By Robert B. Barnett Jr., J.D.
Allegations that Bio-Rad’s acquisition of a competitor constituted monopolistic conduct survived dismissal where Bio-Rad had sufficient market power and failed where it did not.
In a suit by Bio-Rad Laboratories, a leader in the genetic research tools market, asserting that a competitor, 10X Genomics, violated its patents, some of 10X’s counterclaims alleging that Bio-Rad’s acquisition of another competitor, RainDance, violated antitrust laws survived, the federal district court in Boston has held. Specifically, the court allowed two Clayton Act claims and one Sherman Act claim to survive a motion to dismiss because the acquisition may have qualified as monopolistic behavior in two of the three alleged markets. One Clayton Act claim and two Sherman Act claims, however, were dismissed in those markets where either Bio-Red had no market share before the acquisition or it lacked monopoly power in that market even after the purchase (Bio-Rad Laboratories, Inc. v. 10X Genomics Inc., August 31, 2020, Young, W.).
Background. Bio-Rad Laboratories, Inc., produces genetic research tools. 10X Genomics, Inc., is a competitor, formed by three former Bio-Rad employees. Ever since, the two companies have sued one another over intellectual property in courts across the country. In 2017, Bio-Rad bought the life sciences company RainDance Technologies, Inc., for the purpose of using its patents in existing genetic research markets.
In 2019, Bio-Rad sued 10X, accusing 10X of infringing one patent it owns and two patents it licenses from Harvard. 10X counterclaimed, asserting that Bio-Rad’s acquisition of RainDance constituted monopolistic behavior in violation of both the Clayton Act and the Sherman Act. Bio-Rad moved to dismiss the counterclaims.
Markets. The antitrust allegations involved three distinct markets: the Droplet Single-Cell Product market (DSCP market), the Droplet Genetic Analysis Technology market (DGAT market), and the Droplet Digital Polymerase Chain Reaction market (ddPCR market). 10X asserted a violation of §7 of the Clayton Act and a violation of §2 of the Sherman Act in each of the three markets. All six claims rested on whether Bio-Rad’s purchase of RainDance violated those laws. 10X also asserted a separate counterclaim for unfair competition under California law.
Clayton Act claims. To support a Clayton Act counterclaim, 10X was required to establish both a Clayton Act violation and an antitrust injury for each of the three markets.
Clayton—DSCP market. 10X’s antitrust injury in the DSCP market was alleged to be the injury that resulted from Bio-Rad’s litigation campaign, being denied necessary patents, and potentially being excluded from the market. Bio-Rad’s purchase of RainDance, however, was anticompetitive only if 10X could establish that the acquisition substantially lessened competition or created a monopoly. But RainDance was never a major competitor in the DSCP market. Prior to the purchase, Bio-Rad was apparently not competing in the market at all. Furthermore, according to 10X’s allegations, it was the actual leader in the DSCP market. The fact that the purchase allowed Bio-Rad to acquire a larger patent portfolio and compete in the market was not anticompetitive, in the absence of market power. Also, the allegation that the lawsuits themselves constituted an antitrust injury failed because Bio-Rad’s litigation was protected by the Noerr-Pennington doctrine, which protects the legitimate use of the courts to enforce rights. In addition, of course, the refusal to license does not by itself constitute an antitrust violation. The court concluded, therefore, that Bio-Rad’s action in the DSCP market "constitute nothing more than healthy competition." The motion to dismiss this claim was granted.
Clayton—DGAT market. The allegations in the DGAT market differed from the allegations in the DSCP market because the DGAT allegations established that the acquisition may have substantially reduced competition in the market. Prior to the acquisition, both Bio-Rad and RainDance competed in the DGAT market (unlike the DSCP market). The Clayton Act can bar the acquisition of patents if the effect would be to lessen competition substantially or create a monopoly. After the acquisition, Bio-Rad possessed "broad patent rights" in the DGAT market. The antitrust injury consisted of allegations that Bio-Rad raised royalty prices after the acquisition, to reflect the reduction in competition. The allegations of both reduced output (because two firms joined forces) and increased prices were sufficient to establish an antitrust injury. While acknowledging that these "allegations barely pass the threshold of specificity required for the Court to evaluate them," the court concluded that they were enough at this early stage of the litigation to survive the motion to dismiss. The motion to dismiss this claim, therefore, was denied.
Clayton—ddPRC market. 10X alleged that it was a consumer in the ddPRC market and that it was forced to pay supracompetitive prices as a result of the acquisition. In addition, Bio-Rad was alleged to have more than 90% of the ddPCR market after the acquisition. Also, fewer products were available in the market after the acquisition. These allegations were deemed to satisfy 10X’s pleading obligations, even though "the allegations are perhaps a bit lacking in specificity." The motion to dismiss this claim, therefore, was denied.
Sherman Act claims. Sherman Act claims must allege both possession of monopoly power and anticompetitive conduct to maintain that power, as well as an antitrust injury. 10X’s allegation of anticompetitive conduct was the acquisition of RainDance, which the court had already determined was not necessarily anticompetitive. And, once again, Bio-Rad’s litigation did not constitute an antitrust injury because it was protected by the Noerr-Pennington doctrine.
Sherman—DSCP market. The Sherman Act claim in the DSCP market failed for reason similar to why it failed under the Clayton Act. Bio-Rad had nothing close to monopoly power in the DSCP market. In fact, it did not compete in the market until it acquired RainDance, at which point 10X still had the most market power. Also, refusing to license to a rival is anticompetitive only when done by a monopolist, which did not exist under these facts. As a result, the motion to dismiss this claim was granted.
Sherman—DGAT market. Whereas the motion to dismiss the Clayton Act claim involving the DGAT market was denied, the motion to dismiss the Sherman Act claim involving the DGAT market was granted. The result was different because the Sherman Act requires not just that Bio-Rad have market power but that it have monopoly market power. The allegations failed to establish that Bio-Rad was an actual monopolist in the DGAT market. In fact, 10X never alleged any market share in its allegations. Thus, while the allegations were barely sufficient to support a Clayton Act claim, they were insufficient to support a Sherman Act claim because of the additional requirement that the allegations establish monopoly market power.
Sherman—ddPCR market. Unlike in the other two markets, Bio-Rad had monopoly power in the ddPCR market. 10X’s allegations that Bio-Rad controlled 90% of the market after the acquisition was sufficient to raise issues as to whether the acquisition violated the Sherman Act. A dominant competitor further entrenching its monopoly by consolidating its hold on the market can constitute anticompetitive conduct. In addition, allegations that the acquisition resulted in the payment of supracompetitive prices constituted a valid antitrust injury. The motion to dismiss this claim, therefore, was denied.
Unfair competition. 10X’s counterclaim for violations of California’s unfair competition law also survived the motion to dismiss because it rested on the same grounds as the federal counterclaims. Because three of those six counterclaims survived, this one survived.
The court, therefore, granted the motion to dismiss three of the seven counterclaims, and it denied the motion to dismiss the other four of the seven counterclaims.
This case is No. 1:19-cv-12533-WGY.
Attorneys: Audra Sawyer (Wel Gotshal & Manges LLP) for Bio-Rad Laboratories, Inc. David S. Godkin (Birnbaum & Godkin, LLP) and Michael J. Tuteur (Foley & Lardner LLP) for President and Fellows of Harvard College. Aaron M. Nathan (Tensegrity Law Group LLP) for 10X Genomics, Inc.
Companies: Bio-Rad Laboratories, Inc.; President and Fellows of Harvard College; 10X Genomics, Inc.
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