By Jason Rantanen
Ritz Camera & Image, LLC v. Sandisk Corporation (Fed. Cir. 2012)
Panel: Bryson (author), Dyk, and Moore
In Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), the Supreme Court held that a party who uses a patent procured through intentional fraud on the PTO to obtain or preserve a monopoly may be subject to antitrust liability. Ritz Camera addresses an important standing issue for Walker Process claims: whether a direct purchaser of goods covered by the patent has standing to bring a Walker Process antitrust claim against the patentee even if the purchaser would not be entitled to seek declaratory relief against the patentee under the patent laws. In an opinion authored by Judge Bryson, the court held that such direct purchasers do have standing.
Background: SanDisk is a major producer of NAND flash memory; allegedly, SanDisk controls about three-quarters of the market. It holds several patents relating to the memory products under which it sells and licenses flash memory technology. Ritz is a retailer that purchases flash memory products from SanDisk and its licenses.
In 2010, Ritz filed suit alleging that SanDisk had violated Section 2 of the Sherman Act. Ritz contended that SanDisk had fraudulently procured two patents central to its flash memory business by failing to disclose known prior art and making affirmative misrepresentations to the PTO, that SanDisk established its monopoly position by enforcing those patents and by threats of enforcement, and that these actions caused direct purchasers to pay supra-competitive prices for NAND flash memory products. SanDisk sought to dismiss the complaint on the ground that Ritz lacked standing, an argument that the district court rejected. The appeal arrived at the Federal Circuit on a petition for interlocutory review.
Antitrust Standing Even When No Patent Law Standing: The sole question at issue was:
Whether direct purchasers who cannot challenge a patent's validity or unenforceability through a declaratory judgment action (have not been sued for infringement, and so cannot assert invalidity or unenforceability as a defense in the infringement action) may nevertheless bring a Walker Process antitrust claim that includes as one of its elements the need to show that the patent was procured through fraud.
Slip op. at 5. The Federal Circuit held that direct purchasers do have such standing and, more broadly, that antitrust standing is not limited by the rules of patent standing. Rather, "[t]he “full play” of antitrust remedies encompasses the standing requirements that apply in the antitrust setting,... including the recognition that direct purchasers are not only eligible to sue under the antitrust laws, but have been characterized as “preferred” antitrust plaintiffs." Slip Op. at 6 (internal citations omitted). In Walker Process itself, "[t]he Court did not suggest that the class of “those injured by any monopolistic action” should be limited to those within that class who would have standing to bring an independent challenge to the patents at issue." Id.
In reaching this conclusion, the court expressly rejected SanDisk's argument "that allowing direct purchasers to bring Walker Process claims would allow an intolerable end-run around the patent laws because parties unable to pursue invalidity claims could achieve the same result by way of a Sherman Act claim." Slip Op. at 9. The court noted that a Walker Process claim "is a separate cause of action from a patent declaratory judgment action." Id. It is governed by antitrust law, and the patent issue is only one of several elements that must be proven by the claimant.
Nor did the court agree that the result here "would trigger a flood of litigation and stem innovation," particularly given the demanding proof requirements of a Walker Process claim. Walker Process claims involve patents procurred through intentional fraud, which "cannot well be thought to impinge upon the policy of the patent laws to encourage inventions and their disclosure." Id., quoting Walker Process, 382 U.S. at 176 (Harlan, J., concurring).
Note: Judge Bryson recently annouced his move to senior status, effective January 7, 2013. He has written a number of significant opinions over his tenure, including Phillips v. AWH. Once he assumes senior status, he will have a likely have a reduced caseload and will no longer be eligible to participate in en banc decisions unless he is part of the original panel that heard the case. I will certainly miss reading his opinions as often as I was previously able.