Walker Process Antitrust Counterclaim Based On Fraudulently Procured Patent: “Maintenance and enforcement of a patent obtained by fraud on the Patent Office” may be the basis of an action under § 2 of the Sherman Act, and subject to a treble damage claim. Walker Process Equip. v. Food Mach. & Chem. Corp., 382 U.S. 172, 173-74 (1965) (rev’g motion to dismiss; fraud was alleged failure of patent owner to disclose its own public use before the critical date). Must show patent obtained by “knowing and willful fraud,” maintained and enforced with knowledge of the fraudulent procurement, and all other elements of a Sherman Act monopolization or attempted monopolization claim. Id.SeeGiuliano (Fed. Cir. 07/27/17) (non-precedential) (aff’g Summ. J. against Walker Process claim; no genuine issue on intent element of fraud; “must evidence a clear intent to deceive the examiner”); Transweb (Fed. Cir. 02/10/16) (aff’g judgment of antitrust violation and treble damages and attorney fees award against patent owner). “After Therasense, the showing required for proving inequitable conduct and the showing required for proving the fraud component of Walker Process liability may be nearly identical.” Id. Fees incurred in defending the patent infringement suit constitute an injury in fact and an “antitrust injury” that shall be trebled. Id. “The other elements’ necessary to establish an attempted monopolization claim are: ‘(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.’ In determining the dangerous probability of achieving monopoly power for element (3), the courts look at ‘the relevant market and the defendant’s ability to lessen or destroy competition in that market.’” Id.But seeGiuliano (Fed. Cir. 07/27/17) (non-precedential) (higher burden for fraud than for inequitable conduct.) Fed. Cir. does not have appellate jurisdiction over action asserting only a Walker Process claim. Xitronix (Fed. Cir. 02/09/18).
Handgards Antitrust Counterclaim Based on Sham Litigation: Baseless patent litigation may lead to antitrust liability if the other elements of an antitrust claim are met, including using the litigation as an anticompetitive weapon to directly interfere with a competitor’s business relationships. Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir. 1979). “First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail. Only if challenged litigation is objectively meritless may a court examine the litigant’s subjective Under this second part of our definition of sham, the court should focus on whether the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor, through the use of the governmental process-as opposed to the outcome of that process-as an anti-competitive weapon.” Prof’l Real Estate Inv’rs (U.S. 05/03/1993). SeeIndus. Models (Fed. Cir. 11/07/17) (non-precedential) (aff’g dismissal of antitrust action under Noerr-Pennington, rejecting sham litigation argument).
Tortious Interference Based On Patent Enforcement Preempted Unless Can Show Acting In Bad Faith: “State tort claims based on enforcing a patent, including for tortious interference, are preempted by federal patent laws, unless the claimant can show that the patent holder acted in bad faith.” Energy Heating (Fed. Cir. 05/04/18) (aff’g judgment of tortious interference based on patent holder’s bad faith assertion to plaintiff’s customer that it held valid patent).
Patentability Challenges In The Patent Office; CBMR Scope; “Technical Solution”: Since 1980, Congress has established procedures for issued U.S. patents to be challenged before the Patent Office and perhaps cancelled. See generallyRegents of the Univ. of Minn. (Fed. Cir. 06/14/19) (long review of history and purpose of post-issuance review; holding state sovereign immunity does not extend to IPR proceedings). One may target patents via ex parte reexamination (35 U.S.C. § 302), post-grant review (PGR) (35 U.S.C. § 321), inter partes review (IPR) (35 U.S.C. § 311), or (until Sept. 16, 2020) “covered business method review” (CBMR) PGR (AIA § 18). The scope of CBMRs has recently been narrowed. Apple (Fed. Cir. 07/11/18) (non-precedential) (remanding to PTAB to apply correct standard; “it is not enough for the specification to describe how the invention could, in some instances, be used to facilitate financial transactions”); Secure Axcess (Fed. Cir. 02/21/17) (2-1) (rejecting PTAB interpretation of CBMR scope: although the “‘practice, administration, or management of a financial product or service’ phrase … is not limited to the financial services industry, but reaches a wide range of sales and similar transactional activity,” it does not reach activities “incidental to a financial activity,” and a claim must, properly construed, require such financial practice, etc., not simply be one that could be used in such activity.), rehearing en banc denied (w/ several opinions) (Fed. Cir. 06/06/17) (6-5), vacated as moot (U.S. 05/14/2018); Versata II (Fed. Cir. 07/09/15) (approving PTAB interpretation of CBMR scope and applying Sec. 101 in CBMR proceeding); Sipco (Fed. Cir. 09/25/19) (2-1) (vacating PTAB CBM FWD because properly construed claims solve a technical problem with a technical solution: “the technical problem resolved by the claims was how to extend the reach of an existing communication system from a central location to a remote, unconnected device while protecting against unwanted interference with the transmitted signals. The claims solve this problem with a technical solution: the creation of a two-step communication system that communicates information through a low-power, i.e., limited transmission range, transceiver over a first, wireless step, that taps into the intermediate node’s existing network connection to transport information to the central location.”); Trading Techs. II (Fed. Cir. 04/30/19) (“merely providing a trader with new or different information in an existing trading screen is not a technical solution to a technical problem. Instead, it focuses on improving the trader, not the functioning of the computer.”); Trading Techs. (IBG) I (Fed. Cir. 04/18/19) (aff’g PTAB that claims are not technological inventions; “this invention makes the trader faster and more efficient, not the computer. This is not a technical solution to a technical problem.”); Smartflash (Fed. Cir. 07/30/15) (non-precedential) (staying one pre-trial action ivo granted CBMRs but aff’g refusal to stay another action that had already been tried on liability and awaited a damages retrial; CBMRs designed as alternative to litigation ivo contraction of patent eligibility of business methods from State Street to Bilski); IBG (Fed. Cir. 02/13/19) (non-precedential) (vacating PTAB CBM determinations; patents not eligible for CBMR for technological inventions because they are directed to a specific improvement to the way computers operate).
Note: S. Ct. Upholds Constitutionality Of IPRs Under Article III And Seventh Amendment Of The U.S. Const.: At Least For Patents Issuing After IPR Procedure In Place: Because patents are a “public franchise” involving “public rights,” and reconsideration of the patent grant in inter partes review is a qualification placed on that public franchise property right, inter partes review does not violate Article III (or the Seventh Amendment); despite its litigation trappings, it “remains a matter involving public rights, one ‘between the government and others, which from [its] nature do[es] not require judicial determination.’” Oil States (U.S. 04/24/2018) (7-2) (Thomas, J.) (but not deciding “the retroactive application of inter partes review” to patents issued before “that procedure was … in place” or any Due Process or Takings challenge.). This affirmed the Fed. Cir. view. MCM Portfolio (Fed. Cir. 12/02/15) (IPR statute constitutional; Congress “saw powerful reasons to utilize the expertise of the PTO for an important public purpose—to correct the agency’s own errors in issuing patents in the first place.”). See alsoSaint Regis Mohawk Tribe (Fed. Cir. 07/20/18) (tribes lack sovereign immunity in IPRs because “IPR is more like an agency enforcement action than a civil suit brought by a private party,” citing Director’s complete discretion in deciding whether to institute review; Director can continue even if private property drops out; substantial differences from Fed. R. Civ. P.)
Note: Any Future Decision Declaring IPRs Unconstitutional Likely Will Be Prospective Only: Likely any IPR-adverse ruling in any future challenge, on other grounds, will apply prospectively only and not to final written decisions issued in advance of such ruling. Cf.Northern Pipeline (U.S. 06/28/1992) (“Having concluded that the broad grant of jurisdiction to the bankruptcy courts contained in 28 U. S. C. § 1471 (1976 ed., Supp. IV) is unconstitutional, we must now determine whether our holding should be applied retroactively to the effective date of the Act. Our decision in ChevronOil Co. v. Huson, 404 U. S. 97 (1971), sets forth the three considerations recognized by our precedents as properly bearing upon the issue of retroactivity. They are, first, whether the holding in question “decid[ed] an issue of first impression whose resolution was not clearly foreshadowed” by earlier cases,; second, “whether retrospective operation will further or retard [the] operation” of the holding in question; and third, whether retroactive application “could produce substantial inequitable results” in individual cases. In the present cases, all of these considerations militate against the retroactive application of our holding today. It is plain that Congress’ broad grant of judicial power to non-Art. III bankruptcy judges presents an unprecedented question of interpretation of Art. III. It is equally plain that retroactive application would not further the operation of our holding, and would surely visit substantial injustice and hardship upon those litigants who relied upon the Act’s vesting of jurisdiction in the bankruptcy courts. We hold, therefore, that our decision today shall apply only prospectively.”)
Note: S. Ct. Construes Statute As Requiring PTAB To Address In FWD Every Claim Petitioner Challenged: “When § 318(a) says the Board’s final written decision ‘shall’ resolve the patentability of ‘any patent claim challenged by the petitioner,’ it means the Board must address every claim the petitioner has challenged.” SAS Institute (U.S. 04/24/2018) (5-4) (Gorsuch, J.) (Director has no “partial institution” power; statute is clear on its face so deference to agency view unwarranted) (Post SAS Institute, PTAB decided to institute on all grounds on all claims, or not institute at all.)
Trial Court May Exclude Evidence That Defendant Was Party That Requested Unsuccessful Reexamination: Not abuse of discretion to allow reexamination record to be used at trial but preclude identifying defendant as party that requested the reexamination. 01 Communique (Fed. Cir. 04/26/18).