The Justice Department’s antitrust case against Taiwanese liquid crystal display maker AU Optronics was a key test of its ability to target globalized price-fixing and win criminal convictions at trial. As The Recorder reported late Tuesday, the DOJ passed that test with flying colors when federal jurors in San Francisco found the company and two top executives guilty of a five-year conspiracy to fix LCD prices, raising the potential for a $1 billion fine.

But with so much manufacturing moving abroad, AU Optronics’s promised appeal may pose an even more crucial test for the government: whether alleged cartels can scuttle U.S. antitrust enforcement efforts if much of their alleged conduct took place on foreign soil. AUO lawyer and appellate maestro Dennis Riordan of Riordan & Horgan told Bloomberg after the verdict that the case was “just beginning,” and that the overseas reach of the Sherman Antitrust Act would be the focus of the appeal. (Riordan was in court when we tried to reach him Wednesday.)

Riodan’s comments got us wondering if the case may hinge on the U.S. Supreme Court’s June 2010 Morrison v. NAB ruling, which held that U.S. securities laws don’t apply to foreign transactions. Morrison has since been applied to bar claims over overseas conduct in other contexts, like racketeering, and the decision is bound to make at least a cameo appearance in the AU Optronics appeal. But based on an earlier motion to dismiss in the case and two recent federal appellate court decisions in civil price-fixing cases, AU Optronics’s arguments against extraterritorially are more likely to revolve around antitrust law itself.

In their February 2011 motion to dismiss the indictment, Riordan and his co-counsel at Nossaman LLP and Sedgwick noted that there had never been a reported decision on the validity of a criminal antitrust conviction based on foreign conduct. They argued that under the Foreign Trade Antitrust Improvement Act and antitrust precedent in multiple federal circuits, U.S. courts have no jurisdiction over alleged misconduct that has no intended, direct, or substantial effect on U.S. commerce. The government’s claims against the AU Optronics defendants fit the bill and must be dismissed, Riordan asserted.

Those arguments got the attention of the antitrust bar, but San Francisco federal district court judge Susan Illson rejected them in a short April 2011 ruling. The main flaw in the defense’s reasoning, she concluded, was that the indictment clearly described actions and effects inside the U.S. as well as abroad. “[T]he Court simply cannot conclude that the FTAIA was intended to bar criminal prosecution where, as here, the alleged conspiracy involves conduct in furtherance of the conspiracy both inside and outside of the United States,” Judge Illston wrote.

Since that ruling, however, both the Third and Seventh Circuit U.S. Courts of Appeals have weighed on on the extraterritorial reach of the FTAIA in civil antitrust cases. The Third Circuit found that the law imposes a merits limitation (rather than a jurisdictional limitation) on antitrust claims, and the Seventh Circuit concluded that the statute barred antitrust claims over a purported overseas mineral price-fixing conspiracy that allegedly affected U.S. prices. Both decisions also cited the Supreme Court’s Morrison decision, though only in passing.

The Seventh Circuit found that all of the alleged price-fixing in the mineral case took place abroad, which, according to prosecutors and Judge Illston, doesn’t match the facts in the AU Optronics case. But given the stakes for AU Optronics and other international manufacturers, that won’t stop Riordan and AUO’s other lawyers from taking their extraterritoriality arguments as far as they can go.