Tuesday, June 21, 2022

BREAKING: Fifth Circuit panel modifies Continental v. Avanci et al. decision but once again dismisses Conti's patent-related antitrust claims


At the beginning of last week, the Fifth Circuit panel that threw out Continental's appeal of the dismissal of its antitrust complaint against Avanci and some of its licensors (Nokia, Sharp, Optis) reacted to Conti's petition for rehearing en banc by taking charge of the case again, and announced a revised opinion. The new version of the decision just appeared on the docket, and the basic outcome is the same--Conti's case is still thrown out, just on a different basis as I'll discuss further below:

The original (February 2022) panel opinion held that Conti lacked basic Article III standing for lack of injury (as its customers--the automakers--have access to an Avanci license). That line of reasoning was supported by two of the three panel judges (former Chief Judge Stewart, and Judge Engelhardt), while Judge Ho would have affirmed the district court ruling, according to which Conti had Article III standing, but no antitrust standing and no Sherman Act claims (neither under Section 1 nor Section 2). However, Judge Ho didn't "dissent-dissent" but contented himself with a footnote voicing his different preference.

The new consensus--and now it's a truly unanimous panel decision--is that Conti fails at the third hurdle: it failed to state Section 1 or Section 2 Sherman Act claims. In that regard, the panel now affirms the district court. The revised opinion doesn't explain this further, so the district court's reasons are affirmed as they stand.

What the panel decision 2.0 does not address specifically is whether the district court rightly found that Conti lacked antitrust standing. It would have been better to have not only a castle, but a castle with a moat around it, by explicitly affirming both parts of the district court's judgment.

The panel has designated the opinion as unpublished and non-precedential, meaning that this particular litigation has been resolved (again), but others won't be able to really get mileage out of it. This ups the ante for any attempt by Conti--which I guess the automotive supplier is going to make nonetheless--to have the decision reviewed by the full court or by the Supreme Court. It's a means of minimizing the decision's impact on the development of SEP case law. Conti's amici would find it extremely hard to argue that an unpublished, non-precedential decision is of transcendental importance and absolutely needs to be reviewed by ever more judges, all the way up to the Supreme Court.

Fifth Circuit rule 47.5.4 says that unpublished opinions such as this one "are not precedent, except under the doctrine of res judicata, collateral estoppel or law of the case (or similarly to show double jeopardy, notice, sanctionable conduct, entitlement to attorney’s fees, or the like)." In other words, only under narrow circumstances--all of which are closely related to the case, or to any attempt to relitigate the issues between the same parties--is the decision of any relevance.

While it may be cited, the revised opinion itself doesn't contain anything worth citing: all of the substance is now in the judgment by Judge Barbara M. Lynn of the United States District Court for the Northern District of Texas.

Given that the Fifth Circuit has downgraded the importance of the decision, it's conceivable that the panel just agreed on whatever it was able to build a quick unanimous consensus around. The finding of no Article III standing was a 2-1 decision even though there was no formal dissent. Knowing from Judge Ho's footnote that he'd have affirmed the district court's finding of no antitrust standing, it appears more likely than not that one of the other two panel judges would have joined him, but they didn't have to address that part.

The problem with Conti's case is that there are multiple bases on which it can be tossed even prior to any discovery--and if discovery had been conducted, I can't imagine the case would have survived summary judgment. The Fifth Circuit panel had three grounds of pre-discovery dismissal to choose from: Article III standing (the basis of the original panel opinion), antitrust standing (not explicitly addressed today, but clearly doubtful), and Sherman Act claims (it would have been enough for Conti to have either a Section 1 or a Section 2 claim, but according to the affirmed part of the district court's judgment, it has neither).

While I suspect Conti of being hell-bent to keep pushing until all appeals have been exhausted, I would encourage Conti to think really hard about the risk-opportunity ratio. The chances of getting any further review are unbelievably slim, while the risk of annoying one of the most important appeals courts in the United States and potentially the Supreme Court--by seeking a review of an unpublished, non-precedential opinion--is real. This isn't the first U.S. case to which Conti is party, and it won't be the last. Seeking review after review after review when a case has such glaring deficencies is disrespectful to the judiciary.

Psychologists say there are five stages of grief: denial, anger, bargaining, depression, acceptance. It seems Conti never got past the first three stages. It should leapfrog the fourth stage and finally reach the point of acceptance. Those legal fees are a sunk cost.

As a litigation watcher with a focus on U.S. cases, I can sense that all judges so far have been underwhelmed. Judge Lucy H. Koh (then in the Northern District of California, now on the Ninth Circuit) denied Conti a temporary restraining order and granted a motion to transfer the case to Texas. Judge Lynn in the Northern District of Texas disposed of the case at the earliest possible stage and on two independent grounds, though either one of them would have been enough. And now the Fifth Circuit panel has issued a revised opinion of the lowest profile (unpublished and non-precedential). Conti should face a simple fact: no judge really thinks this case deserves to go forward. Different judges may have different perspectives on the legal basis of a dismissal, but they all concur that Conti's complaint isn't deserving of discovery, much less of proceeding to trial.

Conti is still suing Nokia in the Delaware Chancery court, a state court of equity. That case hasn't made any progress. It was removed from the state court to federal court, and then remanded to the state court. It's another Conti case that isn't going to make an impact, and the only question is how--not whether--it will be tossed.