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Qualcomm, Others Win Dismissal of Sherman Act Claims Relating to Development of LTE Mobile Communications Standard

Tuesday, January 24, 2012

Maren Peterson | Bloomberg Law TruePosition, Inc. v. LM Ericsson Tel. Co., No. 11-4574, 2012 BL 2759 (E.D. Pa. Jan. 06, 2012)

  • To raise an inference of a conspiracy, allegations of parallel conduct by the alleged conspirators must be accompanied by allegations of "plus factors" that tend to suggest that the parallel conduct was the result of a preceding agreement.
TruePosition, Inc., a developer of positioning technology that determines the location of mobile-phone handsets, failed to state a claim against three mobile-telecommunications equipment manufacturers and two standards-setting organizations for conspiring to exclude TruePosition's positioning technology from the standards for the next generation of mobile communications. The U.S. District Court for the Eastern District of Pennsylvania found that TruePosition's allegations were insufficient to support an inference that defendants' alleged efforts to exclude the technology were the result of a conspiracy rather than independent action.

Defendants Allegedly Conspire to Exclude TruePosition's Technology from the LTE Mobile-Communications Standards

Plaintiff TruePosition develops and markets location products that operate over cellular telecommunications networks. "TruePosition's positioning technology, called UTDOA, works by using equipment located at multiple cell towers . . . which collaboratively collect timing information necessary to calculate a mobile handset's location . . ." Id. at 4. Defendant Third Generation Partnership Project (3GPP) is a standards-setting organization (SSO) that "create[s] global standards for mobile telecommunications technologies." TruePosition at 3-4. Defendant European Telecommunications Standards Institute (ETSI), also an SSO, is an "organizational partner" of 3GPP. 3GPP is in the process of developing standards for the next generation of mobile communications, known as Long Term Evolution (LTE). Defendants Qualcomm, Inc., Alcatel Lucent USA, Inc. (ALU), and Ericsson Telephone Company (together, the Corporate Defendants) are mobile-telecommunications equipment manufacturers who are members of 3GPP and whose representatives allegedly hold powerful Chairman and Vice-Chairman positions on 3GPP's Technical Specifications Group (RAN TSG) that is responsible for developing standards involving positioning technology. TruePosition alleged that at a RAN TSG meeting in 2008, Qualcomm submitted a work item (the 2008 Work Item) that proposed to include positioning technologies in the LTE standards but expressly excluded UTDOA, despite the fact that UTDOA had been included in previous standards. According to TruePosition, 3GPP's policies mandated that technology previously included in a standard automatically be included in subsequent standards. Allegedly, the 2008 Work Item was co-sponsored by ALU and Ericsson, among other companies. Subsequently, at a RAN TSG meeting in 2009, TruePosition submitted a proposal to add UTDOA to the 2008 Work Item. The Corporate Defendants, however, allegedly engaged in multiple tactics designed to prevent or delay consideration of including UTDOA. For example, an Ericsson representative who served as Chairman of the RAN TSG working group (the Working Group) to which TruePosition's proposal was assigned allegedly delayed consideration of the proposal for three months and then imposed a "double standard" against UTDOA by requiring TruePosition to demonstrate that UTDOA would "would deliver added benefits over other technologies to be considered for inclusion in the LTE standard." Id. at 12. The Corporate Defendants also allegedly submitted sham results on the performance ability of UTDOA, leading to further delay. Allegedly, each time one of the Corporate Defendants took action to prevent or delay consideration of UTDOA, the other Corporate Defendants supported those efforts. Ultimately, in 2010, after other positioning technology allegedly had already been incorporated into the LTE standards (and thus had a "head start"), the Corporate-Defendant controlled Working Group finally accepted UTDOA as a work item for standardization. Allegedly, however, "the Corporate Defendants subjected UTDOA standardization to two explicit conditions: (1) UTDOA would only be standardized for the SRS transmission method [rather than the SPS transmission method, which TruePosition had developed and advocated]; and (2) UTDOA standardization would be pushed to [a particular update to the standards that was] contemplated to be completed by September 2012 at the earliest." Id. at 15. TruePosition sued all defendants under Section 1 of the Sherman Act, 15 U.S.C. § 1, for "collud[ing] in a group boycott to restrain competition." Id. at 43. TruePosition also asserted a claim under Section 2, 15 U.S.C. § 2, against Ericsson and ALU for conspiracy to monopolize. ETSI and the Corporate Defendants moved to dismiss, arguing that the complaint failed to adequately allege an agreement among the defendants. ETSI also moved to dismiss for lack of personal jurisdiction. 3GPP was not served with the complaint.

TruePosition Granted Jurisdictional Discovery as to ETSI

The court first considered ETSI's motion to dismiss for lack of personal jurisdiction. It concluded that TruePosition failed to show that ETSI, a French organization, had sufficient contacts with the United States to justify the exercise of personal jurisdiction. It granted TruePosition limited jurisdictional discovery, however, to obtain additional information regarding ETSI's relationships with U.S. entities.

TruePosition Fails to Allege an Agreement among Defendants to Exclude UTDOA; Complaint Dismissed

Turning to TruePosition's Sherman Act claims, the court explained that, to state a claim under Section 1 or a conspiracy to monopolize claim under Section 2, a plaintiff must allege an agreement among the purported conspirators. A plaintiff may plead direct evidence or circumstantial evidence of an agreement. Where a plaintiff relies on circumstantial evidence, however, allegations of parallel conduct by the alleged conspirators must be accompanied by additional allegations, or "plus factors," that tend to show that the parallel conduct was the result of an agreement rather than unilateral action. — Complaint Does Not Allege Direct Evidence of an Agreement TruePosition argued that it alleged direct evidence of an agreement among the Corporate Defendants to exclude UTDOA from the LTE standards. Specifically, TruePosition pointed to the 2008 Work Item that was co-sponsored by the Corporate Defendants. That Work Item excluded UTDOA, despite the fact that 3GPP rules allegedly dictated that technologies incorporated in prior standards should be automatically carried forward in future standards. Furthermore, TruePosition alleged that the Work Item was untimely submitted, circulated prior to the meeting without TruePosition's knowledge, and accepted immediately by the RAN TSG Chairman – an ALU Representative – when submitted. TruePosition argued that the 2008 Work Item and the manner in which it was submitted and accepted constituted direct evidence of a conspiracy. The court disagreed, however, finding that multiple inferences would have to be made to conclude that the 2008 Work Item was drafted and submitted pursuant to an unlawful agreement. At best, the court wrote, the Work Item could be considered circumstantial evidence of an agreement. Accordingly, to adequately plead the existence of an agreement, TruePosition was required to allege at least one plus factor. — Complaint Fails to Allege Plus Factors The Third Circuit, the court noted, has identified three categories of plus factors that are typically sufficient to raise an inference that parallel conduct stemmed from a preceding agreement: "(1) evidence that the defendant had a motive to enter into a conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy." Id. at 38. The court found that TruePosition failed to allege that the defendants had a motive to enter into a conspiracy. The complaint alleged that the Corporate Defendants were each motivated by a desire to "quash innovative technologies in which [they] do not have dominant patents, and to seize unfair competitive advantages [for technologies in which] . . . they hold substantial patent portfolios and commercial interests." Id. That motive, the court wrote, demonstrated why it would be in each Corporate Defendant's independent economic interest to oppose UTDOA standardization, but "fail[ed] to explain why they would find it necessary to enter into a conspiracy to advance those interests." Id. at 41. Indeed, the existence of an independent economic incentive to exclude UTDOA suggested that defendants' parallel behavior may have resulted from unilateral action rather than from an agreement. Nor did TruePosition plead that any of the Corporate Defendants acted against their interest, the second of the three plus factors identified by the Third Circuit. TruePosition argued that the "action against interest" factor is inapplicable in the context of SSO, but the court was not persuaded, finding that "in the absence of direct evidence of a conspiracy, . . . [TruePosition] is required to plead that the conduct of the Corporate Defendants [was] against interest." Id. at 43. Finally, TruePosition did not allege evidence implying a traditional conspiracy. Such evidence, the court explained, would consist of "non-economic evidence that there was an actual, manifest agreement . . . which may include proof that the defendants got together and exchanged assurances of common action or otherwise adopted a common plan . . ." Id. at 43. The complaint alleged that Qualcomm drafted the 2008 Work Item and that the other Corporate Defendants were among its sponsors. The complaint further alleged that every time one of the Corporate Defendants took action to attempt to stall or prevent the standardization of UTDOA, the other Corporate Defendants supported the attempt. The court found, however, that those allegations were insufficient to suggest a preceding agreement. The court concluded that "given the economic interest that each Corporate Defendant had in opposing UTDOA's standardization, we find that the conduct is entirely consistent with lawful, independent, and unilateral conduct." Id. at 45. Finding that the complaint failed to allege any plus factor that would support a plausible inference that the Corporate Defendants' parallel conduct was more likely the result of an agreement than unilateral action, the court granted defendants' motions to dismiss. The court dismissed the complaint without prejudice, however, to allow TruePosition the opportunity to file an amended complaint that "plac[es] the Defendants' conduct within the context of a preceding agreement." Id. 47. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. 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