U.S. Government Intervenes In Antitrust Case

The United States Government intervenes in the ongoing suit Continental Automotive Systems v. Avanci, LLC, et al.; the government filed a motion for leave to file a statement of interest. The suit was filed in the Texas Northern District Court. Continental Automotive Systems (CAS) is represented by Sheppard, Mullin, Richter & Hampton. Avanci et al. are represented by Winston & Strawn, as well as Baker McKenzie.

The Department of Justice’s Antitrust Division is interested in the case for antitrust purposes as it applies to Section 2 of the Sherman Act. The case “involves the intersection of antitrust law and intellectual property rights.” The government “seeks to ensure that the antitrust laws are correctly applied to promote innovation and enhance consumer welfare, and are not misinterpreted in ways that could undermine these critical goals.”

CAS alleged that Avanci failed to license standard essential patents (SEPs) at a “fair, reasonable, and non-discriminatory (FRAND)” rate.  The government’s Statement of Interest countered that CAS’s complaint does not accuse Avanci of engaging in unlawful exclusionary conduct. According to the government, Avanci’s higher prices did not violate FRAND or mean it engaged in unlawful exclusionary conduct; Avanci’s alleged “deception” about its licensing rates after its FRAND commitment does not mean it engaged in unlawful exclusionary conduct. Additionally, the government argued there is no antitrust obligation to license on FRAND commitments. The government went on to argue that imposing antitrust liability for FRAND violations would result in overdeterrence.  The United States thus sought for the court to grant Avanci’s Motion to Dismiss regarding Section 2 claims.

The case revolves around licensing cellular SEPs for wireless connectivity. Continental Automotive Systems is a cellular component supplier to car manufacturers; it supplies telematic control units (TCUs) and other wireless connectivity devices. Avanci collects and licenses cellular SEPs for its member companies. In the complaint, CAS alleged that Avanci, on behalf of its members, breached FRAND commitments for the SEPs it was licensing and violated antitrust and unfair competition laws.

CAS claimed that in 2017, Avanci tried to directly license patents to car manufacturers. In 2018, CAS tried to obtain a license from Avanci but was denied because Avanci only licensed to car manufacturers, not suppliers. CAS claimed that by only licensing to car manufacturers, Avanci attempted to collect large amounts of royalties for its licensed patents. The royalty will be based on the highly-priced vehicle instead of the lower-priced TCU that CAS would license the patent for.