IP UPDATE
Exploring the latest in intellectual property law
IP UPDATE
Exploring the latest in intellectual property law
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Printed Matter Is Patentable If It’s Functional, Not Just Communicative

by | Nov 19, 2020 |

In a tour de force of issues related to the printed matter doctrine, the US Court of Appeals for the Federal Circuit reversed various rulings that the patents-in-suit were not infringed, not willfully infringed and invalid as directed to printed matter. Instead, the Court held that there was substantial evidence in the record to support a jury finding of infringement and willfulness, and that the asserted claims were not directed solely to printed matter and thus were patent eligible under 35 USC § 101 (thereby raising a genuine dispute of material fact that precludes summary judgment as to anticipation). C R Bard Inc. v. AngioDynamics, Inc., Case Nos. 19-1756, -1934 (Fed. Cir. Nov. 10, 2020) (Reyna, J.)

This dispute began when Bard sued AngioDynamics for infringing three patents directed to identifying a vascular access port that is suitable for power injection, which is a medical procedure requiring injecting fluids into a patient at a high pressure and flow rate. Generally, the identification was accomplished by certain markings on the vascular access port that can be detected during an x-ray scan.

Prior to trial, AngioDynamics moved for summary judgment on patent eligibility, novelty and enablement. This summary judgment motion was initially denied, but the district court sought a report and recommendation prior to trial regarding whether certain limitations relating to radiographic marker images were entitled to patentable weight under the printed matter doctrine. The magistrate judge concluded that the limitations were not entitled to patentable weight, and the district court adopted the recommendation. At trial and at the end of Bard’s case-in-chief, AngioDynamics moved for judgment as a matter of law (JMOL) on non-infringement and no willfulness. Ultimately, the district court terminated the trial and granted AngioDynamics’ JMOL motion for non-infringement and no willfulness. The district court further held that the claims were invalid because they were directed to printed matter and were not inventive. Bard appealed, challenging each of the district court’s findings.

In reversing the summary judgment of no infringement, the Federal Circuit explained that Bard’s expert’s reliance on an incorrect understanding of the district court’s claim construction was alone insufficient to grant judgment as a matter of law. Instead, the expert’s misunderstanding went to credibility, and the Court found the record reflected that the expert properly testified that the various claim elements were met under the proper claim constructions. The Court further explained that Bard did not have an affirmative duty to test AngioDynamics products, but rather was entitled to rely on AngioDynamics’ representations to the US Food and Drug Administration and to its customers. With regard to induced infringement, the Court explained that if an alleged infringer instructs its users to use the product in an infringing way, there is sufficient evidence for a jury to find infringement. Because the district count found no inducement based on its erroneous summary judgment of no infringement, that ruling was similarly reversed.

The Federal Circuit also reversed the district court on its summary judgment of no willfulness, concluding that Bard [...]

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PTO Seeks Comments on Proposed Rulemaking for Denying Patent Reviews

by | Oct 29, 2020 | ,

The US Patent and Trademark Office (PTO) requested public comments on considerations for instituting trials under the Leahy-Smith America Invents Act (AIA). Comments are due by November 19, 2020.

Patent practitioners have grown accustomed to reviewing the PTO Patent Trial and Appeal Board (Board) administrative guide, precedential or informative opinions, and other published filings and decisions to discern best practices for filing petitions for and defending against inter partes review, post-grant review, covered business method and derivation proceedings before the Board. For example, the latest Board Consolidated Trial Practice Guide (Nov. 2019) (CTPG) is available here. The PTO is considering codifying or modifying its current policies and practices through formal rulemaking and wishes to gather public comments on its current approach and other approaches suggested by stakeholders.

PTO policies and Board decisions such as General Plastic, Valve Corp. I, Valve Corp. II, NHK Spring and Fintiv set forth factors for analyzing whether to institute an AIA proceeding (and particularly a follow-on or serial petition) or issue a discretionary denial due to the timeline for parallel district court proceedings. Many of these policies and cases are also discussed in the CTPG. The PTO already has received input from stakeholders on these policies that expand on the PTO director’s discretionary authority to institute an AIA trial. Most stakeholder comments suggested that the case-specific analysis outlined in precedential opinions and the CTPG achieves the appropriate balance and reduces gamesmanship—for example, by ensuring that AIA proceedings do not create excessive costs and uncertainty for the patent owner or the system, while allowing meritorious challenges to patents to be heard. However, some stakeholders have proposed that the PTO adopt brightline rules, regardless of the case-specific circumstances, to:

  • Use its discretion to preclude claims from being subject to more than one AIA proceeding
  • Permit more than one AIA proceeding only if the follow-on petitioner is unrelated to the prior petitioner
  • Place no limits on the number of petitions that can be filed or the number of AIA trials that can be instituted against the claims of a patent, so long as the petition complies with statutory timing requirements and the institution threshold of showing that at least one claim of the patent is unpatentable
  • Preclude institution of an AIA trial against challenged claims if the patent owner opposes institution and a related district court or US International Trade Commission (ITC) action (in which any of the challenged claims are or have been asserted against the petitioner, the petitioner’s real-party-in-interest or a privy of the petitioner) is unlikely to be stayed
  • Eliminate any consideration of the status of any district court or ITC actions involving the challenged patent, so long as the petition complies with statutory timing requirements and the institution threshold.

These contrasting views prompted the PTO to issue a request for comments on the factors that should be considered as part of a balanced assessment of the relevant circumstances when exercising its discretion to institute an AIA trial. The PTO [...]

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Only Human: Broadest Reasonable Interpretation Standard Applies to Intentionally Expired Patent

by | Oct 22, 2020 | ,

Affirming an invalidity finding by the Patent and Trial Appeal Board (PTAB), the US Court of Appeals for the Federal Circuit found that the claims of the now-expired patent should be construed under the broadest reasonable interpretation (BRI) standard, and not under the Phillips standard, because the patent owner intentionally gave up the remainder of the patent term only after the appeal was fully briefed. Immunex Corp. v. Sanofi-Aventis U.S. LLC, Case Nos. 19-1749, -1777 (Fed. Cir. Oct. 13, 2020) (Prost, C.J.).

Immunex owns a patent directed to human antibodies that inhabit certain receptors to treat inflammatory diseases such as arthritis. After being sued for infringement, Sanofi and Regeneron (collectively, Sanofi) requested inter partes review (IPR) of the patent, which the PTAB instituted. Based on the IPR filing date and because the patent was unexpired during the pendency of the IPR proceeding, the PTAB used the BRI standard to construe various claim terms. Had the patent been expired, the PTAB would have used the more stringent Phillips standard to construe the claims. Ultimately, the PTAB found all of the challenged claims unpatentable. Immunex appealed.

After appellate briefing was complete, Immunex filed a terminal disclaimer of its patent. The US Patent and Trademark Office accepted the terminal disclaimer, and as a result the patent term expired approximately two months before oral argument. Immunex then filed a citation of supplemental authority informing the Federal Circuit of the terminal disclaimer and asking the Court to change the applicable claim construction standard from BRI to Phillips.

The Federal Circuit found that the application of the BRI standard to Immunex’s patent was appropriate. Although the PTAB currently applies the Phillips claim construction standard in all newly filed IPRs, at the time that Sanofi filed its IPRs, the PTAB applied the Phillips standard only to expired patents. For unexpired patents, it applied the BRI standard. The Court noted that the use of the Phillips standard in cases where the patent expired during the appellate process should not be an absolute, particularly when the patent term expired at an unexpected early date, such as through the filing of a terminal disclaimer.

The Federal Circuit further affirmed the PTAB’s claim construction under the BRI standard and the invalidity finding predicated on that claim construction. The issue on appeal was whether a “human antibody” must be entirely human (as asserted by Immunex) or whether it may also be “partially human,” including “humanized” (as asserted by Sanofi and construed by the PTAB). The Court agreed with the PTAB and found that the patent’s specification supported the conclusion that the BRI of “human antibody” “includes both fully human and partially human antibodies.” The Court also found that “human antibodies” in the context of the patent-in-suit is a broad category that encompasses both partially and completely human antibodies. The Court therefore affirmed the PTAB’s finding.

The Federal Circuit also commented on the PTAB’s departure from an earlier claim construction ruling by a district court in which “human” was construed to mean “fully [...]

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No Refunds: Cancellation of Patent Claims in IPR Isn’t a Taking

by | Sep 3, 2020 |

The US Court of Appeals for the Federal Circuit found that cancellation of a patent in an inter partes review (IPR) proceeding is not a taking and does not grant the patentee any compensable claim against the United States. Christy, Inc. v. United States, Case No. 19-1738 (Fed. Cir. Aug. 24, 2020) (Hughes, J.).

After Christy sued two competitors for infringement of a patent directed to a vacuum, one of the competitors filed petitions for IPR. The Patent Trial and Appeal Board (PTAB) instituted the IPRs and ultimately found a majority of the patent claims unpatentable. Christy appealed to the Federal Circuit, which affirmed the PTAB’s invalidity decision.

Christy then filed a class action suit in the US Court of Federal Claims to recover from the government the issuance and maintenance fees Christy had paid for the patent, investments Christy had made in the patented technologies, attorneys’ fees from defending the IPR proceedings, the value of the patent claims, royalties and other payments for use of the patents. The government moved to dismiss all six claims for lack of subject matter jurisdiction and failure to state a claim. The court partially granted the motion to dismiss, but found that it had jurisdiction to consider Christy’s Fifth Amendment takings claim. The court found that Christy did not state a claim for relief on the merits, and reasoned that the cancellation of claims in an IPR did not amount to a compensable taking of Christy’s property interest. The court held that it did not have jurisdiction to consider Christy’s alternative illegal exaction claim, since a statute granting authority to the US Patent and Trademark Office (PTO) to refund mistakenly excessive patent-related fees displaced the court’s Tucker Act jurisdiction. In any case, the court found that on the merits, Christy’s issuance and maintenance fees were properly owed at the time they were paid, and were not paid by mistake. The government did not require Christy to pay any alleged damages on the government’s behalf, or at all, and so Christy’s theory that damages were illegally exacted was found “devoid of merit.” Christy appealed.

On appeal, Christy argued that the claims court erred in finding 1) that Christy failed to state a compensable taking claim based on the cancellation of patent claims, 2) that the claims court lacked subject matter jurisdiction over the illegal exaction claim, and 3) that Christy failed to state a plausible illegal exaction claim. The Federal Circuit disagreed, affirming the claims court and reiterating its finding in Golden v. United States that the AIA did not displace Tucker Act jurisdiction over IPR-based takings claims, and that cancellation of patent claims in an IPR cannot be a taking under the Fifth Amendment. Thus, the Court found that the claims court correctly found that it had jurisdiction over Christy’s takings claim, but that such cancellation was not a taking.

The Federal Circuit next considered Christy’s illegal exaction claim. Illegal exaction occurs when money is “improperly paid, exacted, or taken from the claimant [...]

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Standard Essential Patent Licensing Practices Do Not Violate Antitrust Laws

by and | Aug 26, 2020 |

The US Court of Appeals for the Ninth Circuit vacated a district court decision that found Qualcomm’s patent licensing practices violate antitrust laws and reversed a permanent, worldwide injunction against several of Qualcomm’s business practices. Fed. Trade Comm’n v. Qualcomm Inc., Case No. 19-16122 (9th Cir. Aug. 11, 2020) (C.J. Callahan).

Qualcomm sells modem chips that are incorporated into cellular handsets (i.e., smartphones) made by companies such as Samsung, Huawai, Apple and others. Qualcomm also holds a number of standard essential patents (SEPs) implemented by modem chips that are essential to cellular communication standards. A core part of Qualcomm’s business model is that it only licenses its SEPs to smartphone makers, i.e., its original equipment manufacturer (OEM) customers, not to rival modem chip suppliers—even though its rivals’ chips practice Qualcomm’s SEPs. Doing this allows Qualcomm to maximize its profits by charging royalty rates based on the value of the end-product smartphones rather than just the modem chip. In addition, Qualcomm will not supply modem chips to OEM customers unless they first pay to license Qualcomm’s SEPs (“no license, no chips”). OEMs must pay this licensing fee to Qualcomm even if they source chips from another supplier.

In January 2017, the FTC filed suit against Qualcomm in the Northern District of California, alleging that Qualcomm’s licensing practices violate the antitrust laws and unfairly protect its monopoly power as a modem chip supplier. Following a two-week bench trial, the district court issued a lengthy opinion ruling in favor of the FTC and ordering extensive injunctive relief requiring Qualcomm to change its business practices. The court made a number of findings, including: (1) Qualcomm’s refusal to license its SEPs to rival chipmakers violates both its FRAND commitments to standard-setting organizations (SSOs) and an antitrust duty to deal; (2) Qualcomm’s royalty rates for its SEPs are unreasonably high because they are based on the value of end products and (3) Qualcomm’s royalties, in conjunction with its “no license, no chips” policy, imposes an anticompetitive “surcharge” on the price of its rivals’ chips. Qualcomm appealed.

The Ninth Circuit reversed the district court’s decision in its entirety and vacated the injunctive relief which had been ordered, finding that Qualcomm’s licensing practices amount to “hypercompetitive,” not anticompetitive, behavior. The Court recognized that Qualcomm’s licensing practices are designed to maximize its profits, but concluded that they do not unfairly distort competition within the modem chip markets. According to the Court, the district court improperly extended the reach of the antitrust laws in issuing its injunction.

The Ninth Circuit addressed and rejected each of the district court’s findings. First, the Court concluded that Qualcomm does not have an antitrust “duty to deal” with its rival chipmakers. The Court emphasized that the Supreme Court has recognized only a narrow exception to the general rule that a business need not deal with its competitors, and concluded that the exception was not met here. The Court also concluded that whether Qualcomm breached a FRAND commitment to license its SEPs to rivals was [...]

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Senator Tillis Urges USPTO to Adopt Patent Reform Proposals

by | Aug 18, 2020 |

On August 10, 2020, Senator Thom Tillis of North Carolina urged the Director of the United States Patent and Trademark Office (USPTO), Andrei Iancu, to adopt two patent reform proposals suggested by Lisa Larrimore Ouellete and Heidi Williams. Senator Tillis is the Chairman of the Senate Judiciary Committee’s Subcommittee on Intellectual Property. Stanford University professors Lisa Larrimore Ouellete and Heidi Williams proposed the reforms in a paper, Reforming the Patent System, The Hamilton Project, Policy Proposal 2020-12 (June 2020).

The first proposed reform would require patent applicants to more clearly distinguish between hypothetical experimental results and actual experimental results. The USPTO allows applicants to include so-called “prophetic examples” in a patent application. The patent applicant is supposed to distinguish between prophetic examples and actual working examples by the verb tense used to describe the example. Prophetic examples should be described in the present or future tense, while working examples should be described in the past tense. However, the verb tense is not always clear. Moreover, the verb tense distinction may not be appreciated by foreign language translators, scientists and engineers, especially in countries where prophetic examples are not allowed. Ouellette and Williams proposed that prophetic examples in patent applications be clearly labeled. This would reduce confusion by the public. Senator Tillis noted that confusing data in patent applications could be used to mislead the public and pump up profits for a company that has little to offer the economy or the public.

The second proposed reform would require patent owners to disclose ownership of patents in a more transparent and standardized manner. The lack of a transparent and standardized recording of patent assignments increases the costs and uncertainties of freedom-to-operate searches, licensing, negotiations and patent litigation. There is currently no requirement by the USPTO that the assignment records be updated when there is an ownership change of a patent. There is no requirement that hidden owners of patents be listed in an assignment record. Moreover, a single patent owner can be referred to by different names in different patents. Ouellette and Williams proposed: 1) Congress or the USPTO should require standardization of entity and inventor names across patent records, 2) Congress or the USPTO should increase incentives to record changes in patent assignments, and 3) at least for patents involved in litigation, parties having ownership interests in the patents should be identified.

Ouellette and Williams also proposed adjusting patent terms for pharmaceuticals so that pharmaceuticals that have to undergo a lengthy clinical trial would still have a sufficient patent term once they are approved by the Food and Drug Administration. However, patent term changes require a change to the patent statute, and therefore this proposal needs to be approved by Congress.

Senator Tillis explained that the two proposed reforms would enhance “the patent system so that it provides optimal incentives for innovators and inventors while also minimizing transactional costs that may discourage the development of new products.” Senator Tillis noted the two proposed reforms could be implemented by the USPTO [...]

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“Method of Preparation” Claims Still Patent Eligible Under § 101 in Modified Opinion

by | Aug 13, 2020 |

The US Court of Appeals for the Federal Circuit denied an accused infringer’s petition for rehearing en banc and issued a modified opinion with additional analysis maintaining its prior finding that patent claims directed to a method of preparation were patent eligible. Illumina, Inc. v. Ariosa Diagnostics, Inc., Case No. 19-1419 (Fed. Cir. Aug. 3, 2020) (Lourie, J.) (Reyna, J., dissenting).

In its original decision in Illumina v. Ariosa, the Federal Circuit found that claims directed to methods of preparing a fraction of cell-free DNA that is enriched in fetal DNA were not directed to a patent-ineligible natural phenomenon. In its modified opinion, the Court again concluded that the claims were patent eligible under § 101 because they were not directed to a natural phenomenon, but to an exploitation of that natural phenomenon, by inventing a method for preparing a mixture enriched in fetal DNA that selectively removed maternal DNA. In the modified opinion, the majority further explained that the claimed size thresholds were not dictated by any natural phenomenon, but were “human-engineered parameters that optimize the amount of maternal DNA that is removed from the mixture and the amount of fetal DNA that remains in the mixture in order to create an improved end product that is more useful for genetic testing than the original natural extracted blood sample.” The Court emphasized that the claimed methods achieve more than an observation or detection of a natural phenomenon because the claims include “physical process steps that change the composition of the mixture, resulting in a DNA fraction that is different from the naturally occurring fraction in the mother’s blood.” The Court distinguished Myriad by stating that the claims were ineligible in that case because they covered a gene that the inventors isolated but did not invent, whereas in this case, the inventors claimed an innovative method using human-engineered size parameters to perform the separation—not the separated DNA itself. The Court concluded that the claimed methods were patent eligible under § 101 because they “utilize the natural phenomenon that the inventors discovered by employing physical process steps and human-engineered size parameters to selectively remove larger fragments of cell-free DNA and thus enrich a mixture in cell-free fetal DNA.”

Judge Reyna again dissented, arguing that the claims were patent ineligible under § 101 because they were directed to an undisputed natural phenomenon (i.e., the “surprising” discovery of size discrepancy of cff-DNA in a mother’s blood), and the application of the natural phenomenon used routine steps and conventional procedures that are well known in the art. He explained that “[l]ike in Alice, the claims here are directed to a natural phenomenon because they involve a fundamental natural phenomenon, that cff-DNA tends to be shorter than cell-free maternal DNA in a mother’s blood, to produce a ‘mixture’ of naturally-occurring substances.” Judge Reyna argued that the majority ignored the Court’s “claimed advance precedent” by reasoning that the claims belong in a distinct category of “method of preparation” claims, but such characterization should be treated [...]

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Glass Half Empty: Patent Reciting “Half Liquid” Is Indefinite

by | Aug 13, 2020 |

The US Court of Appeals for the Federal Circuit affirmed the district court’s finding that the asserted patent claims were invalid as indefinite because the meaning of the term “half-liquid” was not reasonably clear from the record. IBSA Institut Biochimique, S.A. v. Teva Pharms. USA, Inc., Case No. 19-2400 (Fed. Cir. July 31, 2020) (Prost, C.J.).

IBSA owns a patent directed to pharmaceutical formulations for thyroid hormones that enable a safe and stable oral administration. IBSA listed in the Orange Book the patent for Tirosint®, a soft gel capsule formulation containing the active ingredient levothyroxine sodium. Teva filed an abbreviated new drug application to market a generic version of Tirosint®, and IBSA responded by filing a lawsuit for patent infringement against Teva.

During claim construction, the parties disputed the construction of the term “half-liquid.” IBSA proposed that “half-liquid” should be construed to mean “semi-liquid,” while Teva argued that the term was indefinite or should be construed as “a non-solid, non-paste, non-gel, non-slurry, non-gas substance.” The district court began its analysis by acknowledging that the parties “agree that the intrinsic record does not define ‘half-liquid.’” IBSA argued that a priority Italian patent application’s use of the word “semiliquido” (translation: semi-liquid) in the same places where “half-liquid” was used in the patent at issue supported its position that the two terms were synonyms. The district court disagreed, noting several differences in the two patents that indicated that the different choice of terms was intentional. Further, the district court noted that the applicant originally used the term “semi-liquid” in a dependent claim during prosecution, but later removed this term, indicating that the applicant understood the terms to be different and intentionally chose not to use “semi-liquid” in the asserted claims. The district court also found IBSA’s extrinsic evidence (e.g., reliance on dictionary definitions, other patents and expert testimony) unpersuasive. The district court accordingly found the asserted patent claims invalid as indefinite because the meaning of “half-liquid” was not reasonably ascertainable from the record. IBSA appealed.

The Federal Circuit affirmed. The Court first found that the intrinsic record failed to establish the boundaries of the term “half-liquid.” The Court agreed with the district court’s analysis, finding that neither the claims nor the specification supported IBSA’s proposed construction. The Court also explained that the prosecution history reinforced the conclusion that the applicant understood “half-liquid” to be different from “semi-liquid,” because the applicant intentionally removed the term “semi-liquid” in a dependent claim during prosecution. The Court disagreed with IBSA’s suggestion that the district court refused to consider the foreign Italian priority document—rather, “when discrepancies between a foreign priority document and the U.S. filing exist, it may be proper to view the discrepancies as intentional.”

Turning to the extrinsic record, the Federal Circuit found that the district court did not clearly err in its analysis of the presented dictionary definitions, other patents and expert testimony. The Court noted that IBSA identified no scientific dictionaries containing the term despite IBSA’s argument that “half-liquid” would be a recognizable term [...]

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PTAB May Reject Substitute Claims Under Any Basis of Patentability

by | Aug 5, 2020 | ,

The US Court of Appeals for the Federal Circuit considered for the first time whether a district court’s invalidity determination, when made final after all appeals are exhausted, divests the Patent Trial and Appeal Board (PTAB) of jurisdiction in a co-pending inter partes review (IPR) proceeding involving the same claims, and held that it does not. The Court also held that in an IPR proceeding, the PTAB is free to reject proposed substitute claims for failing to meet the subject matter eligibility requirements of § 101. Uniloc 2017 LLC v. Hulu, LLC, Case No. 19-1686 (Fed. Cir. July 22, 2020) (Wallach, J.) (Dyk, J., dissenting).

Hulu filed an IPR petition challenging claims of Uniloc’s patent directed to adjustable software licensing for digital products. After the PTAB instituted review, Uniloc filed a motion for substitute claims, conditional on whether the PTAB found the original claims unpatentable. Before the PTAB issued its final determination and before it ruled on the motion for substitute claims, a district court, in a related proceeding, held Uniloc’s asserted claims invalid as directed to patent-ineligible subject matter. Shortly thereafter, the PTAB issued a final written decision finding the challenged claims unpatentable over the prior art, and it found the substitute claims unpatentable under § 101. Uniloc appealed the PTAB’s use of § 101 to invalidate its substitute claims.

While Uniloc’s appeal of the Hulu IPR was pending, the Federal Circuit affirmed the district court’s invalidity finding as to the original claims. With respect to the Hulu appeal, the Federal Circuit ordered the parties to address whether the appeal was moot in view of the ultimate finality with respect to invalidity of the original claims, thereby divesting the PTAB of jurisdiction over the IPR.

The majority held that the finality of the district court’s invalidity finding did not necessarily divest the PTAB of authority to consider substitute claims. It determined that the mootness issue was waivable, and that Hulu had waived the argument because it failed to raise mootness during the pendency of the IPR at the time the district court issued its decision. Even if Hulu had not waived the argument, the majority found that the PTAB’s authority to consider substitute claims does not depend on any live dispute about the original claims, as long as the motion to amend in the IPR was timely filed.

As to the PTAB’s rejection of the claims under § 101, the majority held that although the PTAB is restrained in an IPR proceeding to invalidating a patent’s original claims only under the anticipation and obviousness grounds raised in the petition, the PTAB may use other invalidity tools as a “new ground of rejection” for substitute claims, including for lack of patentable subject matter under § 101. The majority also suggested that other grounds of patentability would be within the scope of the PTAB’s authority, including rejections under the various subsections of § 112. The majority was concerned that limiting the PTAB’s review might force it to issue substitute claims that fail to meet all the statutory [...]

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Eighth Circuit Cools Off Antitrust Claims Based on Alleged Patent Fraud

by | Aug 5, 2020 |

The US Court of Appeals for the Eighth Circuit affirmed a grant of summary judgment dismissing antitrust and tortious interference claims based on fraudulent procurement of patents where the plaintiff failed to show a knowing and willful intent to deceive the US Patent and Trademark Office (PTO). Inline Packaging, LLC v. Graphic Packaging International, LLC, Case No. 18-3167 (8th Cir. June 18, 2020) (Smith, J.).

Inline Packaging and Graphic Packaging are manufacturers of susceptor packaging, a specialized food packaging used for microwaving frozen foods. Graphic developed the susceptor design in partnership with Nestlé in 2005. The packaging was redesigned from a prior patent obtained several years earlier. Although Graphic’s computer-aided design drafter was listed as the sole inventor of the redesigned packaging claimed in the asserted patent, Nestlé’s engineer provided feedback that was implemented into the design, including the addition and deletion of certain features of the packaging.

In 2014, Nestlé held an auction to select the next manufacturer of its susceptor packaging. Nestlé originally selected Inline as the supplier of its susceptor packaging, but later awarded 90% of the susceptor packaging business to Graphic after Graphic notified Nestlé that Inline would likely infringe on Graphic’s patents. In June 2015, Graphic initiated patent litigation against Inline. In July 2015, Inline brought an antitrust suit against Graphic alleging that Graphic monopolized the susceptor packaging market using anticompetitive practices in violation of federal and state antitrust laws. To support its antitrust claims, Inline alleged that Graphic fraudulently procured the asserted patents, made baseless litigation threats and engaged in predatory discount bundling through the use of multi-year supply agreements. At the time the lawsuit was initiated, Graphic was the dominant supplier of susceptor packaging, with an almost 95% share of the US market. The district court granted summary judgment in favor of Graphic, dismissing Inline’s claims. Inline appealed.

The Eighth Circuit reviews grants of summary judgment de novo to determine whether a genuine dispute of material fact exists and whether judgment is entitled as a matter of law. Here, all inferences were viewed in the light most favorable to Inline. Section 2 of the Sherman Act prohibits monopolizing, or attempting to monopolize, any part of the trade or commerce among the several states. To prove a violation of Section 2, a claimant must show that an entity possessed monopoly power in the relevant market and willfully acquired or maintained such monopoly power through anticompetitive conduct rather than as the result of fair competition (e.g., by means of a superior product or business acumen).

The Eighth Circuit first considered whether Graphic fraudulently procured the asserted patents. Patent fraud, also known as Walker Process fraud, can support a monopolization claim where the defendant procured the patent at issue by knowing and willful fraud on the PTO, or maintained and enforced the patent with knowledge of the fraudulent manner in which it was obtained. Knowing and willful fraud requires an intent to deceive or inequitable conduct. The Court reasoned that this standard requires clear and convincing [...]

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