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 [...]