October 13, 2011
Intellectual Property
Patent Law
Antitrust
“It Shoulda Been Me”:
The Patent Monopolist and
Antitrust Allegations
of federal antitrust law, prohibits unlawful monopolization and
attempted monopolization.2 Most states also have laws in place
which correspond to federal antitrust law.3
To succeed, a claim of monopolization or attempted
monopolization must meet specific elements developed over
time through case law. Proof of a monopoly that violates the
Sherman Act requires a showing of possession of monopoly
power in the relevant market, as well as the willful acquisition
or maintenance of that power by means of exclusionary conduct,
as distinguished from growth or development as “a consequence
of a superior product, business acumen, or historic accident.”4
In addition, the plaintiff in an antitrust case must demonstrate
injury resulting from the wrongfully gained monopoly. A claim
of attempted monopolization has similar requirements, which
include proof of:
• A specific intent to destroy prices or competition;
Contributed by Stacey P. Slaughter, Robins,
Kaplan, Miller & Ciresi L.L.P.
A patent holder’s legal right to prohibit others from using a
patented technology occasionally intersects with the prohibitions
against harming competition contained in state and federal
antitrust laws. This article will discuss where patent and antitrust
law intersect, the common arguments raised when competition
and invention meet, and give examples from case law explaining
when and how the two legal disciplines interact.
• Predatory or anticompetitive conduct to accomplish the
monopolization;
• Dangerous probability of success;
• Antitrust injury; and
• Market power.
Each element must be established and failure to prove any one
element defeats a claim of attempted monopolization.5
Antitrust & Patent: Different Sides of the
Monopoly Coin
Patent law creates an exception to the limitations on monopolies
enunciated in the Sherman Act and related state laws. A patent
grant from the U.S. Patent and Trademark Office confers
“the right to exclude others from making, using, or selling the
invention.”6 The limited-monopoly patent law establishes acts
as a legal counterpoint to the illegal monopolies and attempted
monopolies the Sherman Act prohibits.7
A monopoly exists when a particular good or commodity has a
single supplier and that supplier has the power to exclude other
competitors.1 As a general rule the Sherman Act, the cornerstone
Usually, these two sides of the monopoly coin can co-exist
peaceably. But, in certain limited circumstances, a patent
monopoly may find itself in a head-or-tails confrontation
Originally published by Bloomberg Finance L.P. in the Vol. 5, No. 42 edition of the Bloomberg Law Reports—Intellectual Property. Reprinted with
permission. Bloomberg Law Reports® is a registered trademark and service mark of Bloomberg Finance L.P.
This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has
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© 2011 Bloomberg Finance L.P. All rights reserved.
2
Intellectual
Property
with antitrust laws and the limitations it places on excluding
competitors and harming competition. Which side wins? The
answer, it turns outs, often depends upon the purpose behind
the claim of antitrust law violation.
Using Antitrust Laws to Defeat Patent Law Claims
Claims of antitrust violations resulting from a patent holder’s
monopoly often arise as a potential defense against an allegation
of patent infringement. Challenging the patent’s validity on
antitrust grounds provides alleged and potential infringers an
opportunity to escape liability for the accused infringement while
offering them the chance, as an antitrust plaintiff, to make their
own claim for treble damages.8 Though turning the defense of a
patent infringement action into a successful offensive antitrust
claim is difficult, it is possible.9
For example, alleged infringers can challenge claimed patent rights
by arguing that the patent infringement action constitutes sham
litigation. Sham litigation claims must clear several procedural
and proof hurdles before they can provide a viable defense
against a claim of patent infringement. First, the allegations must
overcome the Noerr-Pennington doctrine, which immunizes a
party from antitrust liability for petitioning the government
even if the party seeks to advance anticompetitive laws.10 NoerrPennington immunity will not apply if the party making the
allegation of sham litigation can prove that the disputed litigation
was “objectively meritless” and that the “litigant’s subjective
motivation” was an unlawful intent to “interfere directly with
the business relationship of a competitor.”11
In the patent arena, sham litigation claims that survive NoerrPennington must then make the showing enunciated in
Handgards, Inc. v. Ethicon, Inc.12 Handgards requires proof that
the patent owner has attempted to enforce a patent it knows
to be invalid and that all necessary elements of the claimed
antitrust violation exist.13 Federal Circuit law governs antitrust
claims premised on the abuse of patent rights and will be used to
determine whether the patent holder has made an inappropriate
attempt to enforce its patent.14 For example, in Rolite, Inc. v.
Wheelabrator Environmental Sys., Inc.,15 a competitor adequately
pled a Handgards claim against the holder of a patent for recycling
ash residue by alleging all elements of attempted monopolization
and facts which showed that the patent holder claimed patent
rights in the marketplace, though it had deliberately failed to
renew its patent.16
Alleged infringers may also bring a so-called Walker Process
claim, which removes the usual immunity from Section 2 of the
Sherman Act granted by the patent laws, if the patent holder has
attempted to enforce a patent procured by knowing and willful
fraud upon the USPTO.17 Like Handgards claims, Walker Process
claims require that all elements of the alleged antitrust violation
also be established.18 In addition, the successful Walker Process
claimant must plead and prove all elements of common law
fraud.19 These multiple showings make success on Walker Process
claims difficult, but not impossible to achieve.20 In Unitherm
Food Systems, Inc. v. Swift-Eckrich, Inc.,21 a competitor obtained
a jury verdict on its Walker Process claim after showing that the
subject patent application replicated a system for preparing and
browning pre-cooked meats that a competitor had previously
demonstrated to the patent holder on multiple occasions.22 The
jury’s verdict was ultimately affirmed on appeal.23
In limited circumstances, alleged infringers can also turn
to antitrust policy to support allegations of patent misuse. 24
Antitrust analysis applies because misuse claims can only succeed
by proving that the challenged behavior had anticompetitive
effects.25 Typical misuse claims involve tying—conditioning
the purchase of a patented product on the purchase of an
accompanying product—or attempting to illegally extend the
duration of the patent grant. 26 But recent case law from the
Federal Circuit restricts the instances when patent misuse can
serve as a defense to patent infringement.27 In Princo v. ITC,28 the
Federal Circuit found that misuse is a doctrine to be applied and
interpreted narrowly and held that the defense of patent misuse
requires a direct connection between the patents-in-suit and the
alleged misconduct, even if the claimed misconduct has a clear
anticompetitive effect.29 Should a defense of patent misuse remain
viable under Princo’s exacting standards, a finding of misuse will
still not invalidate the patent at issue or allow a claim for antitrust
damages. Instead, it will render the patent unenforceable during
the time of the misuse, excusing infringers from liability.30
Using Antitrust Laws to Protect Claimed Patent
Rights: “It Should Have Been Me”
Attempts to protect actual or asserted patent rights under the
antitrust laws are less common—due, no doubt, to the fact that
those claims have to-date proved uniformly unsuccessful. Patent
holders who have tried to claim antitrust injuries are generally
attempting to regain the competitive advantage their invention
was supposed to bestow. They claim that their named defendant’s
anticompetitive conduct caused their loss and thus seek redress
in antitrust. But, because the patent holder can usually only
demonstrate an injury to themselves and not to competition as
a whole, these claims are doomed to fail. Two cases illustrate
difficulties of trying to enforce patent rights with antitrust laws.
A historical example comes from the decision in Brunswick Corp.
v. Riegel Textile Corp.31 In the case, plaintiff Brunswick invented
a process for making an antistatic yarn. Brunswick, which was
not a textile manufacturer, chose to disclose the invention to
defendant Riegel, which was. Riegel allegedly agreed to keep
the invention a secret, but then applied for its own patent on
it. Though Brunswick filed its own patent application first, the
USPTO issued the patent to Riegel. The USPTO discovered its
error and commenced patent reexamination proceedings. While
those proceedings were still pending, Brunswick brought a
separate antitrust action, claiming Riegel’s conduct constituted
illegal attempted monopolization. The district court dismissed
the action on the pleadings, finding Brunswick’s complaint failed
to state an antitrust cause of action.32
Writing for the Seventh Circuit on appeal, Judge Posner affirmed.
Judge Posner found that Brunswick’s claim failed to meet any
3
Intellectual
Property
of the three conditions necessary for an alleged patent fraud to
violate § 2 of the Sherman Act. The requisite conditions Judge
Posner stated are:
1.
Market share;
2. The invention sought to be patented is not patentable
and, but for the fraud perpetrated on the PTO, no patent
would have issued to anyone; and
3. The patent must have some colorable validity conferred,
for example, by the patentee’s efforts to enforce it.33
Though Brunswick’s complaint could not adequately plead any
of these conditions, the patentability of its invention caused
the greatest impediment to its claims of an antitrust violation.
According to Judge Posner, if the invention at issue is patentable,
it does not matter “what skullduggery the defendant may have
used to get the patent issued or transferred to him. The power
over price that patent rights confer is lawful, and is no greater
than it otherwise would be just because the person exercising
the rights is not the one entitled by law to do so.”34 Thus, even
the outright theft of a perfectly valid patent has no antitrust
significance because it merely shifts a lawful monopoly into
different hands. Though this harms the lawful owner, it does
not exact harm on competition or consumer interests beyond
that made in the initial grant of patent. What the inventor/plaintiff
truly seeks then, is the return of that monopoly to him. But,
according to Judge Posner, “[i]t is not the purpose of antitrust
patent laws to confer patents or to resolve disputes between rival
applicants for a patent.”35
Another recent effort by a patent holder to resolve a patent
licensing dispute using the antitrust laws proved similarly
unsuccessful.36 In Digital Sun v. The Toro Co.,37 Digital Sun, the
patent holder of a wireless sprinkler system, alleged that Toro
had engaged in illegal attempted monopolization after failed
negotiations for Toro to purchase Digital Sun. During the course
of negotiations, Toro had loaned Digital Sun money. When
Digital Sun was unable to repay the loans, Toro agreed to take
an exclusive license of Digital Sun’s patents for use on golf course
and sports fields, and a non-exclusive license in all other areas in
exchange for debt forgiveness. Toro subsequently terminated the
negotiations to acquire Digital Sun, and Digital Sun brought suit.
Digital Sun claimed that Toro’s conduct, when combined with its
acquisition of another wireless sprinkler company, showed an
illegal attempt to monopolize. Toro argued that Digital Sun had
failed to state a plausible claim for relief and moved to dismiss.38
Granting the motion, the district court found that Digital Sun
had failed to establish the necessary elements of an attempted
monopolization claim. Agreeing with Brunswick, the court
held that the licenses involved could not serve as evidence of
predatory conduct because they did nothing more than transfer
Digital Sun’s monopoly into Toro’s hands—an event that “has
no antitrust significance.”39 Furthermore, Digital Sun could not
show any true antitrust injury, as its chief complaint of injury
stemmed from the fact that the exclusive license allowed Toro to
replace it in the areas where it once had monopoly rights under
the patent. Quoting Columbia River People’s v. Portland General
Elec.,40 the district court observed, “if the plaintiff’s only claim
is of the nature ‘I, rather than the defendant, was entitled to be
the monopolist of this market,’ then the plaintiff is not a victim of
antitrust injury.”41 While the court dismissed the complaint with
leave to amend, it cautioned that “judicially-noticed documents
and Plaintiff ’s own arguments leave the Court with doubts as
to whether these claims can be resurrected”, and indeed, no
amendment occurred.42
Brunswick and Digital Sun represent an interesting cul de sac in
the already complex landscape that marks the intersection of
antitrust and patent laws. Patent holders contemplating using
antitrust laws as a possible source of recourse when a patent
monopoly is in dispute are well-advised to consider them fully
before proceeding. Together, the decisions show that, so far,
the antitrust laws remain immune to claims that the wrong
monopolist holds the power.
Conclusion
Litigants in disputes involving patents may view antitrust laws
as a way to gain an upper hand. Given the right mix of factual
circumstances, those seeking to escape liability for infringement
or potential infringement may be able to obtain that advantage.
But, because antitrust is concerned with redressing harm to
competition, inventors who need help regaining or obtaining
the monopoly rights conferred by patent must look somewhere
other than antitrust to find the relief they seek.
Stacey P. Slaughter is a partner in the Minneapolis office of Robins,
Kaplan, Miller & Ciresi L.L.P. A trial attorney practicing in the
area of business litigation, Ms. Slaughter provides representation
for complex business litigation cases including matters involving
antitrust, trade regulation, and the intersection of the laws regarding
intellectual property and competition. Ms. Slaughter can be reached
at [email protected] and her full biography is available online
at: http://www.rkmc.com/Stacey_Slaughter.htm.
1
See, e.g., United States v. EI du Pont de Nemours & Co., 353 U.S. 586,
592-93 (U.S. 1957).
2
Sherman Act, 15 U.S.C. § 2.
3
See, e.g., Cal. Bus. & Prof. Code §§ 16720 – 16770; Minn. Stat. §§
325D.51 et seq.
4
United States v. Grinnell Corp., 384 U.S. 563, 570 (1966).
5
See, e.g., Cost Mgmt. Servs. Inv. v. Washington Natural Gas Co., 99 F.3d
937, 949 (9th Cir. 1996) (elements of an attempted monopolization claim);
Newcal Indus. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir. 2008)
(Market power requirement).
6
35 U.S.C. § 154(a)(1). See also King Instruments Corp. v. Perego, 65 F.3d
941, 947 (Fed. Cir.1995).
7
See Simpson v. Union Oil Co., 377 U.S. 13, 24 (1964) (“The patent laws
which . . . give a monopoly on making, using or selling the invention are in pari
materia with the antitrust laws and modify them pro tanto.”).
8
Cf. Clayton Act § 4, 15 U.S. § 15 (allowing “threefold” damages for antitrust
law violations”) with Patent Act, 35 U.S.C. § 284 (giving courts authority to
increase damages assessed “up to three times,” limited by case law to cases
of willful infringement)
9
Nobelpharma Ab v. Implant Innovations, 141 F.3d 1059, 1073 (Fed. Cir.
1998) (upholding district court’s finding that plaintiff/counterclaim defend-
4
Intellectual
Property
Columbia River People’s v. Portland General Elec., 217 F.3d 1187, 1190
(9th Cir. 2000).
ant-appellant’s patent was invalid and jury verdict in favor of defendant/counterclaimant-appellee on its antitrust counterclaim).
40
E.R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127, 140
(1961); United Mine Workers v. Pennington, 381 U.S. 657, 669-70 (1965).
41
Professional Real Estate Investors, Inc. v. Columbia Pictures Indus, Inc.,
508 U.S. 49, 60-61 (1993).
42
10
11
12
Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 994-96 (1979).
See, e.g., Walter Kidde Portable Equip. v. Universal Security Instruments,
Inc., 669 F. Supp. 895, 899-900 (N.D. Ill. 2009).
13
See Nobelpharma AB v. Implant Innovations, 141 F.3d 1059, 1068 (Fed.
Cir.1998) (en banc in relevant part); Unitherm Food Systems, Inc. v. SwiftEckrich, Inc., 375 F.3d 1341, 1357 (Fed. Cir. 2004), rev’d other grounds,
546 US 394 (2006).
14
Rolite, Inc. v. Wheelabrator Environmental Sys., Inc., 958 F. Supp. 992
(E.D. Pa. 1997).
15
16
Id. at 1006.
Walker Process Equip., Inc. v. Food Machinery & Chem. Corp., 382 U.S.
172, 177-78 (1965).
17
See, e.g., Kaiser Foundation Health Plan, Inc. v. Abbott Laboratories, Inc.,
552 F.3d 1033 (9th Cir. 2009).
18
See, e.g., Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337, 1346 (Fed. Cir.
2007).
19
See Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341
(Fed. Cir.2004), rev’d other grounds, 546 US 394 (2006).
20
21
Id.
22
Id.
Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc, 546 US 394, 126 S. Ct. 980
(2006) (reversing court of appeals ruling on effect of failure to make postverdict motions)
23
24
See, e.g., C.R. Bard, Inc. v. M3 Sys., 157 F.3d 1340, 1372 (Fed. Cir.1998).
See Princo v. ITC, 616 F.3d 1318, 1334 (Fed. Cir. 2010), cert denied, 131
S. Ct. 2480 (U.S. 2011).
25
See generally Illinois Tool Works v. Independent Ink, Inc., 547 U.S. 28
(2006) (tying patent misuse on proof that patent holder has market power);
Brulotte v. Thys Co., 379 U.S. 29 (1964) (misuse to collect royalties after
expiration of patent)
26
Princo v. ITC, 616 F.3d 1318, 1334 (Fed. Cir. 2010), cert denied, 131 S.
Ct. 2480 (U.S. 2011).
27
28
Id.
29
Id. at 1329-1335.
Apple, Inc. v. Motorola Mobility, Inc., No. 11-CV-00178, Opinion and Order
at *40-41 (W.D. Wis. June 7, 2011) (claim of patent misuse to proceed as
an independent equitable cause of action, even before a claim for infringement has been brought); see also Qualcomm Inc. v. Broadcom Corp., 548
F.3d 1004, 1025-26 (Fed. Cir. 2008) (explaining that patent misuse doesn’t
invalidate the patent, rather renders it unenforceable during the time of
misuse)
30
31
Brunswick Corp. v. Riegel Textile Corp., 752 F.2d 261 (1984), cert denied.
32
Id. at 264.
33
Id. at 265-266.
34
Id. at 265.
35
Id. at 267.
Digital Sun v. The Toro Company, No. 10-CV-04567, 2011 BL 74436 (N.D.
Cal. Mar. 22, 2011) (Robins, Kaplan, Miller & Ciresi served as counsel for
The Toro Company in this matter)
36
37
Id.
38
Id.
39
Id. at *6.
Digital Sun, 2011 BL 74436 at *7, quoting Columbia River, 217 F.3d at
1190.
Id. at *9.