Patent Watch: Ritz Camera & Image, LLC v. SanDisk Corp.

Alerts / November 21, 2012

[A] direct purchaser is not categorically precluded from bringing a Walker Process antitrust claim, even if it would not be entitled to seek declaratory relief against the patentee under the patent laws.

On November 20, 2012, in Ritz Camera & Image, LLC v. SanDisk Corp., the U.S. Court of Appeals for the Federal Circuit (Bryson,* Dyk, Moore), in an interlocutory appeal, affirmed the district court's denial of SanDisk's motion to dismiss Ritz's Walker Process antitrust claim that U.S. Patents No. 5,172,338 and No. 5,991,517, which related to NAND flash memory, were invalid and/or unenforceable. The Federal Circuit stated:

SanDisk's appeal is limited to a single question: Whether direct purchasers who cannot challenge a patent's validity or enforceability through a declaratory judgment action (and have not been sued for infringement, and so cannot assert invalidity or unenforceability as a defense in the infringement action) may nevertheless bring a Walker Process antitrust claim that includes as one of its elements the need to show that the patent was procured through fraud. SanDisk contends that allowing parties such as Ritz to use a Walker Process antitrust lawsuit to challenge patents would represent an unjustifiable expansion of the Walker Process doctrine and would undermine well-recognized limitations on standing to bring a declaratory judgment action challenging a patent. We disagree.

Walker Process set forth two conditions for antitrust liability based on the fraudulent procurement of a patent. First, the plaintiff must show that the defendant procured the relevant patent by knowing and willful fraud on the PTO or (in the case of an assignee) that the defendant maintained and enforced the patent with knowledge of the fraudulent manner in which it was obtained. Second, the plaintiff must prove all the elements otherwise necessary to establish a Sherman Act monopolization charge. With the first condition, the Court made clear that the invalidity of the patent was not sufficient; a showing of intentional fraud in its procurement was required. With the second condition, the Court incorporated the rules of antitrust law generally. "[A]s to this class of improper patent monopolies, antitrust remedies should be allowed room for full play." The "full play" of antitrust remedies encompasses the standing requirements that apply in the antitrust setting, including the recognition that direct purchasers are not only eligible to sue under the antitrust laws, but have been characterized as "preferred" antitrust plaintiffs.

Nothing in Walker Process supports SanDisk's argument that the rules governing standing to bring patent validity challenges should be imported into an antitrust case simply because one element of the antitrust cause of action requires proof of improper procurement of a patent. In fact, the Supreme Court in Walker Process rejected an argument closely analogous to SanDisk's argument here. The Court stated that it found no merit in the proposition that rules defining who may bring suit "to cancel or annul a patent" should also dictate the boundaries of antitrust standing. Notwithstanding the fact that "one of its elements is the fraudulent procurement of a patent," the Court explained, an antitrust claim under the Clayton Act is not a claim under the patent laws. Rather, "the gist of [the antitrust] claim is that since [the defendant] obtained its patent by fraud it cannot enjoy the limited exception to the prohibitions of § 2 of the Sherman Act, but must answer under that section and § 4 of the Clayton Act in treble damages to those injured by any monopolistic action taken under the fraudulent patent claim." The Court did not suggest that the class of "those injured by any monopolistic action" should be limited to those within that class who would have standing to bring an independent challenge to the patents at issue.

Walker Process recognizes a clear distinction between claims that arise under the antitrust laws and those that arise under the patent laws. Because direct purchasers are generally permitted to bring antitrust actions, and because the Walker Process decision did not preclude purchasers from bringing this particular type of antitrust claim, we hold that Ritz's status as a direct purchaser gives it standing to pursue its Walker Process claim even if it could not have sought a declaratory judgment of patent invalidity or unenforceability.

If you have questions about the material presented above, please contact Dr. Lawrence M. Sung (lsung@bakerlaw.com or 202.861.1537) or any member of our Intellectual Property Team.

See information regarding BakerHostetler's Patent Litigation and IP Prosecution and Portfolio Management practices.


Baker & Hostetler LLP publications are intended to inform our clients and other friends of the Firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience. © 2012 Baker & Hostetler LLP