See 3A AREEDA & HOVENKAMP, ANTITRUST LAW ¶ 782k, at 281 (an unjustified patent infringement suit ... might be abused by a monopolist to the detriment of actual or potential rivals). Whether Bell Atlantic's suit had such an effect is, again, a question not properly decided upon a motion to dismiss. 37 Bell Atlantic next disputes Covad's characterization of the patent suit as baseless. Resolving this matter requires us to consider the Noerr-Pennington doctrine, under which petitioning the Government for redress of grievances, whether by efforts to influence legislative or executive action or by seeking redress in court, is immune from liability under the antitrust laws. See E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972) ( Noerr-Pennington doctrine encompasses the approach of citizens ... to courts). 38 Noerr-Pennington immunity, however, does not extend to sham litigation. The presumption of antitrust immunity for litigating is dispelled if the plaintiff can show that two conditions are met: 39 First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.... Only if challenged litigation is objectively meritless may a court examine the litigant's subjective motivation.... This two-tiered process requires the plaintiff to disprove the challenged lawsuit's legal viability before the court will entertain evidence of the suit's economic viability. 40 Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus. , 508 U.S. 49, 60-61, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993). Bell Atlantic urges us to decide as a matter of law that its patent suit against Covad was not objectively baseless. Covad interposes no issue of fact and joins issue on the question of law. With the opinions of the patent courts before us, we see no barrier to our determining now whether Bell Atlantic's suit was a sham and hence without Noerr-Pennington immunity from antitrust liability. 41 Bell Atlantic sued Covad for patent infringement. The district court, in a lengthy and detailed opinion, granted summary judgment in favor of Covad. Bell Atlantic Network Services, 92 F.Supp.2d at 499-500. Bell Atlantic appealed, and the Court of Appeals for the Federal Circuit, in another lengthy and detailed opinion, see 262 F.3d 1258 (2001), affirmed the judgment of the district court. That Covad ultimately prevailed, of course, tells us little about whether Bell Atlantic's patent suit lacked objective merit. See Prof'l Real Estate Investors, 508 U.S. at 60 n. 5, 113 S.Ct. 1920 (court must resist the understandable temptation to engage in post hoc reasoning by concluding that an ultimately unsuccessful action must have been unreasonable or without foundation). 42 Our review of the patent courts' opinions convinces us that Bell Atlantic's case against Covad was not objectively baseless. Bell Atlantic advanced reasonable arguments that each court went to some lengths to reject. Nothing in their opinions suggests that no reasonable litigant could [have] realistically expect[ed] success on the merits. Id. at 60, 113 S.Ct. 1920. 43 Covad also alleges Bell Atlantic singled Covad out for suit and used the patent action as the vehicle for serving discovery requests on Covad seeking confidential information about a competitor. Those allegations, however, speak to Bell Atlantic's subjective motivation for suing Covad, which may be evaluated [o]nly if [the] challenged litigation is objectively meritless. Id. We therefore conclude that Covad's allegation that Bell Atlantic brought a baseless and bad faith patent suit against it fails to state a claim under § 2 of the Sherman Act.