By There is an inherent conflict between the antitrust laws and the patent laws. The antitrust laws protect competition and benefit consumers, in part, by prohibiting monopolies. The patent laws promote innovation and reward inventors, in part, by awarding the patent owner a limited monopoly which inhibits competition.
Sometimes the antitrust laws and the patent laws intersect. A defendant in a patent infringement suit may assert an antitrust claim as an affirmative defense or as a counterclaim. One particular type of antitrust claim asserted by a patent owner’s competitors is a “Walker Process claim.” This is a claim for monopolization under §2 of the Sherman Act based on the patent owner’s fraudulent procurement of a patent. The claim arises from the Supreme Court’s decision in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), in which the Court held that a plaintiff could state a claim for antitrust liability if the plaintiff could show that: (1) the defendant procured a patent by knowing and willful fraud on the United States Patent and Trademark Office (or by maintaining and enforcing a patent knowing of the fraudulent manner in which it was obtained); and (2) the elements required for a claim under §2 of the Sherman Act were met.
In Ritz Camera & Image, LLC v. SanDisk Corporation, 700 F.3d 503 (Fed. Cir. 2012), the Federal Circuit Court of Appeals addressed the issue of whether a direct purchaser of a patented product had standing to bring a Walker Process claim against the patent owner even though the purchaser had no standing under the patent laws to sue for a declaratory judgment of patent invalidity or unenforceability. The court’s answer was that the direct purchaser did have standing.
The plaintiff, Ritz Camera, was a retailer who purchased products, including digital cameras, from the defendant, SanDisk, for resale to consumers. The products Ritz purchased from SanDisk contained SanDisk’s patented NAND flash memory devices.
Ritz sued SanDisk for violation of §2 of the Sherman Act (unlawful monopolization) in the Northern District of California. Ritz alleged that SanDisk controlled 75% of the market for NAND flash memory, and that SanDisk had unlawfully obtained its monopoly by enforcing two fraudulently procured patents against its competitors. Ritz further alleged that SanDisk’s conduct resulted in higher prices to the retailers.
SanDisk moved to dismiss the Walker Process claim on the grounds that Ritz did not have standing to bring a Walker Process claim because it had not been threatened with patent infringement by SanDisk and had no standing to bring a declaratory judgment action for invalidity of the patents. Ritz responded that its claim was an antitrust claim, not a claim under the patent laws. The district court denied SanDisk’s motion. The Federal Circuit affirmed.
The appellate court reviewed the Supreme Court’s Walker Process decision and noted that the Supreme Court had held that the rules for determining standing to challenge a patent’s validity should not be applied to an antitrust claim. According to the Supreme Court, a Walker Process claim was not a claim under patent law, and there was no basis for limiting antitrust plaintiffs to those who could sue to invalidate a patent. In fact, as the appellate court explained, under antitrust law, direct purchasers are a “preferred” class of plaintiffs.
The appellate court pointed out that several courts had already addressed the issue of standing for a Walker Process claim. The Federal Circuit itself, and the Courts of Appeal for the Second Circuit and the District of Columbia had all decided cases in which the plaintiffs were permitted to bring a Walker Process claim despite not having standing to bring a claim for patent invalidity.
The court rejected SanDisk’s argument that if direct purchasers could bring Walker Process claims, this would result in the ability of a party to challenge a patent under the Sherman Act even though they could not do so under patent law. The court stated that a Walker Process claim is fundamentally an antitrust claim whose remedy is not the invalidation of a patent.
SanDisk also argued that if the court permitted direct purchasers to file Walker Process claims, the volume of litigation would increase and innovation would decrease. The court disagreed, noting that the Supreme Court had emphasized that “the interest in protecting patentees from ‘innumerable vexatious suits’ [cannot] be used to frustrate the assertion of rights conferred by the antitrust laws,” quoting Walker Process, 382 U.S. at 176.
The court left no doubt that standing to bring an antitrust claim based on fraudulent procurement of a patent is separate from standing to invalidate a patent, in stating, at 508:
“Walker Process recognizes a clear distinction between claims that arise under the antitrust laws and those that arise under the patent laws. Because direct purchasers are generally permitted to bring antitrust actions, and because the Walker Process decision did not preclude purchasers from brining this particular type of antitrust claim, we hold that Ritz’s status as a direct purchaser gives it standing to pursue its Walker Process claim even if it could not have sought a declaratory judgment of patent invalidity or unenforceability.”