Judge Ronald Gould, United States Court of Appeal for the Ninth Circuit
Judge Ronald Gould, United States Court of Appeal for the Ninth Circuit ()

SAN FRANCISCO — The U.S. Court of Appeals for the Ninth Circuit has breathed new life into a 2010 antitrust suit between Samsung Electronics Co. and Panasonic Corp.

The three-judge panel ruled Friday that Samsung’s suit, which accuses Panasonic of using its patents to hijack the market for certain digital memory cards, was filed within the four-year statute of limitations that governs federal antitrust law. The unanimous ruling authored by U.S. Circuit Judge Ronald Gould reverses a 2012 decision from U.S. District Judge Jeffrey White that the suit had been filed too late.

Kathleen Sullivan, a partner in the New York office of Quinn Emanuel Urquhart & Sullivan, argued the appeal Dec. 5 on behalf of Samsung, which is also represented by lawyers at Covington & Burling. Jeffrey Kessler, a partner with Winston & Strawn in New York, and chairman of the firm’s antitrust and competition practice, argued on behalf of Panasonic. Christopher Hockett, a partner with Davis Polk & Wardwell in Menlo Park, represented SD-3C, a company established in part by Panasonic and also named as a defendant.

Samsung v. Panasonic, 12-15185, centers on secure digital, or SD, cards—memory cards used in cellphones and other electronics. Panasonic, which along with Toshiba and SanDisk claim the essential patents for certain flash memory products, widely licensed the technology in 2003, requiring other companies that manufactured the cards to pay a 6 percent royalty on all sales. In 2006, Panasonic created new forms of SD cards and licensed them under a similar agreement.

Samsung, which began manufacturing SD cards in 2006, paid royalties to Panasonic but refused to sign a license and ultimately sued Panasonic, claiming the company was using its patents to restrict competition.

“They now exploit control of this manipulated standard to raise their competitors’ costs and to discourage competing innovations,” the Covington & Burling lawyers wrote in a complaint filed in the Northern District of California on behalf of Samsung. “While claiming to have engaged in legitimate standard-setting and licensing activities, they are, in effect, a disguised cartel.”

In his motion to dismiss, Dewey & LeBoeuf partner Aldo Badini, on behalf of Panasonic, countered that his client’s actions were perfectly legal and enhanced competition.

“Among the important pro-competitive effects of industry standard setting are greater interoperability of products, promotion of competition among devices that make use of the standard, and increased value to consumers,” Badini wrote.

Samsung asked the court for restitution of all royalties paid to Panasonic and SD-3C, damages, and an injunction preventing the defendants from collecting further royalties. The parties in this case are waiting for the pending appellate ruling on a companion class action, Oliver v. SD-3C, 12-16421, which addresses the same antitrust issues on behalf of consumers.

The pressing questions of both cases, including where the line should be drawn between protecting intellectual property and violating antitrust law, have yet to be decided.

White dismissed the 2010 lawsuit because it was filed more than four years after Panasonic’s 2003 license agreement. But Gould concluded the statute of limitations should be measured from the 2006 license, and all subsequent attempts Panasonic made to collect royalties from Samsung. Those two events are new and independent developments, not merely continuations of the original 2003 license, ruled the panel, which also included Circuit Judge Richard Paez and U.S. District Judge David Ezra of the Western District of Texas, sitting by designation.

“When the SD defendants approached Samsung and required it to make license payments,” Gould wrote, “whether under a new 2006 license or under the 2003 license—those acts caused independent harm and accumulating injury.”

In addition, Samsung did not start manufacturing SD cards until 2006 and, therefore, could not quantify the harm Panasonic’s actions caused until that year.

“Because the harm to Samsung challenged in this suit was speculative at the time of the initial wrong,” Gould wrote, “the law of limitations in federal antitrust actions allowed Samsung to file suit once the harm crystallized in 2006.”

Contact the reporter at mkendall@alm.com.