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District Court Considers Whether Organization's "Working Procedures" Give Rise to Contract-Based Counterclaims in Antitrust Suit

The U.S. District Court for the Eastern District of Pennsylvania has dismissed various contract-based counterclaims arising out of an alleged breach of an organization's "working procedures" ("Procedures") in an antitrust suit.

In Trueposition, Inc. v. Lm Ericsson Tel. Co. Telefonaktiebolaget Lm, No. 11-4574, 2013 U.S. Dist. LEXIS 145898 (E.D. Pa. Oct. 9, 2013), the plaintiff, which is a member of a standard-setting organization ("SSO"), alleged antitrust violations against the SSO and several of its other members in connection with an alleged conspiracy to exclude the plaintiff's technology from the specification standards set by the SSO. The SSO counterclaimed, alleging that the plaintiff had failed to abide by certain operating rules set forth in the SSO's Procedures. Essentially, it was the SSO's position that the plaintiff had failed to dispute the exclusion of its technology from the SSO's standards in accordance with the Procedures and therefore could not use the antitrust suit as a means of circumventing the SSO's Procedures. The court disagreed, holding that the SSO's Procedures were too indefinite to form an enforceable contract between the SSO and the plaintiff.

According to the court, even if the parties had intended for the Procedures to be a binding contract rather than mere procedural guidelines that were implemented to govern the activities of the SSO, the articles at issue did not sufficiently identify the members' obligations so as to allow the court to determine what conduct constituted a breach or what would happen in the event of breach. Accordingly, separate and apart from the legal question of whether rules or procedures can form the basis of an enforceable contract, the Procedures failed for indefiniteness. The court also dismissed the SSO's claims for declaratory relief, which implicated similar issues under the Procedures. Specifically, the court found that there was no "case or controversy" concerning the standard in dispute because the plaintiff was not using the antitrust suit to challenge the standard (and, in fact, was still working through the SSO's Procedures at the time of the suit), and there was no waiver of the plaintiff's right to challenge the SSO's prior decisions regarding the standard since the Articles were indefinite.

The court's full decision can be found here: Trueposition, Inc. v. Telefonaktiebolaget LM Ericsson, No. 11-4547, (E.D. Pa. Oct. 9, 2013).pdf

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