By Robert E. Freeman, Sarah E. Hughes and Jonathan Mollod, of Proskauer
After a couple of rounds of litigation, on March 18, 2019, the Supreme Court declined to review an antitrust lawsuit between Topgolf Int’l, Inc. (“Topgolf”), a company operating golf entertainment centers that offer point-scoring golf games and SureShot Golf Ventures, Inc. (“SureShot”), a would-be competitor that had licensed ball-tracking technology from a company that was subsequently acquired by Topgolf. With the scorecards handed in, at least for now, Topgolf remains on top of the leaderboard.
Topgolf is a global sports entertainment company that has been in business since 2000. Their parent company, Topgolf Entertainment Group, has expanded to include, among other things, online golf games, ball-tracking technologies that are used during golf tournaments to show ball flights to TV audiences and golf entertainment venues where players can hit golf balls embedded with microchips that use Topgolf’s own technology to track the shot’s distance and accuracy, enabling players to accumulate points for hitting specified targets, while enjoying food and beverages in a sports bar setting.
SureShot is a Texas based company formed in 2014 that aimed to compete with Topgolf’s golf entertainment venues. While Topgolf used a proprietary technology to track golf balls, SureShot licensed the Protracer Range System from a Swedish company, Protracer. The 3-D ball-tracking technology helps golfers analyze their shot paths through television monitors. In its appellate brief, SureShot claimed that the Protracer model would create a more exciting 3-D experience than Topgolf’s ball-tracking technology and that Protracer’s turnkey system for managing and maintaining a ball-tracking system across a large golf range would assist it on the business side. SureShot considered the Protracer tech as integral to their business model as a favorite 9-iron is to a weekend duffer.
In April 2015, SureShot and Protracer entered into a licensing agreement for SureShot to use the Protracer Range System through 2020 (the “Frame Agreement”). The agreement required Protracer to provide support and maintenance services to SureShot’s Protracer Range Systems. All was par for the course until May 24, 2016, when Topgolf announced it had acquired Protracer.
Being that SureShot was created with an aim of competing with Topgolf, and Topgolf now owned the tech that was critical to its business, SureShot was concerned that Topgolf would deprive SureShot of long-term licensing of the Protracer tech beyond the existing five-year license term. SureShot apparently met with Topgolf to seek assurances that the Protracer system would be available after the Frame Agreement’s initial term expired in 2020. However, at least according to the allegations in its antitrust complaint, talks faded and did not go as well as SureShot executives had hoped. According to SureShot, not only did Topgolf refuse to give them assurances of continued access, but one Topgolf executive purportedly commented: “If I was in your position, I would look for alternatives.”
In January 2017, SureShot filed an antitrust suit against Topgolf alleging monopolization, unlawful acquisition and other related claims, arguing that the acquisition of Protracer had deprived SureShot of an opportunity to enter the market and that the primary goal of Topgolf’s acquisition was to foreclose competition. More specifically, SureShot alleged that (1) Topgolf acquired the very technology that was essential to SureShot’s business, (2) Topgolf refused to provide SureShot assurances that the Protracer technology would be available after the licensing agreement expired, and (3) any support and maintenance requests Protracer received under the Frame Agreement would expose SureShot confidential information to Topgolf, thus hindering SureShot’s expansion plans. Topgolf countered, among other things, that SureShot’s claims were not ripe and that SureShot pleaded no actual harm, but only an anticipated denial of access or future breach of contract, and that it failed to plead anticompetitive or exclusionary conduct in its complaint. Throughout all of this and during the match play between these entities, Topgolf continued to honor the terms of the Frame Agreement.
The suit had trouble getting distance off the first tee when a Texas district court dismissed SureShot’s suit. (SureShot Golf Ventures, Inc. v. Topgolf International, Inc., No. H-17-127 (S.D. Tex., Aug. 24, 2017)). The district court sided with Topgolf, finding: (i) SureShot failed to plead Topgolf denied SureShot access to the Protracer Range System; (ii) the alleged statement made by the Topgolf executive was not equivalent to a denial of access of the licensed tech; and (iii) SureShot lacked standing because the allegations of monopolistic of behavior were speculative and none of the antitrust behavior outlined in the complaint had actually occurred (i.e., excluding competitors from access to the tech, sending less qualified personnel for service requests, or only licensing the tech to entities outside the golf entertainment center industry). The district court also held that SureShot lacked antitrust standing because it suffered no “antitrust injury.” As a result, the court dismissed SureShot’s suit, ruling that the claims were not ripe for judicial determination.
With its case sitting like a fried egg in a sand trap, SureShot appealed to the Fifth Circuit, stating that the district court had mischaracterized its antitrust claim as a complaint about a future contractual decision and that the case should clear the motion to dismiss stage based on the fact that SureShot was compelled to cease operations of its golf entertainment business because of the Topgolf-Protracer acquisition and Topgolf’s subsequent refusal to provide assurances that the licensed tech would be available in the future. The circuit court affirmed the lower court’s ruling that SureShot failed to show antitrust injury and that their claims were not ripe for review. (SureShot Golf Ventures, Inc. v. Topgolf Int’l, Inc., No. 17-20607 (5th Cir. Oct. 9, 2018) (per curiam)). The Fifth Circuit found that SureShot’s alleged injury was not “certainly impending” and that Topgolf did not unequivocally state it would not extend the Frame Agreement past 2020. In a small victory for SureShot, the Fifth Circuit held that since the ruling was based on a lack of standing (i.e., a lack of subject-matter jurisdiction), the claims should be dismissed without prejudice, meaning SureShot could re-file the case sometime in the future if it could plead an actionable injury.
With its appeal having just missed the water, on January 9, 2019, SureShot filed a petition for certiorari to the Supreme Court, presenting the principal issue of “Whether the Article III ripeness doctrine bars a competitor’s antitrust claims against a monopolist who acquired essential and patented technology to foreclose competitors from the market.” On March 18th, the Supreme Court declined review, and, for now, the suit remains off-course.