Monday, October 06, 2003

The Courts: First Monday is Here

Today is the traditional opening of the Supreme Court's new Term. Normally there would be oral arguments, but because of the Jewish holiday, the justices will defer the first arguments until tomorrow. The Court did release an 83-page orders list, however, disposing of several hundred petitions made during the summer recess. CAC was tracking three pending petitions for possible amicus briefs. Of the three, two were denied outright, and a third lives on for now.

The two cases denied review were Infineon Technologies v. Rambus, Inc. and George Washington University v. District of Columbia. The Infineon case is part of an ongoing dispute between Rambus, a California-based developer of computer technology, and several industry competitors who claim they were essentially duped them into adopting Rambus' proprietary technology as an industry standard. A trial jury ruled against Rambus on some claims, but the U.S. Court of Appeals for the Federal Circuit--which has nationwide jurisdiction over intellectual property appeals--vindicated Rambus as a matter of law. The anti-Rambus faction, represented by Ken Starr, enjoyed backing from numerous amici, including several state attorneys general, but the Court apparently found nothing in the Federal Circuit's decision worthy of review.

This is not the end of Rambus' legal troubles, however. For over a year now, the Federal Trade Commission has prosecuted an administrative case against Rambus for violating the antitrust laws. The FTC's claims are based on the same exact facts the failed Infineon case was, but the FTC is never one to yield to the authority of more competent tribunals. If anything, FTC staff has made a big deal of its Rambus case, using it as a platform to attack various ideas antithetical to the FTC's worldview--things such as intellectual property rights, due process, and separation of powers. Rambus' opponents have been openly colluding with FTC staff in pursuing the Rambus case, and while the company stands a good chance of prevailing in the long-run, it will be several more years before the matter is concluded.

The George Washington case, like Rambus, involves a long-running dispute between competing private interests. Like all universities in Washington, GW is required to submit an overall development plan to the District's zoning authorities every ten years. In the most recent review, the District decided to impose an arbitrary cap on the number of full-time students GW could enroll. GW filed a federal suit to overturn this restriction, arguing numerous violations of the school's due process rights. The District of Columbia Circuit ruled for the city. While GW had a strong argument, I thought, its presentation was weak.

I attended the oral arguments at the D.C. Circuit, and GW counsel Deborah Baum presented arguments that made no sense at all. For example, she contended an enrollment cap violated GW's First Amendment right to "academic freedom," a claim she also presented in GW's petition to the Supreme Court. That's one of the stupidest things I've ever heard. Academic freedom only applies to the content of subject matter taught by a university, not to the number or even composition of the student body. While I agree GW's property rights were trampled on by D.C., that has little to do with the First Amendment.

The third case we've been keeping an eye on is 3M v. LePage's, an appeal of the Third Circuit's decision to uphold a $68 million judgment against 3M, the nation's largest transparent tape producer. LePage's, a competing tape company, claimed 3M used its pricing policies to squeeze LePage's out of a particular sub-market of transparent tape. Despite the fact LePage's still dominated the sub-market in question--and the fact 3M did not resort to "below-cost" pricing, a typical antitrust violation--a jury awarded damages to LePage's. A divided three-judge panel of the Third Circuit initially reversed in favor of 3M, but the full 11-judge court later reinstated the judgment.

The Supreme Court did not dispose of 3M's petition for review today. Instead, the justices asked Solicitor General Ted Olson to file a brief expressing the federal government's view of the case. This is a wise move. The Third Circuit's decision hinges on how broadly section 2 of the Sherman Act should be read to restrict a dominant firm's pricing policies. If the original Third Circuit panel's view is accepted, firms like 3M will enjoy greater protection of their economic rights in the marketplace. A narrower reading might also limit the scope of government antitrust prosecutions. Given the current administration's obsession with stamping out "price-fixing" in business, I'm surprised the Justice Department didn't voluntarily submit a brief to the Court on this case.

Having said that, the Court's invitation is not a totally positive sign. The Solicitor General is likely to heed the Antitrust Division's wishes and seek to uphold the Third Circuit's decision, which means the Government will likely reccomend not addressing 3M's petition at this time. Still, I'll be positive for now and wait to see exactly what the Solicitor General says.

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