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THE LATEST: Walker Process Claims Don’t Belong in the Federal Circuit

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.



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THE LATEST: Ninth Circuit Affirms Dismissal of Antitrust Counterclaim against Labor Union Clarifying Scope of Noerr-Pennington Doctrine and the Implied Labor Exemption

On July 24, 2017, the US Court of Appeals for the Ninth Circuit affirmed the dismissal of an antitrust counterclaim brought by ICTSI Oregon, Inc. (ICTSI), the operator of a marine shipping facility, against the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). ILWU is a labor union that represents many ICTSI employees, including longshoremen and mechanics. PMA is a multi-employer collective bargaining association covering the West Coast of the United States, which represents employers, including ICTSI, in negotiations with labor unions.

The opinion elucidates the current law surrounding the scope of Noerr-Pennington immunity and the implied labor exemption to antitrust liability.

WHAT HAPPENED
  • ICTSI’s antitrust counterclaim arose out of a labor dispute concerning ILWU’s collective bargaining agreement (CBA) with PMA, which required that all “reefer work” (i.e., plugging, unplugging and monitoring refrigerated shipping containers) performed by PMA members must be assigned to ILWU workers. When ICTSI instead assigned its reefer work to a rival union, the collective bargaining agreement administrator, the Joint Coast Labor Relations Committee, notified ICTSI that it was in violation of the CBA and faced monetary fines and expulsion from the collective bargaining association.
  • ICTSI initiated a proceeding before the National Labor Relations Board (NLRB) to resolve the dispute. The NLRB ruled that the rival union workers were entitled to the reefer work. While the NLRB proceedings were pending, ILWU and PMA filed suits in the US District Court for the District of Oregon seeking an injunction ordering ICTSI to comply with the Joint Committee decision and assign the work to ILWU.

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THE LATEST: FTC Files Complaint Against Louisiana Real Estate Appraisers Board

This week, the Federal Trade Commission filed an administrative complaint against the Louisiana Real Estate Appraisers Board (LREAB). This complaint is the FTC’s first against a state licensing board since it prevailed in the Supreme Court in the decision in NC State Board of Dental Examiners v. FTC in 2015. There, the Court held that immunity from the antitrust laws under the state action doctrine does not apply to a state board that regulates an industry if: 1) a majority of the board members are active participants in the market they are regulating, and 2) the board has not been actively supervised by the state. McDermott reported in detail about the NC Board of Dental Examiners at the time of the decision. The complaint comes on the tail of a settlement agreement between the FTC and a trade organization, the American Guild of Organists, as reported this week.

FTC alleges that the LREAB violated Section 5 of the Federal Trade Commission Act by unreasonably restraining price competition for real estate appraisal services provided to appraisal management companies (AMCs) in Louisiana.

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LegalZoom and the North Carolina Bar Settle Antitrust Dispute

In the latest development from a number of antitrust lawsuits filed against state regulatory boards, LegalZoom.com Inc. signed a consent agreement with the North Carolina State Bar (State Bar) to settle a $10.5 million lawsuit.  LegalZoom had alleged multiple violations of federal antitrust laws, including a Section 1 claim that the State Bar had collectively refused to deal with the online legal services provider by refusing to register its prepaid legal services.

Under North Carolina law, the State Bar is tasked with registering prepaid legal services plans, which provide plan-holders access to licensed attorneys to provide legal advice and services.  A plan that is not registered may not be sold in North Carolina, nor can licensed attorneys in North Carolina provide services under a plan that is not registered.  LegalZoom attempted to register  its legal services plans with the State Bar, but the State Bar refused, claiming that LegalZoom’s plans did not meet the N.C. State Bar requirements for registration.  LegalZoom then filed a lawsuit, and the parties ultimately reached the settlement at present, which will allow LegalZoom to offer its plans in North Carolina.

This case—and others filed against medical boards, veterinary boards, or state bar associations, to name a few examples—follow from the U.S. Supreme Court’s decision earlier this year in North Carolina State Board of Dental Examiners v. Federal Trade Commission, 574 U.S.___ (Feb. 25, 2015).  Prior to that decision, state regulatory boards often claimed state-action immunity from antitrust liability.  Under the state-action doctrine, the conduct of states acting in their sovereign capacity is shielded from federal antitrust scrutiny.  In North Carolina State Board of Dental Examiners, the Supreme Court reasoned that conduct by state regulatory boards that are controlled by active participants in the profession the board regulates does not constitute exercise of the state’s sovereign power, unless the board is subject to active supervision by the state.  Therefore, such state agencies do not receive state-action immunity and are subject to the federal antitrust laws. Here, LegalZoom used the Supreme Court’s decision in North Carolina State Board of Dental Examiners to argue that the State Bar was subject to federal antitrust laws, claiming the board was controlled by active market participants and was not actively supervised by the state.  While the parties’ settlement meant that this specific question was never resolved, the lawsuit highlights a trend in antitrust claims filed against state regulatory boards.

We previously analyzed North Carolina State Board of Dental Examiners shortly after the decision came down. As this blog has previously pointed out, “many states regulate professions and occupations through boards controlled by experienced, active practitioners in the fields they regulate.  Any state or quasi-state entity composed, in whole or in part, of market participants should take careful note of this case and examine the entity’s structure, composition and operations to assess whether its market participants have “control.”  If they do, then the entities and their states must consider changes, either to eliminate the market participants’ controlling role [...]

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Sham-Wow! Antitrust Liability May Attach to Sham Administrative Petitions

Addressing whether the “sham” exception to Noerr-Pennington immunity is limited to sham litigation in courts, the U.S. Court of Appeals for the Federal Circuit vacated a lower court’s summary judgment of no antitrust liability, finding that antitrust liability can attach to sham administrative petitions and that the sham litigation exception is not limited to court litigation.  Tyco Healthcare Group LP v. Mutual Pharm. Co., Inc., Case No. 13-1386 (Fed. Cir., Aug. 6, 2014) (Bryson, J.) (Newman, J., dissenting).

Tyco Healthcare acquired patents relating to temazepam, an insomnia drug marketed as Restoril.  Seeking Food and Drug Administration (FDA) approval to manufacture and sell generic temazepam, Mutual Pharmaceutical filed an Abbreviated New Drug Application (ANDA), certifying that its generic product would not infringe any patents.  Tyco disagreed and sued Mutual for infringement under the Hatch-Waxman Act.  The district court rejected this claim, reasoning that products manufactured to the ANDA’s specification could not infringe.  Tyco then filed a citizen petition with the FDA, urging new guidelines to require generic temazepam manufacturers to more extensively demonstrate bioequivalence to Restoril.  The FDA denied Tyco’s citizen’s petition “indicating that, in the FDA’s view, it was wholly without merit.”

In response to Tyco’s infringement suit, Mutual brought antitrust counterclaims, including allegations that Tyco’s suit and citizen petition were shams.  In other words, Mutual argued that Tyco used illegitimate means to keep Mutual’s product off the market.  On summary judgment, the district court rejected these counterclaims, holding that it was reasonable for Tyco to proceed with its infringement action and that antitrust liability for sham claims cannot apply to filing administrative petitions because the exception “is expressly limited to litigation.” Mutual appealed.

The Federal Circuit vacated the rulings on antitrust issues and remanded for further consideration.  With regard to Tyco’s Hatch-Waxman claim, the Federal Circuit found that it was not unreasonable for a patent owner to allege infringement under Hatch-Waxman if the patent owner has evidence that the as-marketed commercial ANDA product will infringe, even though the hypothetical product specified in the ANDA could not infringe.  The Court concluded that further inquiry was necessary to determine if Tyco’s factual theory of infringement was objectively baseless.  With regard to the administrative proceeding, the Court found that the sham exception to Noerr-Pennington is not limited to court litigation, and that it has been applied to administrative petitions, including FDA citizen petitions.  Accordingly, it remanded this counterclaim for resolution of fact issues regarding whether the citizen petition was objectively baseless and motivated by a subjective desire to directly interfere with Mutual, as well as whether Mutual suffered any anticompetitive injury.

Judge Newman dissented from the court’s conversion of routine patent litigation into antitrust violations, arguing that “[e]nforcement of a presumptively valid patent against a product that infringes by statute [Hatch-Waxman] cannot be deemed objectively baseless” and patent holders have “the right to communicate with the FDA concerning public information on matters within the agency’s authority and responsibility without incurring antitrust liability.”




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The Supreme Court Clarifies When Antitrust Law Applies to Joint Ventures in American Needle Inc. v. National Football League, Inc.

by Jon B. Dubrow, Stephen Wu and Vincent C. van Panhuys

In a unanimous decision issued on May 24, 2010, the Supreme Court of the United States clarified when participants in a joint venture may face antitrust liability for their joint activities.   In American Needle, Inc. v. National Football League, Inc., et al, the Supreme Court ruled that the National Football League (NFL) and its member teams are not immune from the antitrust laws when licensing the teams’ intellectual property rights jointly through a single entity.  Instead, the antitrust laws do apply and the teams’/League’s conduct must be analyzed to determine whether it can be an agreement in restraint of trade violating the antitrust laws.

The American Needle decision has broad application to joint ventures and other collaborations involving competitors across all industries.  This is because the Supreme Court held that participants to a joint venture are not categorically immune from the antitrust laws even if they form one entity to conduct their joint activities.  Rather, the antitrust laws will still apply and courts must apply the “rule of reason,” which requires weighing the pro- and anticompetitive effects of the joint venture’s activities to analyze whether they violate the antitrust laws.

The Supreme Court stated that the test for whether antitrust laws relating to agreements in restraint of trade applies to a joint venture’s conduct focuses on whether the conduct at issue involves separate decision makers whose joint activities would rob the marketplace of “independent centers of decision making” and, thus, actual or potential competition.   To make that determination, the Supreme Court stated that courts should focus on “competitive realities” and whether the participants to the joint venture still have separate competing economic interests that are not necessarily aligned.  Courts should do this even if participants have formed one entity through which they act and even if participation by competitors in the joint venture is necessary to produce a product or service.  The Supreme Court stated the fact that a joint venture that undertakes some conduct for which participation by competitors is required to offer a new product or service enables it to receive rule of reason, rather than per se, analysis, but does not render it immune.  The case was remanded for that rule of reason analysis.

The Supreme Court’s decision, the first decision it has granted in favor of a private antitrust plaintiff since the early 1990s, provides a timely opportunity to remind businesses to reexamine their joint ventures and other collaborations involving competitors that may subject them to risk under the antitrust laws.   Companies should take a fresh look at their participation in these activities and determine whether certain modifications would reduce their risk of liability under the antitrust laws.




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