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Legal arguments about Hypex and NORD licensing

restorer-john

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#1
I read this interesting tidbit on Nord's site:

https://www.nordacoustics.co.uk/nc1200

"Until recently the Hypex NC1200 was only available to a few Manufactures and with amplifiers costing upwards of £10K. We had access to the module but with a minimum pricing policy of £6.5K decided was to expensive for a boutique manufacture like Nord. A recent change in pricing policy means we are free to price as we feel fit. Without the expensive infrastructure of distributors , dealers, Reps, advertising, shows and other expense we can bring you this exalted amplifier at a reasonable cost."

What they are indirectly saying that Hypex were likely (and had been doing so for a period of time) engaging in retail price maintenance by only supplying material content if the selling price was artificially maintained at a minimum of £6.5K or above!

In this country, that behaviour is illegal and attracts rather large penalties (and jail time). Pretty sure it falls under the anti-competitive and cartel-like behaviour too. Maybe someone has pointed out they were treading on thin ice and they 'changed' their policy. If you had any reason to believe the various modules are ridiculously priced for what they are (I do), this might convince you.

Personally, I'm not surprised, but I am pretty disgusted. I sincerely hope the latest endeavours in Class D actually offer value for money and not just a lucrative cash-laden gravy train for the 'inventors' via licensing fees and artificial price points. I won't hold my breath.

Nord appears a stand-up, decent company BTW, something refreshing these days, with many others wallowing in a sea of dishonesty and deception.
 

amirm

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#2
In this country, that behaviour is illegal and attracts rather large penalties (and jail time). Pretty sure it falls under the anti-competitive and cartel-like behaviour too.
It would raise serious eyebrows here too. This is basic stuff that you don't do. Did they not have a lawyer review their contracts/terms????
 

Samoyed

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#3
The Sherman anti-trust Act does NOT spank folks regarding the use of their PATENT. However, many states spank DECEPTIVE or UNFAIR trade practices, patent owner or not.

I can dictate the price of my patented goods so long as others don’t conspire with me to maintain those prices. So, as long as the patent is valid, Sherman means little.

On to Colin, one of the good guys...he really is a stand up guy, and all he can do is pay the price demanded by the seller/patent owner.
 
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amirm

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#4
I can dictate the price of my patented goods so long as others don’t conspire with me to maintain those prices. So, as long as the patent is valid, Sherman means little.
The patent owner can't set the price of the final product though which is what seems to have gone on here.
 

Samoyed

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#5
Hm, that is one, but not the only inference. Competing inferences include setting the component price at a level consistent with customary gross margins such that the assembled equipment likely meets the expected sale price.

In any event, the Sherman Act requires a price fixing “conspiracy,” and after forty years as a trial lawyer, defending medical device and other manufacturers, I assure you that when price is dictated, there is no conspiracy. (For example, “I will not sell you modules unless they are incorporated into an amp selling for no less than 6,500 gbp” is an adhesion contract, not a conspiracy to fix market prices, particularly since the market is FLOODED with audio amplifiers.)

State law, and remember there are 50, is another matter.

Funny, really, I have a JD and an LLM, but hey, everybody is a lawyer....
 
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restorer-john

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#6
(For example, “I will not sell you modules unless they are incorporated into an amp selling for no less than 6,500 gbp” is an adhesion contract, not a conspiracy to fix market prices, particularly since the market is FLOODED with audio amplifiers.)
The modules are proprietary, patented designs and they are the only supplier of those modules. How is it not anti-competitive behaviour if they were forcing manufacturers who wanted to buy the modules, to artificially price their products much higher than they needed, or wanted to? They were potentially attempting to prevent manufacturers who have an established value proposition and reputation for same, from buying and incorporating those modules and, at the same time, protecting manufacturers who tended to position their products well up the price scale.

Clearly it was attempted retail/resale price maintenance (by a component supplier no-less), as the prices of NC1200 equipped Nord products after the 'changes to the pricing policy' are considerably more reasonable aren't they?

1560141290847.png


Can you imagine Nichicon forcing manufacturers to only use UFG (fine gold) capacitors only in amplifiers costing in excess of $3,000? Would Sanken refuse to supply their LAPTs to manufacturers who were putting them in $199 shelf systems? Does Alps only supply RK27 blue velvet pots to esoteric HiFI manufacturers? Nope.

Anyway, whatever way you look at it, it's not a good look and I think Nord should be praised for shining a light on it. It's all speculation, but interesting nonetheless.
 
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amirm

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#7
Funny, really, I have a JD and an LLM, but hey, everybody is a lawyer....
I am not a lawyer but have been schooled enough by our corporate ones to know what I should or should not do from a business perspective. The guidelines here are pretty clear. Here is the US FTC antitrust guidelines: https://www.ftc.gov/sites/default/files/attachments/competition-policy-guidance/0558.pdf

1560143190520.png


We clearly have a case of NORD being kept out of producing amplifiers and competing with the rest of their licensees. The guidelines get even more specific later in section 5.2:

1560143288586.png


It is pretty clear that you can't license your intellectual property and at the same time fix the resale price of end product.

(For example, “I will not sell you modules unless they are incorporated into an amp selling for no less than 6,500 gbp” is an adhesion contract, not a conspiracy to fix market prices, particularly since the market is FLOODED with audio amplifiers.)
The market for class-D modules is highly concentrated into two companies (B&O and Hypex). Other amplifiers are larger, less efficient, produce less power, etc. It would be pretty easy to demonstrate this to a judge and jury. Just hold a hypex module against any other and the case for exclusivity is made.

Anyway, the goal for a business should be to stay way away from such risks. Last thing a small company needs to do is to fight the multiple governments/EU on anti-trust concern. Trust me, I know this first-hand from working for Microsoft. ;):)
 

JJB70

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#8
What Restorer John has identified isn't a conspiracy but retail price maintenance in that Hypex appears to have had a policy of dictating minimum pricing. That is generally illegal here.
 

RayDunzl

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#9
How does this apply to items where the technology is not licensed, as in Equipment Dealers, that all seem to have the same advertised price for some items of interest?
 

amirm

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#10
How does this apply to items where the technology is not licensed, as in Equipment Dealers, that all seem to have the same advertised price for some items of interest?
Advertised price is not the same as selling price. To avoid Internet price shopping, manufactures often set MAP or minimum advertised price. They are very careful to NOT tell you how much you can sell it for. You just can't advertise that sale price publically.
 

Samoyed

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#11
Your authorities are correct but your application is not. THE market, for amplifiers, is NOT affected, or if so, it is de minimis. The market at issue is not that of these modules but for ALL electronic devices that provide amplification.

Trust me, you entertain a misconception of law.

I never worked at Microsoft but 1. I’ve stayed at a holiday inn and 2. The number of competing operation systems has always been very limited, whereas amplifiers, of class or type, tube or solid state, are more plentiful than fleas on a monkey’s back nor do component purchasers require a license to incorporate them, but only to use a trademark.
 
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Samoyed

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#12
Oh, and there is this minor detail:

On June 28, 2007, the Supreme Court overruled Dr. Miles, discussed above, holding that such vertical price restraints as Minimum Advertised Pricing are not per se unlawful but, rather, must be judged under the "rule of reason." Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). This marked a dramatic shift on how attorneys and enforcement agencies address the legality of contractual minimum prices and essentially allowed the reestablishment of resale price maintenance in the United States in most (but not all) commercial situations.
 

Samoyed

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#13
Here is the syllabus. https://www.law.cornell.edu/supct/html/06-480.ZS.html

N.B. The manifest distinction between Interbrand price fixing versus INTRABRAND price fixing and Sherman merely codifies common law, which requires a “rule of reason, “ hence Miles was incorrectly decided and overruled as to the per se rule. Applying a rule of reason, a manufacturer, in a wide and varied market of substantially similar but not identical products, may reasonably protect its unique device, intrabrand, whether using licenses or otherwise.
 

restorer-john

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#15
Oh, and there is this minor detail:

On June 28, 2007, the Supreme Court overruled Dr. Miles, discussed above, holding that such vertical price restraints as Minimum Advertised Pricing are not per se unlawful but, rather, must be judged under the "rule of reason." Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). This marked a dramatic shift on how attorneys and enforcement agencies address the legality of contractual minimum prices and essentially allowed the reestablishment of resale price maintenance in the United States in most (but not all) commercial situations.
These modules are made and marketed all around the world. The UK has outlawed retail price maintenance have they not? And in Australia and no doubt other countries it is also frowned upon greatly (our ACCC is all over companies that try it, and levy very large fines)

https://www.accc.gov.au/business/anti-competitive-behaviour/imposing-minimum-resale-prices
http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/caca2010265/s96.html

The US is just one market for these products, and probably only a small proportion of sales (most would be in the EU I would expect) It's also unfortunate for consumers (and manufacturers it would seem) that your laws have sadly been watered down in this regard.

At the end of the day, it wouldn't pass muster here (in AU). A lowly component supplier dictating to a manufacturer what the ultimate RRP/SRP of a finished product must be (at a minimum) in order to secure component parts. Especially when that price point is bordering on the ridiculous in any case.
 

Samoyed

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#17
These modules are made and marketed all around the world. The UK has outlawed retail price maintenance have they not? And in Australia and no doubt other countries it is also frowned upon greatly (our ACCC is all over companies that try it, and levy very large fines)

https://www.accc.gov.au/business/anti-competitive-behaviour/imposing-minimum-resale-prices
http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/caca2010265/s96.html

The US is just one market for these products, and probably only a small proportion of sales (most would be in the EU I would expect) It's also unfortunate for consumers (and manufacturers it would seem) that your laws have sadly been watered down in this regard.

At the end of the day, it wouldn't pass muster here (in AU). A lowly component supplier dictating to a manufacturer what the ultimate RRP/SRP of a finished product must be (at a minimum) in order to secure component parts. Especially when that price point is bordering on the ridiculous in any case.
I’ve neither stated nor implied that I have an opinion about ANY non-US jurisdiction. I doubt the Supreme Court’s position is sui generis, and you should note well its holding that the Sherman Act merely codifies the common law. In a jurisdiction that does NOT codify common law, the issue is one of legislative intent.

You can flap and hiss all you want, but “here” is not “there” and here, Leegin supplies the rule of decision.
 
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Samoyed

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#18
For those under the Coriolis effect, read the well reasoned Leegin decision. Whether one agrees or not, it is well reasoned and supported by authorities at every instance.

And, assuming the proposition that the US is a “small market” for Hypex merely militates for the Leegin rule of reason.

Maybe Hypex’s lawyers stayed at a Holiday Inn, too, lacking Microsoft’s monies, or market forces....

Horses for courses.
 
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Samoyed

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#19
Oh, the “simple” answer is that Hypex modules are not intellectual property, like operating systems, though certainly Hypex has trademark and copyright interests it can and does license, and under Leegin, which “trumps” some advisory, outdated FTC enforcement manual limited in subject matter to intellectual property, in THIS case a rule of reason “likely” means Hypex, a minor US player, gets a pass on INTRABRAND price fixing. (One must be mindful when citing advisory publications as primary or secondary authorities when such don’t purport to be more than guidelines, and such are seldom supplemented after publication to reflect existing law, e,g., Leegin.)

If folks in the US want to buy the modules and assemble such PERSONAL property into greater components, they gotta pay the piper....as for Colin and his lot, I doubt “they” want the pissing contest.
 
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Samoyed

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#20
For anyone still awake, here is what happened to Leegin on remand by the Supremes (the plaintiff got crap canned): https://www.antitrustlawblog.com/20...nce-case-anew-following-supreme-court-remand/

So, at least in the US, Hypex can very likely dictate to buyers of its modules, and, if relevant, its patent, trademark or copyright licensees, the minimum retail sale price of the goods into which they are incorporated. Would be lawyers should note, however, that reasoning by analogy to Leegin overlooks the fact that Hypex is a MERE component manufacturer that sells to manufacturers, NOT RETAIL SELLERS, who incorporate such into their product, thus Hypex is perhaps outside the purview of Sherman and Leegin altogether, but, in any event, both factually and legally, there is a taller hill to climb as to the burden of pleading a claim for relief and the burden of persuasion at trial.

I’m just sayin....;)
 
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