On interlocutory appeal from a district court, the U.S. Court of Appeals for the Federal Circuit addressed whether a direct-purchaser plaintiff has standing to bring an antitrust claim based on Walker Process if the plaintiff would not have standing under the Declaratory Judgment Act.  The Court affirmed that “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.”  Ritz Camera & Image LLC v. SanDisk Corp., Case No. 12-1183, (Fed. Cir., Nov. 20, 2012) (Bryson, J.).

The plaintiff, retailer Ritz Camera, is a direct purchaser of SanDisk’s flash memory for use in its cameras.  Ritz filed a complaint on behalf of itself and a class of direct purchasers of flash memory alleging that SanDisk fraudulently procured two patents critical to its flash memory business by failing to disclose known prior art and making affirmative misrepresentations to the U.S. Patent and Trademark Office (PTO).  Ritz alleged that SanDisk’s enforcement of these patents suppressed competition in the flash memory product market and permitted SanDisk to illegally maintain its monopoly position, in violation of Sherman Act § 2 (monopolization).

Defendant SanDisk argued in its motion to dismiss that Ritz did not have 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.  After the district court declined to dismiss the claims SanDisk brought this interlocutory appeal.

The Federal Circuit concluded that nothing in Walker Process, or in the patent laws, prohibited “those injured by any monopolistic action” to bring an antitrust claim because an antitrust claim is a separate cause of action from a patent declaratory judgment action and is governed by the principles of antitrust law.  However, the Court conceded that even though a Walker Process antitrust claim did not seek a patent’s annulment, the “likely practical effect” on the patent in suit should the plaintiff win on its Walker Process antitrust claim would be the same.

In addition, the Court did not agree with SanDisk’s fear that allowing standing to such direct purchaser plaintiffs would “trigger a flood of litigation.”  Quoting the Supreme Court in Walker Process, the Court stated that “the interest in protecting patentees from innumerable vexatious suits cannot be used to frustrate the assertion of rights conferred by the antitrust laws.”  Furthermore, because Walker Process has the heightened evidentiary requirements of proving intentional fraud, the Court was also not persuaded by SanDisk’s “flood of litigation” argument.

Practice Note:  Patent holders should be cognizant of antitrust claims that could have the indirect effect of rendering their patents unenforceable.  However, while a Walker Process antitrust claim from a direct purchaser plaintiff could now survive a motion to dismiss, the heightened evidentiary standard required to prove such a claim could still serve as the basis for a dismissal of such claims at the summary judgment stage.