Ruling Dismisses Antitrust Claims Against AMTSO
Ruling in NSS Labs Inc. v. CrowdStrike Inc. et al. dismissing antitrust claims against AMTSO, a standards organization for anti-malware testing.
Yesterday, the U.S. District Court for the Northern District of California dismissed an antitrust claim brought against a standards organization by one of its members.
Summary of Ruling
The Anti-Malware Testing Standards Organization (AMTSO) is composed of software vendor members such as co-defendants Symantec, CrowdStrike, and ESET along with testing lab members such as plaintiff NSS Labs. Vendors outnumber testers both in the market and in AMTSO. NSS sued AMTSO and three vendor members, alleging that AMTSO adopted a standard that, while voluntary on its face, was being used by the vendor members to boycott NSS.
AMTSO and the vendor co-defendants moved to dismiss all of NSS’s claims, and yesterday the court granted all of those motions. The court found that NSS’s per se antitrust claims against AMTSO failed because the AMTSO standard was facially pro-competitive, and quoted extensively from the standard’s forward, which described how the standard was intended to improve competition.
The court also dismissed the conspiracy claims against AMTSO, noting that AMTSO is not a market participant such that it could participate in a boycott, and NSS alleged only that AMTSO adopted a voluntary standard by vote of its membership, which is insufficient to support the inference that AMTSO conspired to boycott NSS. NSS failed to allege market power.
Finally, the court found that NSS had failed to allege antitrust injury against AMTSO, as all AMTSO was alleged to have done is adopt a voluntary standard by membership vote. While coercion or other improper or illegal action could create liability for a standards-setting organization, the fact that more AMTSO members are vendors than testers did not amount to coercion. NSS alleged that the standard is anti-competitive, but the court noted that the standard is voluntary and NSS is free to refuse to adhere to it.
Implications for Standards Organizations
One of the biggest concerns of a member-based nonprofit technology standards organization is that it will be involved in an antitrust lawsuit. Technology standards organizations are typically nonprofits with limited annual budgets. The directors and officers are typically volunteers. Antitrust lawsuits can cause significant harm to a standards organization by straining budgets and chilling participation. Yesterday’s ruling provides reassurance that such lawsuits can be dismissed early. It also provides helpful guidance to organizations.
First of all, organizations can explicitly describe their pro-competitive intent and purpose on the face of standards or specifications. It may not be apparent to lay judges how a technical specification or standard will improve interoperability, establish transparency, or otherwise promote competition in a given industry. Organizations are free to provide those explanations in plain language on the face of their standards or specifications, as AMTSO did, and they should do so.
Second, organizations adopting voluntary standards should make it clear in their documentation, public statements, etc. that the standard is voluntary. In this case, NSS’s allegation that the net effect of the standard was anticompetitive gained no traction because AMTSO took no action to require anyone—member or not—to use its standard.
Third, while this point did not make the Order, during the hearing on these motions the court made it clear that organizations should not view antitrust laws as penalizing an open discussion. NSS pointed to alleged discussions between AMTSO members about driving adoption of the standard to support its claim that the standard was really mandatory. But these discussions did not amount to any action taken by AMTSO to require anyone to use the standard, and that distinction was important to the court, which observed that “if the antitrust laws are going to chill debate, which they don’t, we would really be in the wrong place.”
One other important issue during this case was the role played by the Standards Development Organization Advancement Act (“SDOAA”). The SDOAA was enacted in 2004 with some hope of being of benefit to the standards industry, but to date there has been little evidence that it has provided the limitation on liability that was intended. AMTSO invoked the SDOAA as a bar to NSS’s per se claims. NSS argued that the SDOAA was unavailable to AMTSO. Here, the Department of Justice stepped into this case unexpectedly and filed a Statement of Interest to specifically argue that a determination under the SDOAA should require an examination of the facts and therefore should not be a basis for dismissal. AMTSO pointed out in response that if the Department of Justice’s interpretation of the SDOAA were adopted, it would eviscerate the SDOAA. The court declined to rule on the SDOAA issue, noting the intervention by the Department of Justice and ruling in AMTSO’s favor on other grounds. If the Department of Justice’s position is eventually adopted, then the SDOAA will provide little benefit to the standards community, as SDOs will have to prove they qualify for its safe harbor at trial.
The Motion to Dismiss was granted with leave to amend; therefore, this case has yet to be fully resolved. However, with much being written about this case, it is important to provide a client update now in regard to a decision that is impactful to the standards development community.
Arnold Brown and Brenna Legaard of Schwabe, Williamson & Wyatt represented the Anti-Malware Testing Standards Organization, with Brenna Legaard leading the litigation team and arguing the motion.