The past few weeks I’ve been working on the chapter of my book project on wrongful patent assertion that addresses the topic of sham (or predatory) litigation antitrust suits. Often, though not inevitably, the allegedly sham or predatory litigation is an earlier patent infringement suit. The theory is that sometimes an entity may be motivated to file such a suit not because it wants to win (though it probably wouldn’t mind that), but rather to put the target of the litigation, typically a competitor or potential competitor, at some disadvantage—perhaps to exclude or at least delay them from entering the plaintiff’s market, or otherwise to make them incur costs that will inhibit them from competing effectively. In other words, the plaintiff’s motivation for suing is not, ultimately, to win—the expected damages or other legitimate benefits, multiplied by the probability of success, alone wouldn’t justify the suit—but to gain some collateral, anticompetitive benefit. Interestingly, two people that one would not normally categorize as reckless antitrust interventionists, namely Robert Bork (in chapter 18 of his famous book The Antitrust Paradox) and Richard Posner (in one of his early opinions as a federal judge, Grip-Pak, Inc. v. Illinois Tool Works, Inc., 694 F.2d 466 (7th Cir. 1982)), both expressed the view that predatory litigation was a problem that antitrust needed to take seriously, because (among other things) it is relatively cheap compared to other types of predation such as predatory pricing, and because the burden of defending a suit can be asymmetric (particularly if the plaintiff is a monopolist and the defendant a prospective new entrant).* On the other hand, inquiring into whether an entity that filed a previous lawsuit was primarily motivated by a legitimate desire to win, or by the hope that doing so would exclude the defendant regardless of outcome and thus enable the litigant to preserve its market power, is not an easy task. Further, if the standard is too easy to meet, we run the risk of encouraging nuisance litigation brought by the entity that was the defendant in the earlier suit—so-called “sham-sham” suits, as Christopher Klein and Einer Elhauge have referred to them. In short, as in other antitrust contexts, you want to figure out how to minimize the aggregate social costs resulting from false positives (wrongly condemning legitimate conduct), false negatives (wrongly exonerating anticompetitive conduct), and adjudication. An additional wrinkle in relation to sham litigation antitrust suits, moreover, is that the U.S. (and other countries) place substantial weight on the individual’s right of access to the courts. See U.S. Const. amend. I (“Congress shall make no law . . . abridging . . . the right of the people . . . to petition the Government for a redress of grievances.”). The easier it is to plead and prove a sham litigation antitrust claim, the greater the risk of judicial error (wrongly condemning a lawsuit as predatory or sham), and thus the greater the risk that, ex ante, litigants will be unduly “chilled”—deterred from exercising their right to petition the government (here, the courts) for redress.
Over the years, the U.S. Supreme Court has developed a body of law—referred to as Noerr-Pennington immunity, after two cases that established the doctrine in the 1960s—to determine under what circumstances the act of petitioning the government (which includes legislative, administrative, and judicial bodies) is immune from antitrust or other liability. Most courts and commentators today view the Noerr-Pennington doctrine as grounded in the First Amendment provision cited above (though there remains a lively debate over whether that is the correct way to think about it); but the right is not absolute, and the Court has held in various contexts that a person alleging an antitrust violation premised on petitioning the government can overcome this constitutional immunity by showing that the petitioning was merely a “sham.” If that showing is made, the antitrust defendant is stripped of its immunity from suit and the antitrust plaintiff can proceed with trying to prove that the sham petitioning enabled the antitrust defendant to acquire or maintain monopoly power. Elaborating further on this point, in the context of an antitrust suit alleging monopolization by means of sham copyright litigation, the Supreme Court in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 60-62, 65 (1993), held that to overcome the antitrust defendant’s Noerr-Pennington immunity the antitrust plaintiff must show both that the earlier suit was “objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits,” and that it was subjectively motivated by the desire to “‘interfere directly with the business relationships of a competitor,’ . . . through the ‘use [of] the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon.” To show that a lawsuit was objectively baseless, the antitrust plaintiff can show that it lacked probable cause, or perhaps that it was filed in violation of Rule 11 of the Federal Rules of Civil Procedure. This is not impossible, but it is extremely hard to do, and as a result sham litigation antitrust claims rarely succeed—indeed, rarely even need to get to the second, subjective motivation, prong of the test announced in Professional Real Estate Investors.
While I was in the middle of this project last week, the U.S. Supreme Court announced its opinion in Trump v. United States, addressing the U.S. president’s immunity from criminal prosecution for conduct committed while in office. As most readers by now will be aware, the majority (6-3) holding is that the president is absolutely immune for conduct falling within the “core” of his official duties; presumptively immune from prosecution for conduct falling “within the outer perimeter of his official responsibility” (but this presumption can, somehow, be rebutted); and not immune from prosecution for “unofficial” acts. I’m not a constitutional law scholar and, although I certainly have an opinion on the matter, am not going to weigh in on the merits here. One thing that struck me, however, is the majority’s concession that it will sometimes be difficult to distinguish official from unofficial acts; but that, in making this determination, “courts may not inquire into the President’s motives” (p.18). If I am understanding this correctly, then, conduct that is “objectively” within the president’s official duties therefore is immune from prosecution, even if the president wouldn’t have engaged in it absent a corrupt motive.
Thinking about this in relation to the test described above for sham litigation antitrust claims, it’s clear that in both contexts the Court is willing to trade off (potentially) a good many false negatives to avoid as much as possible any risk of false positives or nuisance suits. That’s obviously not how the Court would describe what it is doing in Trump v. United States, and of course the meaning of false positive is a bit different in the presidential immunity context. Instead of meaning that the possibility of judicial error and nuisance suits might cause a litigant to refrain from filing a legitimate suit, here it means that the possibility of judicial error and nuisance suits may chill the president from, as the majority puts it, “taking the ‘bold and unhesitating action’ required of an independent Executive” (majority opinion, p.13). To avoid these risks, we immunize the conduct at issue from liability, unless it is unofficial (Trump) or objectively baseless (Professional Real Estate Investors). And only if the conduct is unofficial (Trump) or objectively baseless (Professional Real Estate Investors) would we proceed to consider subjective motivation, as the case might warrant. (In a criminal prosecution, of course, subjective motivation normally would matter a lot.)
In
both instances, people may have different views over whether the tradeoff the
Court reached is, in fact, firmly rooted in the constitutional structure or
text; and also whether, as a policy matter, that tradeoff is optimal. What is clear is that, in both contexts,
society potentially could pay a lot to avoid the chilling effects that are
assumed to result from the possibility of false positives and nuisance
suits. And, of course, one downside to
making these questions a matter of constitutional law is that we lose
flexibility to adjust the balance later on, should we someday come to the conclusion
that the tradeoff is off-kilter.
* I should note, however, that some of what Bork had to say about predatory litigation in The Antitrust Paradox (pp. 358-59), and some passing remarks by Posner in his 2001 book Antitrust Law (pp. 259-60), can also be taken as advocating a restrained approach to sham litigation consistent with Professional Real Estate Investors’ focus on objective baselessness.
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