Friday, 30 November 2012

Affected Customers Have Standing To Assert Walker Process Antitrust Claims Against Patentee

Under U.S. law, a defendant accused of patent infringement may assert an affirmative counterclaim for antitrust injuries when a plaintiff-patentee asserts a patent knowingly procured by fraudulent conduct in a lawsuit commenced in order to create or preserve a market monopoly. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). In a recent case, the U.S. Court of Appeals for the Federal Circuit ruled that a customer allegedly injured by increased market prices, but not an accused infringer, also has standing to bring such a Walker Process claim. Ritz Camera & Image, LLC v. SanDisk Corp., Case No. 2012-1183 (Fed. Cir. Nov. 20, 2012). The decision may provide an alternative avenue for those seeking to challenge defective patents.

Ritz Camera is a purchaser of NAND flash memory devices. SanDisk controls approximately three-fourths of NAND market. Ritz filed a putative class action lawsuit on behalf of itself and other NAND users, alleging that SanDisk maintained its market control by procuring two critical patents, U.S. Patent Nos. 5,172,338 and 5,991,517, through fraud before the USPTO and then asserting the patents against competing flash memory manufacturers. As a result, Ritz contends, SanDisk has been able to maintain its prices at inflated levels.

SanDisk moved to dismiss the action on the grounds that Ritz and other NAND consumers lacked standing to bring the Walker Process-style claim, because SanDisk had not threatened to sue them for infringing the ‘338 or ‘517 patents. For example, Ritz likely would lack standing to maintain a declaratory judgment action alleging unenforceability of the SanDisk patents under the Declaratory Judgment Act, 28 U.S.C. § 2201. See Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).

The Federal Circuit held that the Supreme Court’s Walker Process decision did not restrict antitrust claims under the Sherman Act to accused patent infringers. In addition, the court noted that the jurisdictional limits on patent litigants do not normally apply to actions under the antitrust laws. Ritz Camera’s Walker Process claim was not an “end-run” around the standing requirements for declaratory judgment actions, because plaintiffs in Walker Process claims are seeking redress for antitrust injuries and do not directly seek to invalidate the affected patents. Finally, the CAFC was not persuaded by SanDisk’s argument that Ritz Camera’s claim would open the floodgates for future patent challenges:
[W]alker Process claims “deal only with a special class of patents, i.e., those procured by intentional fraud,” and “cannot well be thought to impinge upon the policy of the patent laws to encourage inventions and their disclosure,” 382 U.S. at 180 (Harlan, J., concurring). Particularly in light of the demanding proof requirements of a Walker Process claim, we are not persuaded by SanDisk’s “flood of litigation” argument.
Ritz Camera, at 10.  The decision is available HERE.

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