Sunday, September 20, 2020

Softbank's two major competition cases: Apple-Intel antitrust suit against Fortress, and merger review of Nvidia's envisioned acquisition of ARM

Softbank--though huge--was mentioned on this blog for the first time when Intel and Apple brought an antitrust action against its Fortress Investment subsidiary over the industrialized abuse of patents. That case is still pending, and another major competition case involving Softbank is around the corner: its contemplated sale of chip company ARM to Nvidia for $40 bilion is likely to draw regulatory scrutiny in multiple jurisdictions.

While my focus will definitely remain on App Store antitrust cases (as an app developer and antitrust commentator, I'm doubly interested) and component-level licensing of standard-essential patents, the Apple and Intel v. Fortress litigation and the upcoming Softbank-ARM merger reviews are also worth keeping an eye on. In this post I'd like to share a few observations on both matters.

1. Fortress Investment's motion to dismiss amended Apple-Intel complaint

In the Fortress case, Apple and Intel are trying to enforce antitrust law against an extremely aggressive patent troll group. Their first joint complaint was dismissed by Judge Edward Chen of the United States District Court for the Northern District of California, but without prejudice, and the plaintiffs brought an amended complaint. Fortress is now seeking the definitive (= with prejudice) dismissal of the amended complaint (this post continues below the document):

20-09-15 Fortress Motion to... by Florian Mueller

Judge Chen had given Apple and Intel some guidance in his order on the motion to dismiss as to what they'd have to improve in order for an amended complaint to (potentially) survive. But Fortress's new motion to dismiss, which was filed on Tuesday (September 15, 2020) argues that the new complaint still falls far short of a well-pleaded antitrust complaint, allegedly having essentially the same deficiencies as the original complaint.

Market definition--a topic with respect to which this foreign-owned patent troll group was supported by the Antitrust Division of the United States Department of Justice--is still Fortress's first attack vector. Fortress argues in its new motion to dismiss that Apple and Intel don't define the relevant patent markets narrowly enough, and that they fail to plead facts relating to cross-elasticity of demand.

Fortress also says that the amended complaint still fails to plead antitrust injury (such as supracompetitive royalties having been extracted).

As far as the part of the complaint in which Apple alleges standard-essential patent (SEP) abuse is concerned, Fortress seeks to get a lot of mileage out of a Ninth Circuit panel decision in Qualcomm's favor (against the FTC).

The motion hearing will take place on December 17, 2020.

2. Nvidia's proposed $40B acquisition of ARM

Nvidia's interest in acquiring ARM has been known for some time. The announcement was finally made one week ago, emphasizing Artifical Intelligence. The deal is done as far as buyer and seller are concerned, but whether Softbank will actually be able to sell ARM to Nvidia is now subject to regulatory approval. When the parties to such a deal expect that it will take 18 months until the transaction can ultimately be consummated, they expect strong headwinds on the merger review front.

The Conversation published an interesting discussion of what the combination of Nvidia and ARM would mean for the tech industry at large. UK-based ARM's strength has so far been its neutrality, enabling it to business with anybody while avoiding conflicts of interest. ARM's acquisition by Nvidia would profoundly impact some of ARM's existing business relationships.

An IAM (Intellectual Asset Management) Magazine article takes a closer look at the potential concentration of chipset patents. In fields of technology in which semiconductor companies have traditionally filed patents, IAM believes the two portfolios are largely complementary. In recent years, both have been very active in filing for patents on AI and machine learning technologies. The IAM article expresses doubts as to whether the deal will actually materialize (as it might suffer the fate of Qualcomm-NXP), but in case it does, "it will be acritical moment in Nvidia's patent history," the authors (S. Rajan Kumar and Sumair Riyaz, both of Dolcera) conclude.

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