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Direct Purchasers Have Standing to Pursue Walker Process Antitrust Claims, Even If They Are Not Entitled to Seek DJ Under Patent Laws

November 20, 2012

Decision icon Decision

Last Month at the Federal Circuit - December 2012

Judges: Bryson (author), Dyk, Moore

[Appealed from: N.D. Cal., Judge Fogel]

In Ritz Camera & Image, LLC v. SanDisk Corp., No. 12-1183 (Fed. Cir. Nov. 20, 2012), the Federal Circuit affirmed on interlocutory appeal the district court’s ruling that a direct purchaser of goods that are protected by a patent has standing to bring a Walker Process antitrust claim against the patent owner, even if the purchaser has no other basis for seeking a DJ of patent invalidity or unenforceability.

Ritz Camera & Image, LLC (“Ritz”) brought suit against SanDisk Corporation (“SanDisk”) on behalf of itself and a class of direct purchasers of NAND flash memory, a type of flash memory used in consumer products such as digital cameras, mobile phones, and USB drives. The complaint alleged that SanDisk violated section 2 of the Sherman Act by fraudulently procuring two patents central to its flash memory business and using those patents to establish its monopoly position in the NAND flash memory market. SanDisk moved to dismiss the complaint for lack of standing. The district court rejected SanDisk’s argument, and SanDisk sought interlocutory review of the ruling.

On appeal, the Federal Circuit held “that the district court was correct to rule 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.” Slip op. at 3. The Court rejected SanDisk’s argument that standing should be governed by the rules for patent validity challenges under the DJ Act because antitrust claims require improper procurement of a patent. The Court noted that the Supreme Court rejected a similar argument in Walker Process and that SanDisk’s reliance on a statement from that case was misplaced. “Nothing in that sentence, or elsewhere in the Court’s opinion, suggests that the standing limitations on direct actions to challenge patent validity should be imported into antitrust actions predicated on fraudulently procured patents.” Id. at 8. The Court also noted that it and other courts had declined to apply limitations on patent invalidity suits to Walker Process antitrust actions.

Finally, the Federal Circuit indicated it “[did] not share SanDisk’s concern” that “allowing direct purchasers to bring Walker Process claims would authorize an intolerable end-run around the patent laws because parties unable to pursue invalidity claims could achieve the same result by way of a Sherman Act claim.” Id. at 9. The Court explained that a Walker Process claim is separate from a patent DJ action and is governed by the principles of antitrust law. The Court further noted that Ritz’s claim sought relief under antitrust laws and did not directly seek to invalidate or render unenforceable SanDisk’s patents, “even though that would likely be the practical effect if Ritz were to prevail on its Walker Process claim.” Id. at 10.

The Court thus affirmed the district court’s rejection of SanDisk’s motion to dismiss for lack of standing. “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.” Id.

Summary authored by David R. Lefebvre, student associate at Finnegan.