Antitrust suit against defensive patent purchasing organization dismissed

On 29 December 2010, the U.S. District Court for the Southern District of New York dismissed an antitrust suit brought by Siti-Sites.com, Inc. (“Siti”) against Allied Security Trust (“AST”) and allegedly associated entities and individuals (all collectively referred to as “defendants” below) due to the lack of antitrust standing.

AST purchases patents, provides licenses to its members (and sometimes to third parties as well), and then sells the patents again (“catch and release”). Siti alleged that, through their cooperation, the defendants violated Section 1 of the Sherman Act by preventing non-practicing entities who own patents in the telecommunications industry from licensing or selling their patents at fair market value. According to Siti, the defendants’ unlawful conduct consists of collusion to achieve devaluation of patents, concerted refusals to deal with selected non-practicing entities, and deceptive price-fixing through the use of brokers in patent acquisition.

However, the court held that Siti lacked standing to sue for the alleged antitrust violations. This is because Siti is not a direct victim of the alleged violations, as Siti does not own the patents at issue. Siti’s economic interest in receiving payments from the actual owner of the patents on the basis of a contract with the latter was considered too remote to confer antitrust standing.

In view of the lack of standing, the court did not (need to) address the defendants’ motion to dismiss the antitrust claims on the bases that, first, the alleged agreement is not unlawful per se and Siti failed to allege adverse effects on competition or market power possessed by the defendants, and, second, that Siti’s allegations of an illegal agreement among the defendants to refuse dealings are too conclusory. [Juha Vesala]

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