This case deals with the limits on standing to bring a Walker Process antitrust lawsuit. A Walker Process antitrust lawsuit can be brought when a party procured a patent through intentional fraud, and uses the patent to create a monopoly on the patented technology. The question in this case is directed towards whether a Walker Process antitrust lawsuit can be brought by a directed purchases of goods that are protected by the patent, even if the purchaser faces no threat of an action for patent infringement and has no other basis to seek a declaratory judgment holding the patent invalid. In this case the court of appeals held that, a directed purchaser is not precluded from bringing a Walker Process claim, even if they would not be entitled to seek declaratory relief.
In this case SanDisk creates flash memory devices and retailers such as Ritz Camera purchase flash memory storage devices. Ritz filed a suit that SanDisk has procured two patents US Patent Numbers 5,172,338 and 5,991,517 by fraud for failing to disclose known prior art. Ritz contents that SanDisk had created a monopoly over the technology in the fraudulently procured patents which created retailers to pay inflated prices for flash memory storage devices. In response, SanDisk argued that the suit should be dismissed because Ritz was under no threat of patent infringement. The district court rejected SanDisk’s argument alleging that Walker Process antitrust claims place “no limitations on the class of plaintiffs eligible to bring such claims.”
On appeal, the court of appeals rejected SanDisk’s arguments that allowing parties such as Ritz to bring Walker Process antitrust lawsuits would undermine limitations on standing to b ring a declaratory judgment challenging a patent. The COA stated that Walker Process suits require two conditions 1) the plaintiff must show that the defendant procured the patent by fraud and enforced the patent with knowledge it was obtained by fraudulent means and 2) the plaintiff must prove all the elements otherwise necessary to establish a Sherman Act monopolization charge.
The COA rejected SanDisk’s argument because the gist of an antitrust claim is that since the defendant obtained its patent by fraud it cannot enjoy the limited exception to the prohibitions of the Sherman Act, and must pay damages to those injured by any monopolistic action taken under the fraudulent patent claim. The court further reasoned that those injured by the monopolistic action should not be limited to a class that had standing to bring an independent challenge to the patents at issue. ‘
Therefore, the COA held that a Walker Process antitrust suit recognizes a clear distinction between claims that arise under antitrust laws and patent laws, and thus a party can bring an antitrust suit even if they could not have sought declaratory judgment of a patent suit.
Patent Attorney Takeaways:
1) SanDisk’s patents may not have been found to have been procured by fraud if they would have disclosed known prior art. For patent attorneys and their clients it is crucial that information disclosure statements get filed for each and every known cited art reference, whether the patent attorney or the client believes that they are material.
2) As a patent attorney if you client is desires to sue a licensor, one clear theory of infringement may be under antitrust law if they are precluded from bringing a patent suit.
3) If your client had obtained a patent via fraud and procured a monopoly over the given technology, it may be important to determine what would have been the prices for products associated with the patented technology to possible prevent antitrust lawsuits.