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Corporate Counsel Connect collection

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August 2014 edition

Merger review and enforcement trends; induced patent infringement; consent decree review

Merger review and enforcement trends

Companies considering a merger should review the trends in merger review and enforcement outlined in the antitrust agencies' HSR Annual Report for Fiscal Year 2013 (HSR Report).

The HSR Report states that in fiscal year 2013:

  • 2,628 HSR filings were received, a 7% decrease from fiscal year 2012.
  • 1,326 transactions were reported under the HSR Act, a 7.2% decrease from 2012.
  • The cumulative dollar value of reported transactions was $815 billion, a 12% decrease from 2012.

Early termination of the HSR waiting period was:

  • Requested in 77% of reported transactions, down from 78% in 2012.
  • Granted 80.5% of the time it was requested, down from 82% in 2012.

The HSR Report also addresses:

  • Clearance to investigate. The antitrust agencies obtained clearance to investigate in 16.9% of reported transactions in 2013 (217 transactions). In 2012, clearance was granted in 14.7% of reported transactions (206 transactions).
  • Second Requests. In 2013, 47 merger investigations resulted in a Second Request (3.7% of reported transactions). In 2012, the percentage of Second Requests was lower (3.5%), but the number of investigations was higher (49 investigations).
  • Enforcement actions. Together, the antitrust agencies brought enforcement actions in just over 2% of reported transactions in 2013 (38 transactions). This number includes enforcement actions brought in transactions not reported under the HSR Act. The antitrust agencies also brought two actions against parties who failed to make required HSR filings. These cases resulted in aggregate civil penalties of $1.2 million.

For resources to assist counsel with HSR filings see the Hart-Scott-Rodino Act Toolkit.

Induced patent infringement

Patent owners should be aware of a recent US Supreme Court decision that significantly narrows the scope of induced patent infringement, particularly for software and business method patents.

In Limelight Networks, Inc. v. Akamai Technologies, Inc., the Supreme Court held that liability for induced patent infringement under 35 U.S.C. § 271(b) only exists if there is direct infringement by a single entity under 35 U.S.C. § 271(a). The Supreme Court rejected the Federal Circuit's holding that inducement liability does not require direct infringement attributable to a single entity.

The Supreme Court left intact the direct infringement standard in Muniauction, Inc. v. Thomson Corp., where the Federal Circuit held that direct infringement of a patented method exists if a party either performs:

  • Every step of the claimed method.
  • Some (but not all) of the claimed steps and controls those who perform the remaining steps.

In Limelight, the Supreme Court found no induced infringement because Limelight failed to perform one method step and did not control its customers' performance of that step.

As a result of the Limelight decision:

  • It will be easier to defeat induced infringement claims, especially for software and business method patents.
  • Discovery concerning an accused infringer's control over other parties' performance of method steps will assume a key role in proving divided infringement.
  • Patent owners will draft patent claims that focus on the actions of a single entity so that they can allege direct infringement.

For more information on patent litigation and patent infringement claims and defenses, see Practice Note, Patent Infringement Claims and Defenses.

Consent decree review

A recent Second Circuit decision makes it easier for companies accused of securities law violations to settle with the SEC.

In SEC v. Citigroup Global Markets, Inc., the Second Circuit adopted a deferential standard for district court review of proposed consent decrees. In vacating the district court's refusal to approve a proposed settlement, the Second Circuit held that a district court must enter a consent decree if it is fair and reasonable, unless any injunctive relief in the consent decree would disserve the public interest.

In making these judgments, a district court should consider:

  • The basic legality of the consent decree.
  • Whether the terms of the consent decree are clear.
  • Whether the consent decree resolves the actual claims in the complaint.
  • Whether the consent decree is tainted by improper collusion or corruption.

The Second Circuit also held that a district court may not:

  • Consider whether a proposed SEC consent decree is adequate.
  • Condition approval of a settlement on the SEC establishing the truth of its allegations or the defendant admitting wrongdoing.

This decision should facilitate settlement of SEC enforcement actions because it limits the scope of a district court's review and accords substantial deference to the SEC's judgment about when and how to settle. The decision also identifies the factors that companies and their counsel should address when submitting a consent decree to a district court for approval.

This look at the major issues on the horizon for corporate counsel comes from Practical Law – an online legal know-how service. View all the looming issues now – compliments of Practical Law The Journal, which covers the latest transactional and compliance topics that impact your practice. To gain access to more related know- how resources, please visit http://us.practicallaw.com.

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