FTC Dismisses Divestiture Action Against Axon in the Body-Worn-Camera Arena

Axon Enterprise no longer faces the prospect of having to share its intellectual property with a body-worn-camera competitor after the Federal Trade Commission (FTC) announced its dismissal of a proposed administrative action that would have required Axon to divest part of its company, including key software.

This FTC dismissal was issued after the U.S. Supreme Court ruled in Axon’s favor that the previous FTC enforcement system was unconstitutional, because agency decisions could not be appealed in federal court—a ruling that many believe will have a significant impact on multiple federal agencies.

“As I said from the beginning, no one should ever face the prospect of a government that can demand to seize your most precious assets without the ability to defend yourself in a fair and impartial court of law,” Axon founder and CEO Rick Smith said in a prepared statement.

“We made it clear that we were prepared to take the merits of our constitutional claims right back to the Supreme Court, and I’m exceedingly proud of our legal team and the inroads we forged that will now allow others to press these critically important due process and separation-of-powers issues to ultimate resolution. We at Axon remain laser focused on our mission to protect life.”

Many of the big-picture implications of the Supreme Court may not be determined fully for years, but the more immediate consequence of the Supreme Court ruling appears to be the FTC dropping its proposed administrative action against Axon.

FTC officials previously claimed that Axon’s 2018 purchase of body-worn-camera competitor Vievu—a company that Axon officials repeatedly have claimed was “failing” at the time—was harmful to competition in the body-worn-camera market. With this in mind, the FTC told Axon officials that the agency planned to require Axon to divest of its Vievu assets to create a new competitor in the body-worn-camera marketplace and to provide this new competitor with its software solution.

Axon officials indicated that the company would accept the Vievu divestiture, but it was outspoken in its opposition to the idea of releasing its software. Axon filed suit against the FTC action before the agency announced its planned divestiture action, with Axon claiming that the FTC process at the time essentially meant that any appeal would be heard by the same agency officials—and that no appeal had ever successfully overturned a decision.

“The FTC demanded not only that we undo the Vievu acquisition, but that we give them a ‘blank check’ to stand up a complete ‘clone’ of our camera and digital evidence management business,” Smith wrote in a January 2020 blog.

“We also had to provide access to all of our resources, including intellectual property and customer relationships we’ve built over 10 years.”

This case was heard by the Supreme Court, which made its ruling on the jurisdictional issue in April and remanded the constitutional challenge to a federal district court, according to the FTC order order issued on Friday about the matter.

“The FTC’s unilateral dismissal, intended to moot Axon’s advancing constitutional claims in the District of Arizona, will result in a global resolution of both cases,” Pam Petersen—Axon’s vice president of litigation and counsel of record for Axon in both the administrative and federal cases—said in a prepared statement.

“We intend to file a stipulation to dismiss our federal claims on Tuesday, ending this 5-year battle to protect our intellectual property and our investors.”

In its dismissal order, the FTC reiterated its belief that Axon’s acquisition of Vievu “effectively create[ed] a monopoly and harming both police departments and communities who fund them,” so it warranted FTC administrative action. But the FTC decided to dismiss the matter, noting that it probably would take “year of additional litigation” to continue to pursue its case.

“As it does with any enforcement action, … the Commission must constantly evaluate the deployment of its limited agency resources to ensure maximal efficacy and utility,” according to the FTC order. “Here, there are a variety of factors we must consider in pursuit of those priorities, including the increasingly unlikely possibility of reaching a timely resolution of the antitrust merits that led to the filing of our complaint in the first place.

“Based on the totality of the circumstances, we have come to the difficult conclusion that the public interest requires that this litigation no longer be continued.”