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In Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., the Supreme Court held that antitrust liability may attach when a party uses a patent to obtain or preserve a monopoly if the patent was procured through intentional fraud on the Patent and Trademark Office (PTO).
The question in this interlocutory appeal was whether a direct purchaser of patent-protected goods can bring a Walker Process antitrust action against the owner of a patent, even if the purchaser faces no threat of an action for patent infringement and has no other basis to seek a declaratory judgment holding the patent invalid or unenforceable.
SanDisk, the defendant in this matter, allegedly controls about three-quarters of the market for NAND flash memory. Flash memory is a computer chip that can be erased and reprogrammed; NAND is a particular type of flash memory.
The capacity of NAND flash memory to store large amounts of data and to rewrite the contents of that data has led to its widespread use in consumer products such as digital cameras, mobile phones, and USB drives. SanDisk holds patent rights needed to make NAND products. With those patents, SanDisk manufactures and sells flash memory products and also licenses the technology to other manufacturers.
Retailers, like plaintiff Ritz Camera & Image, LLC, purchase flash memory products from SanDisk and its licensees.
Ritz sued on behalf of itself and a class of direct purchasers of NAND flash memory, alleging Sherman Act violations. Ritz claimed that SanDisk had fraudulently procured two patents central to its flash memory business by failing to disclose known prior art and making affirmative misrepresentations to the PTO. Ritz further alleged that SanDisk established its monopoly position by enforcing those patents against its competitors and by threatening the competitors' customers.
SanDisk moved to dismiss the complaint, arguing that Ritz lacked standing to bring a Walker Process antitrust claim based on the invalidity or unenforceability of SanDisk's patents, because Ritz faced no threat of an infringement action and had no other basis to bring a declaratory judgment action challenging the patents.
The Federal Circuit Court of Appeals held on Tuesday that a direct purchaser is not categorically precluded from bringing a Walker Process claim, even if it would not be entitled to seek declaratory relief against the patentee under the patent laws.
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