Lawyers for a trio of tech defendants and their joint licensing venture scored a major victory on Monday, when a judge in San Francisco concluded that consumers of flash memory cards waited too long to sue over an alleged price-fixing scheme. Not only is the case now dismissed with prejudice, but the judge rejected an interpretation of time limits for antitrust claims that might have spelled trouble for defendants in other indirect purchaser class actions.
In a 7-page order, U.S. District Judge Jeffrey White threw out an antitrust complaint alleging that Panasonic Corporation, Toshiba Corporation, SanDisk Corporation, and a joint venture called SD-3C LLC colluded to fix prices of SD-brand memory cards, which account for 80 percent of flash memory cards sales worldwide. The ruling is a loss for plaintiffs lawyers at Susman Godfrey and a win for a defense lineup from Davis Polk & Wardwell, Latham & Watkins, Bingham McCutchen, and Winston & Strawn.
Toshiba, Panasonic, and SanDisk pooled their patents to collaborate on designing and promoting next-generation memory cards back in 1999. They formed a joint venture, SD-3C, that charged companies that wished to license the resulting SD card technology a hefty six percent royalty on all card sales.
One licensee, Samsung Electronics Co. Ltd., hired Covington & Burling to file an antitrust complaint in 2010, alleging that the patent licensing deals inflated prices and restrained trade. Judge White ruled in that case last August that Samsung’s claims were time-barred, since the underlying conduct occurred more than decade ago. Samsung had argued that, while the licensing scheme dated back to 1999, its anticompetitive impact became more pronounced in late 2006, which fell within the four-year statute of limitations for federal antitrust claims. But White finally put the case to rest in January, concluding that Samsung couldn’t plead its way around the time limits.
Plaintiffs lawyers representing indirect SD card purchasers had incorporated many of Samsung’s allegations into their own class action complaint against the same defendants, so they clearly needed a way to distinguish their arguments from Samsung’s. They argued that consumers, unlike SD-3C’s licensees, didn’t suffer any an economic injury until they actually bought SD cards. Therefore, the lawyers asserted, the statute of limitations should restart at the time of sale.
Judge White didn’t buy it. On Monday, without waiting for oral argument, he granted a joint motion to dismiss filed by the defendants. “The Court is not persuaded by the distinction between consumers in this action and competitors in the Samsung Action,” he wrote. “The statute of limitations. . .runs from the time of the last overt act made by the defendant, not from the last purchase made by a potential plaintiff. Should the Court find otherwise, there would essentially be no statute of limitations bar to indirect purchaser claims.”
The ruling gives “peace of mind” to technology companies, said Jeffrey Kessler of Winston & Strawn, who represented Panasonic (Kessler brought the case with him from Dewey & LaBoeuf when he left the firm earlier this month). The plaintiffs “attack[ed] industry standard-setting practices more than a decade after those practices were put into effect, when the industry has already to come rely on them,” he said.
The arguments made by the class action plaintiffs lawyers at Susman Godfrey and by Samsung’s lawyers at Covington “were really two flavors of the same ice cream,” added Kessler. “You can always find some consumer who five years later buys the product for the first time. That can’t change the conclusion.”
Davis Polk represented SD-3C LLC. Toshiba had Latham & Watkins, and SanDisk was represented by Bingham McCutchen.
Susman partner Max Tribble, who represented the indirect purchaser plaintiffs, didn’t respond to a request for comment.