Fortress Moves to Dismiss Antitrust Case

Fortress Investment Group has filed a joint notice of motion and a motion to dismiss and to strike plaintiffs’ complaint in response to an antitrust suit filed in late 2019. The case, filed by Apple and Intel, represents the tech giants’ attempt to fight back against so-called patent trolls. 

Fortress’s motion questioned if if Intel and Apple have “pleaded a viable antitrust market or market power… a cognizable antitrust injury” and if claims are allowed under legislation such as the Sherman Act, Clayton Act, California’s Anti-SLAPP statute, and the California Business & Professions Code.

Intel and Apple’s complaint stated that Fortress, owned by megainvestor Softbank, violated the state and federal antitrust law. The companies accused Fortress of amassing a large portfolio of patents that are crucial to the design and development of high-tech consumer electronics, leading to billions in damages. They stated that Fortress “controls” a “web” of patents and Patent Assertion Entities (PAEs) as part of a “scheme” to aggregate “weak” patents and bring meritless suits. Additionally, the plaintiffs complained of difficulty designing their products without infringing upon the broad patent portfolio that Fortress and Softbank assembled, “resulting in a greater windfall in both licensure and litigation for Fortress.” For example, “Fortress’ portfolio prevented alternatives from being designed and entering the market without infringement, much like how a merger of competitors reduces the possibility of competition.” Intel argued that Fortress is behaving unfairly and anticompetitively, and thus, has caused great expense to other businesses.

Fortress claimed that “Apple and Intel…assert unprecedented ‘antitrust’ claims against companies a tiny fraction of their size in an attempt to intimidate those companies from enforcing their Constitutionally-protected patent enforcement rights.” Fortress argues that Intel and Apple’s “real complaint is that loans or equity investments from Fortress-managed investment funds have allowed patent owners to sue Plaintiffs for infringement when the original inventors and owners might not have been able to withstand Plaintiffs’ high-priced defenses and refusals to pay for the technology they are using.”

Fortress also alleged that the plaintiffs failed to adequately describe a market in which Fortress could have caused harm. The proposed market is for “patents for high-tech consumer and enterprise electronic devices and components or software therein and processes used to manufacture them, the ‘Electronic Patents Market.’” Fortress argued this proposed market is “vague and overbroad,” and that the plaintiffs did not explain how Fortress would have gained such large market power.

Apple and Intel, according to the motion, did not “plead cognizable antitrust injury.” They alleged Fortress has “supracompetitive” license rates but did not say that they paid those prices nor if they licensed from Fortress. Further, Fortress stated that “the Complaint contains no allegations to support that the patent litigation costs paid by Plaintiffs – who according to Plaintiffs, are Defendants’ customers, not competitors – flowed from any competition reducing aspect or effect of Defendants’ behavior.”

The hearing on the motion is set for April 23.  The motion was filed by attorneys from Irell & Manella and Paul, Weiss, Rifkind, Wharton & Garrison.