IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 23, 2008
No. 07-40954 Charles R. Fulbruge III
Clerk
GOLDEN BRIDGE TECHNOLOGY INC
Plaintiff - Appellant
v.
MOTOROLA INC; ERICSSON INC; PANASONIC MOBILE
COMMUNICATIONS DEVELOPMENT CORP OF USA; QUALCOMM
INCORPORATED; LUCENT TECHNOLOGIES INC
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Texas
Before GARZA and ELROD, Circuit Judges, and HICKS,* District Judge.
EMILIO M. GARZA, Circuit Judge:
Plaintiff Golden Bridge Technology, Inc. (“GBT”) appeals the district
court’s grant of summary judgment in favor of the defendants.1 The district
court granted summary judgment against GBT’s claim that the defendants
*
District Judge of the Western District of Louisiana, sitting by designation.
1
The summary judgment briefing included defendants Nokia, Motorola, T-Mobile, Ericsson,
Qualcomm, and Lucent. Subsequently the district court entered dismissals as to T-Mobile and Nokia,
so the only appellees to this action are Motorola, Ericsson, Qualcomm, and Lucent (“Appellees”).
No. 07-40954
unlawfully conspired not to deal with GBT in violation of the Sherman Antitrust
Act. For the following reasons, we affirm.
I
Golden Bridge Technology (“GBT”) develops wireless communications
technology for cellular networks. Along with the Appellees, GBT is a member
of a non-profit standard setting organization called Third Generation
Partnership Project (“3GPP”). 3GPP institutes uniform technology standards
for the telecommunications industry to ensure worldwide compatibility of
cellular devices and systems. More than 260 companies belong to 3GPP,
representing all levels of the cell phone industry. The 3GPP members are
responsible for creating and developing the 3GPP standard, which means
determining what technologies will be included in the standard as either
mandatory or optional features.
GBT owns patents to Common Packet Channel technology (“CPCH”),
which allows the transmittal of electronic information packets between cellular
phones and base stations. In 1999, 3GPP adopted CPCH as an optional feature.
Optional status meant that manufacturers did not have to use CPCH, but if they
chose to they had to follow the 3GPP standard to ensure compatibility with other
equipment and networks. Since that time, two companies have obtained licenses
to use CPCH, but neither company has field tested or implemented the
technology.
Changes to the 3GPP standard occur through consensus of the individual
members. Individual members are divided into Working Groups, which have
different responsibilities related to developing the standard. Each Working
Group belongs to one of six Technical Specification Groups, and the Technical
Specification Groups are presided over at the top level by the Project
Coordination Group. The Working Groups propose changes to the 3GPP
standard by submitting change requests to the other Working Groups, which if
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No. 07-40954
approved are submitted to the relevant Technical Specification Group for
decision. The opposition of a single individual member prevents approval of a
change request, unless 71% of individual members attending a subsequent
plenary meeting vote to adopt the change. Technical decisions are appealable
to the Project Coordination Group.
At the 2004 plenary meeting for the Technical Specification Group to
which GBT and the Appellees belonged, individual members wanted to simplify
the 3GPP standard by removing old and unused technologies. At a subsequent
Working Group meeting in Scottsdale, Arizona, two individual members
presented a proposed feature clean-up list that did not include CPCH. No
decision was reached, and the clean-up discussions continued via emails between
several companies in attendance at the Scottsdale meeting. These companies
(including Motorola, Ericsson, and Qualcomm, but not Lucent) discussed adding
CPCH to the clean-up list. No agreement was reached and they ultimately
declined to include it, apparently due to concerns that its inclusion would
prevent consensus. GBT did not attend this meeting and was not included on
the emails.
The next plenary meeting occurred in Tokyo, Japan. Appellees all
attended this meeting, but GBT did not. The proposed feature clean-up list was
presented, still not including CPCH. However, an Ericsson representative spoke
out in front of the entire group, suggesting adding CPCH to the clean-up list.
Cingular, a previous friend of CPCH, announced support for removal. No
objections arose. Discussion turned to other issues, and the chairperson of the
plenary meeting requested that the members hold an offline session to obtain
consensus on unresolved items. On the final day of the plenary meeting, the
members presented the revised clean-up list with CPCH included. No one
objected, so the Working Groups created change requests for each feature on the
list. These change requests were approved at a subsequent Working Group
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No. 07-40954
meeting, which GBT failed to attend. At the following plenary meeting in
Quebec, the change requests obtained final unanimous approval and all of the
features on the revised clean-up list were removed from the 3GPP standard.
GBT also failed to attend this meeting and did not appeal CPCH’s removal to the
Project Coordination Group.
GBT filed this lawsuit prior to the Quebec meeting, alleging a violation of
the Sherman Antitrust Act, 15 U.S.C. § 1. GBT claimed that the defendants
conspired with each other to remove CPCH from the 3GPP standard, resulting
in the unlawful exclusion of GBT from the market. The district court granted
the defendants’ motion for summary judgment, finding that GBT had failed to
present any evidence of a conspiracy. GBT now appeals.
II
We review the district court’s grant of summary judgment de novo,
applying the same standard as the district court. Fabela v. Socorro Indep. Sch.
Dist., 329 F.3d 409, 414 (5th Cir. 2003). We view all facts in the light most
favorable to the non-movant, and affirm only when the evidence “show[s] that
there is no genuine issue as to any material fact and that the movant is entitled
to judgment as a matter of law.” FED R. CIV. P. 56(c); see also Coury v. Moss, 529
F.3d 579, 584 (5th Cir. 2008).
The Supreme Court has specified what a plaintiff must show to avoid
summary judgment on a Sherman Act § 1 claim:
To survive a motion for summary judgment . . . a plaintiff seeking
damages for a violation of § 1 must present evidence ‘that tends to
exclude the possibility’ that the alleged conspirators acted
independently. Respondents . . . must show that the inference of
conspiracy is reasonable in light of the competing inferences of
independent action or collusive action that could not have harmed
respondents.
See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-
88 (1986). Accordingly, we reverse the district court’s grant of summary
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No. 07-40954
judgment only where the evidence is strong enough to reasonably exclude the
possibilities of independent action and conduct consistent with permissible
competition. See Tunica Web Adver. v. Tunica Casino Operators Ass’n, 496 F.3d
403, 409 (5th Cir. 2007).
III
Section 1 of the Sherman Act states: “Every contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is declared to be illegal.” 15
U.S.C. § 1. Although § 1 could be read to outlaw all contracts, it has long been
interpreted to only proscribe unreasonable restraints. See Leegin Creative
Leather Prods. v. PSKS, Inc., 127 S. Ct. 2705, 2712 (2007). To establish a § 1
violation, a plaintiff must prove that: (1) the defendants engaged in a conspiracy;
(2) that restrained trade; (3) in the relevant market. See Apani Sw., Inc. v. Coca-
Cola Enter., Inc., 300 F.3d 620, 627 (5th Cir. 2002). Once a plaintiff establishes
that a conspiracy occurred, whether it violates § 1 is determined by the
application of either the per se rule or the rule of reason. See Spectators’
Commc’n Network, Inc. v. Colonial Country Club, 253 F.3d 215, 222-23 (5th Cir.
2001). If the court determines that the defendant’s conduct “would always or
almost always tend to restrict competition and decrease output,” the restraint
is per se illegal and no further inquiry occurs. See Leegin, 127 S. Ct. at 2713.
However, if the conduct is not deemed per se unreasonable, the plaintiff will also
have to prove that the conduct unreasonably restrains trade in light of actual
market forces under the rule of reason. Id.
Regarding the conspiracy element, the Supreme Court recently observed
that “the crucial question [in a § 1 claim] is whether the challenged
anticompetitive conduct stems from independent decision or from an agreement.”
Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964 (2007) (internal quotations
omitted). The plaintiff must present evidence that the defendants engaged in
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No. 07-40954
concerted action, defined as having “a conscious commitment to a common
scheme designed to achieve an unlawful objective.” Monsanto Co. v. Spray-Rite
Serv. Corp., 465 U.S. 752, 764 (1984). Concerted action may be shown by either
direct or circumstantial evidence. Direct evidence explicitly refers to an
understanding between the alleged conspirators, while circumstantial evidence
requires additional inferences in order to support a conspiracy claim. See
Tunica, 496 F.3d at 409. Independent parallel conduct, or even conduct among
competitors that is consciously parallel, does not alone establish the contract,
combination, or conspiracy required by § 1. See Bell Atlantic, 127 S. Ct. at 1964.
GBT argues that email communications between the Appellees and others
following the Scottsdale meeting show a conspiracy, in the form of a group
boycott, to eliminate CPCH from the 3GPP standard. The district court
disagreed, granting summary judgment because GBT failed to present any
evidence supporting the inference of a conspiracy. We agree.
As a threshold matter, GBT has presented only circumstantial evidence
of a conspiracy. None of the emails, or any other evidence GBT presents, show
an explicit understanding between the Appellees to collude and unlawfully
eliminate CPCH from the standard. Compare Tunica, 496 F.3d at 410 (finding
that email communications show conspiracy because they contain direct evidence
stating that the parties entered into a “gentlemen’s agreement” not to deal with
another company). Unlike Tunica, here the emails actually reveal disagreement
among the Appellees. The Appellees disliked CPCH for different reasons and
wanted to remove it at different times. They disagreed about the very action
GBT claims constituted the conspiracy—whether to add CPCH to the clean-up
list being presented at the Tokyo meeting. Viewing the evidence favorably to
GBT, the emails do reveal a common dislike for CPCH among some of the
Appellees and other companies. However, common dislike is not the same as an
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No. 07-40954
explicit understanding to conspire, so we accordingly review GBT’s claim under
the stricter standard required for circumstantial evidence.
To show conspiracy, circumstantial evidence must tend to exclude the
possibility that the Appellees acted independently. See Matsushita, 475 U.S. at
587-88. However, GBT has presented no evidence refuting the possibility that
the Appellees found CPCH outdated and independently supported its removal.
Viewed most favorably to GBT, the evidence indicates that some of the Appellees
communicated their dislike of CPCH to each other, and that each Appellee
hoped CPCH would eventually be removed from the standard. However, at least
one Appellee (Lucent) only expressed a desire to remove CPCH in internal
company emails, and was not part of the group email discussions. This evidence
amounts to an exchange of information, followed by parallel conduct when the
Appellees (and over 100 other companies) unanimously voted to remove CPCH,
and it does not refute the likelihood of independent action. See Consol. Metal
Prods., Inc. v. Am. Petroleum Inst., 846 F.2d 284, 294 n.30 (5th Cir. 1988) (noting
that the mere exchange of information, or even consciously parallel action, is
insufficient to establish a conspiracy under § 1). Moreover, the action that GBT
alleges implemented the conspiracy—when the Ericsson representative moved
to place CPCH on the clean-up list at the Tokyo meeting—occurred
independently before the entire plenary body, and GBT offers no evidence
indicating it resulted from any explicit agreement. On the contrary, the
evidence indicates that Ericsson’s action was in opposition to what some of the
other Appellees wanted, due to their concerns about Cingular’s allegiance to
CPCH.
GBT argues that the Appellees’ had economic motives to remove CPCH,
demonstrating that they did not act independently. These purported motives
include avoiding the payment of royalty fees to use CPCH and promoting their
own competing technology. The first motive finds no support in the evidence,
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No. 07-40954
because none of the Appellees, and in fact no company at all, had ever paid
royalties to GBT for CPCH. Further, CPCH was an optional feature in the 3GPP
standard. There was no rational reason for the Appellees to conspire to
unlawfully remove CPCH to avoid paying royalties, when they could simply opt
not to use it. Regarding the alleged competing-technology motive, such evidence
does not exclude the possibility of independent conduct. Appellees could still
support CPCH’s removal because they disliked it, even if they owned competing
technology. In fact, the existence of an independent financial motive to remove
CPCH might be an independent reason for each Appellee company to support
CPCH’s removal. It is not sufficient under Matsushita for GBT to simply
propose conceivable motives for conspiratorial conduct; GBT’s evidence must
tend to show that the possibility of independent conduct is excluded. See
Matsushita, 475 U.S. at 587-88. GBT’s evidence does not tend to exclude the
possibility that the Appellees acted independently, motivated by a desire to
improve the 3GPP standard by removing outdated and underused technologies.
Moreover, the Appellees presented evidence showing that these informal
communications are an important part of the standard setting process, and that
the 3GPP standards are beneficial to the market. We have maintained that “it
has long been recognized that the establishment and monitoring of trade
standards is a legitimate and beneficial function.” Consol. Metal Prods., 846
F.2d at 293-94 (finding that though a trade association naturally involves
collective action by competitors, it is not by its nature a “walking conspiracy”).
The standards 3GPP sets allow the numerous necessary components of cellular
communications to operate compatibly. Potential procompetitive benefits of
standards promoting technological compatibility include facilitating economies
of scale in the market for complementary goods, reducing consumer search
costs, and increasing economic efficiency. See ABA SECTION OF ANTITRUST LAW,
HANDBOOK ON THE ANTITRUST ASPECTS OF STANDARD SETTING 10 (2004). We
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No. 07-40954
have found it “axiomatic” that a standard setting organization must exclude
some products, and such exclusions are not themselves antitrust violations. See
Consol. Metal Prods., 846 F.2d at 294. To hold otherwise would stifle the
beneficial functions of such organizations, as “fear of treble damages and
judicial second-guessing would discourage the establishment of useful industry
standards.” Id. at 297. Accordingly, we decline to infer conspiratorial action on
the basis of limited circumstantial evidence, particularly where this evidence
is at least as consistent with permissible competition, and with independent
action, as with unlawful conspiracy. See Matsushita, 475 U.S. at 588.
As GBT has not met the threshold requirement of demonstrating the
existence of an agreement in restraint of trade, we need not review the district
court’s findings as to the remaining requirements of a § 1 violation.2
IV
For the foregoing reasons, we AFFIRM the district court’s grant of
summary judgment.
2
Accordingly, though we affirm the district court’s ruling, our opinion should not be
construed to endorse its conclusion that if GBT had shown an agreement in restraint of trade,
the Appellees’ conduct would be considered per se illegal. A proper review of that conclusion
would consider whether it conflicts with Consol. Metal Prods., where we held that a standard
setting organization’s decision not to certify a particular product did not pe se violate Sherman
Act § 1. See 846 F.2d at 292.
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