The Federal Circuit held Walker Process Claims without a “substantial” patent issue can be heard outside the Federal Circuit based on the US Supreme Court decision in Gunn v. Minton.

WHAT HAPPENED:

  • The tug-of-war between antitrust and intellectual property continued Friday, February 9, with the Federal Circuit transferring a Walker Process claim to the Fifth Circuit for lack of jurisdiction. Xitronix Corp. v. KLA-Tencor Corp., Case No. 2016-2746 (Fed. Cir., Feb. 9, 2018) (Moore, J.).
  • In Walker Process, the Supreme Court held that a patent holder may be subject to antitrust liability in a situation where the patent was obtained by knowing and willful fraud on the patent office and all the other necessary elements for a Sherman Act charge are present.
  • Here, Xitronix brought a Walker Process claim alleging KLA fraudulently obtained a patent. Though both parties asserted the Federal Circuit had jurisdiction over the claim, the Federal Circuit disagreed.
  • The Federal Circuit specifically asked for supplemental briefing after oral argument relating to Gunn v. Minton, 568 U.S. 251 (2013), to determine whether jurisdiction in the Federal Circuit was proper. In Gunn, the Court held that though the Federal Circuit has exclusive jurisdiction over patent issues, the law doesn’t bar other courts from hearing malpractice claims relating to pursuing patents.
  • Citing Gunn v. Minton, the Federal Circuit held that though this case would potentially involve “analysis of the [patent] claims and specifications and may require application of patent claim construction principles,” the federal question jurisdictional statute required more than “mere resolution of a patent issue.”

Thus, finding no “substantial” issue of patent law, the Federal Circuit transferred the claim to the Fifth Circuit to determine whether the patent was procured through fraud in order to illegally create or preserve a monopoly.

WHAT THIS MEANS:

  • Going forward, Walker Process claims will not be heard in the Federal Circuit merely because they require some consideration of a patent issue.
  • Gunn v. Minton continues to narrow the jurisdiction of the Federal Circuit. Tangential resolution of a patent dispute is not necessarily enough to invoke Federal Circuit jurisdiction.

WHAT HAPPENED:

  • Wading into the merging streams of antitrust and patents, the US Court of Appeals for the Ninth Circuit upheld dismissal of an antitrust suit where a jury verdict in a parallel case found no patent infringement. Cascades Computer Innovation, LLC v. RPX Corp. and Samsung Electronics Co. Ltd., Case No. 16-15782 (9th Cir., December 11, 2017).
  • Cascades Computer Innovation is a non-practicing entity that owns a series of 38 patents (collectively known as the Elbrus portfolio) allegedly used to optimize Android devices. Cascades intended to license these patents for use by companies including Motorola, HTC, Samsung, LG Electronics, Dell and RPX (a defensive patent aggregator that purchases patents on behalf of subscriber organizations using membership fees). An agreement couldn’t be reached. Cascades alleged this lack of agreement was due to a conspiracy between the defendants, using RPX, to not seek licenses for use of these patents—an agreement in violation of antitrust law.
  • Cascades filed two related lawsuits against Samsung, Motorola, HTC and others in separate district courts with separate causes of action. In Illinois, Cascades’ claim rested on patent infringement. Although the entire Elbrus portfolio was referenced in the complaint, the court determined only one patent, referred to by the court as “the ‘750 patent,” was truly at issue. Cascades asserted that merely installing the Android mobile device operating system resulted in an infringement of this patent. In California, Cascades relied on antitrust law arguing the agreement between defendants not to purchase licenses amounted to a violation. Again, the ‘750 patent was primarily at issue. Thus, Cascades simultaneously argued that a group of companies infringed on their patent and also that those companies illegally conspired to refuse to obtain licenses for use of that patent.
  • A jury in Illinois determined there was no patent infringement, which undercut Cascades’ argument in California. Without any infringement, the court in California noted “[o]nly those who possess antitrust standing by virtue of having suffered antitrust injury may bring a private action for damages for violation of the antitrust laws” before ruling for the defendants on a motion for judgment on the pleadings. The California court reasoned that in order to show antitrust injury, there must be harm to competition, not any particular competitor. The court reasoned that a “failure to license a non-infringed patent typically cannot serve as the basis for a cognizable antitrust injury.” Because Cascades’ entire theory of injury was based upon ongoing infringement of the ‘750 patent, and not on any potential, unalleged future infringement, there was no antitrust injury in the case.
  • On appeal, the 9th Circuit determined the district court “properly recognized the preclusive effect of [the Illinois decision] and correctly reasoned that because the defendants did not infringe the ‘750 patent, Cascades’ failure to license the patent was not a cognizable antitrust injury.” In a footnote, the panel explained, “[h]ere, the defendants were not infringing the valid patent; therefore, they were not using the invention. Thus, the failure to license had no effect on price or quantity of any consumer goods.”
  • In sum, the district court held and the 9th Circuit affirmed that without any infringement there can be no antitrust injury, and thus no antitrust claim.

WHAT THIS MEANS:

  • While seeking an antitrust remedy where no patent infringement is found represents a relatively novel tactic, alleging an injury without an infringement doesn’t appear to be a winning strategy in private causes of action.

WHAT HAPPENED

  • On Friday, October 13, acting FTC chairman Maureen Ohlhausen delivered a speech at the Hillsdale College Free Market Forum titled, “Markets, Government, and the Common Good,” highlighting her view on the intersection between IP and antitrust domestically and abroad.
  • Chairman Ohlhausen’s position, that IP rights must be vigorously protected, is in line with her long-held belief that some enforcement of antitrust laws, especially abroad, has been overzealous when it comes to intellectual property.
  • In 2012, Ohlhausen objected to the FTC’s decision to require Robert Bosch GmbH to refrain from pursuing injunctions on certain SEPs (standard essential patents), and she wrote a dissenting opinion on the commission’s consent agreement with Google Inc. and Motorola Mobility Inc. requiring Google to withdraw claims for injunctive relief on SEPs.
  • In Friday’s speech, she argued that though “foreign [governments] take or allow the taking of American proprietary technologies without due payment,” the US should continue to protect patent rights and avoid punishing a company for “a unilateral refusal to assist its competitors.”
  • Ohlhausen also addressed what she termed the current “age of IP skepticism” as it relates to patent-assertion entities (PAEs).
  • She concluded that while some minor changes may be appropriate to promote innovation in the face of “Litigation PAEs” employing nuisance litigation techniques, these changes should be “narrowly tailored to address observed behavior.”
  • She voiced support for case management practices that could mitigate litigation cost asymmetries between PAE plaintiffs and defendants, increased transparency, and rules encouraging courts to stay litigation by PAEs when parallel proceedings are already underway, but eschewed more drastic measures such as the creation of “new, specialized guidelines to address particular types of IP disputes,” which, she argued, are unsupported by the available evidence.
  • In her view, “the key to addressing the US patent system lies in incremental adjustment where necessary based on a firm empirical foundation.”

WHAT THIS MEANS

  • Ohlhausen’s concern that certain antitrust enforcement “inappropriately morphs antitrust law into a tool for price regulation” is a notable policy direction that could make the FTC less inclined to pursue cases involving alleged violations of SEPs.
  • Under her direction, any changes forthcoming at the FTC are likely to be minor adjustments reflecting the belief that protecting patent rights is “fundamental to advanc[ing] innovation.”

WHAT HAPPENED

  • On February 14, 2017, Integra agreed to purchase Johnson & Johnson’s Codman neurosurgery business (excluding Codman’s neurovascular and drug deliver businesses) for $1.045 billion.
  • Seven months later, on September 25, 2017, the Federal Trade Commission (FTC) agreed to clear the transaction subject to the parties divesting five neurosurgical tools and associated assets including the relevant intellectual property (IP), manufacturing technology and know-how, and research & development (R&D) information related to the five tools. Additionally the buyer of the divested assets can freely negotiate to hire any employees that worked on sales, marketing, manufacturing, or R&D for the divestiture products. The parties must also supply Natus Medical Incorporated (Natus) with cranial access kits often sold with the divestiture assets until Natus can start sourcing them independently.
  • The FTC required that the parties divest the following medical devices:
    • Intracranial pressure monitoring systems, which measure pressure inside the skull. The FTC determined that Integra (68 percent) and Codman (26 percent) combined market share in the United States would be 94 percent and that only fringe competitors with limited presence would have remained.
    • Cerebrospinal fluid collections systems, which drain excess cerebrospinal fluid and monitor pressures within the fluid. The FTC found that Integra (57 percent) and Codman (14 percent) would combine for 71 percent market share in the United States and would have reduced the number of significant competitors from three to two.
    • Non-antimicrobial external ventricular drainage catheters, which funnel excess cerebrospinal fluid form the brain to cerebrospinal fluid collection systems to relieve intracranial pressure. Here, the FTC said Integra (29 percent) and Codman (17 percent) are the number two and three competitors accounting for 46 percent of the market in the United States and would have reduced the number of significant competitors from three to two.
    • Fixed pressure valve shunts, which are used to treat excessive accumulation of cerebrospinal fluid. The FTC found that Integra (23 percent) and Codman (15 percent) were the number two and three competitors would control 38 percent of the US market and, again, that the number of competitors would have been reduced from three to two.
    • Dural grafts, which are used to repair or replace the membrane that surrounds the brain and spinal cord and keep cerebrospinal fluid in place. The FTC determined that the merger would have reduced the number of significant competitors from four to three with Integra (66 percent) and Codman (nine percent) combining for 75 percent market share.
  • Under the terms of the settlement, the parties must divest within 10 days of closing to Natus, which is a global health care company with an existing neurology business including systems that are complementary to the divestiture assets.

Continue Reading THE LATEST: Integra Forced to Divest Neurosurgical Tools to Gain FTC Clearance

Reversing long-standing Federal Circuit precedent, the United States Supreme Court has now held that a patentee extinguishes its patent rights on a product upon its sale of that product, regardless of (1) whether the patentee placed a restriction on the sale (prohibiting reuse or resale), or (2) whether the sale occurred within the United States.

Read the full article.

On January 13, 2017, the Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) issued updated Antitrust Guidelines for the Licensing of Intellectual Property (the Guidelines). The revised Guidelines follow nearly half a year of consideration and public commentary. According to the FTC, the updates were “intended to modernize the IP Licensing Guidelines without changing the agencies’ enforcement approach with respect to intellectual property licensing or expanding the IP Licensing Guidelines to address other topics.” In that vein, the modest updates to the Guidelines affirm that the antitrust agencies still believe that IP issues do not require an altered analysis and that the licensing of intellectual property is generally procompetitive.”

Read the full article here.

On December 2, 2016, the Supreme Court of the United States granted cert in a key case regarding the scope of the patent exhaustion doctrine, or “first sale doctrine,” as it relates to (1) sales of a patented item subject to restrictions on post-sale use and (2) authorized sales of a patented article outside of the United States. The US Supreme Court’s resolution of this case will have important implications for secondary markets for patented products and global commerce.

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On 8 September 2016, the General Court of the European Union upheld the European Commission’s decision in which the antitrust regulator imposed fines of approximately EUR 150 million on Lundbeck and a number of generic companies for entering into reverse settlement agreements which delayed the entry of cheaper generic versions of a blockbuster antidepressant.

The Commission had first hinted that patent settlement agreements causing delayed generic entry might be problematic in its 2009 report on the Pharmaceutical Sector Inquiry. Continue Reading EU Court Confirms European Commission’s Decision on Pay-for-Delay Agreements

On October 6, the Federal Trade Commission (FTC) released its report on patent assertion entity (PAE) activity. The report is the result of research that began in September 2014 to address a gap in the agency’s understanding of PAEs, how they operate and how policies can be developed to reduce nuisance litigation. The study focused on PAE practices, including acquisition, litigation and licensing. The FTC recommends that policymakers address asymmetries in PAE litigation through various procedural and substantive reforms.

Read the full article here.

On 8 September 2016, the General Court of the EU (GCEU) handed down five judgments upholding a decision by the Commission of 19 June 2013 imposing fines on Lundbeck, an originator company, and Merck (the parent company of Generics), Arrow, Alpharma and Ranbaxy, four generic companies. The Commission found that the companies had entered into anticompetitive “pay-for-delay” settlement agreements whereby Lundbeck paid a lump sum to the generic companies in exchange for their agreement to delay their entry on the market for Citalopram, an anti-depressant drug.

This ruling is notable in that it is the first time that the GCEU has been asked to rule on patent settlements between originators and generic companies. The GCEU upheld the Commission’s reasoning, noting that the Commission’s reasoning in this case reflects the provisions of its Guidelines on the application of Article 101 of the Treaty on the Functioning of the EU (TFEU) to technology transfer agreements.

Continue Reading General Court of the EU Confirms Fines Imposed on Lundbeck and Generic Drug Manufacturers for Entering into Patent Settlements