Opinion ID: 210805
Heading Depth: 2
Heading Rank: 4

Heading: Walker Process Antitrust Claim

Text: 32 The defendants in this case counterclaimed against DDI for violation of § 2 of the Sherman Act, and the same jury that found the patent obvious found DDI liable on that counterclaim. Proof that a patentee has obtained the patent by knowingly and willfully misrepresenting facts to the Patent Office . . . [is] sufficient to strip [the patentee] of its exemption from the antitrust laws. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). A party who asserts such a fraudulently obtained patent may be subject to an antitrust claim. If a patentee asserts a patent claim and the defendant can demonstrate the required fraud on the PTO, as well as show that the other elements necessary to a § 2 case are present, the defendant-counterclaimant is entitled to treble damages under the antitrust laws. Id. at 175, 86 S.Ct. 347. 33 The first barrier for a Walker Process claimant to clear is the requirement that the patent be obtained through actual fraud upon the PTO. This question is governed by Federal Circuit law. Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1068 (Fed.Cir.1998) ( en banc in relevant part). A finding of inequitable conduct does not by itself suffice to support a finding of Walker Process fraud, because inequitable conduct is a broader, more inclusive concept than the common law fraud needed to support a Walker Process counterclaim. Nobelpharma, 141 F.3d at 1069. To demonstrate Walker Process fraud, a claimant must make higher threshold showings of both materiality and intent than are required to show inequitable conduct. Id. at 1070-71; C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1364 (Fed.Cir.1998) ( Walker Process claimant must make a greater showing of scienter and materiality than when seeking unenforceability based on conduct before the Patent Office). Furthermore, a finding of Walker Process fraud cannot result from an equitable balancing between the two factors; a strong showing of one cannot make up for a deficiency in the other. Nobelpharma, 141 F.3d at 1071. The difference in breadth between inequitable conduct and Walker Process fraud admits the possibility of a close case whose facts reach the level of inequitable conduct, but not of fraud before the PTO. This is such a case. 34 The heightened standard of materiality in a Walker Process case requires that the patent would not have issued but for the patent examiner's justifiable reliance on the patentee's misrepresentation or omission. C.R. Bard, 157 F.3d at 1364. The defendants have established materiality even under this strict threshold, since the evidence supports a finding that the patent would not have issued if DDI had disclosed the Festival Market sales to the PTO. The difficulty comes in establishing that the omission of those sales was done with fraudulent intent. DDI did make certain statements to the PTO that would have been more completely accurate had it included information about the Festival Market sales. For instance, it suggested that its method was the first method to allow serving of a completely free flowing frozen alimentary dairy product for direct consumption by consumers. That statement would have been more helpful to the PTO if it had also disclosed that the first free-flowing sales had arguably happened at Festival Market, but the statement was not actually false. Likewise, DDI argued against obviousness by pointing out that none of the cited references taught free-flowing service. Again, this statement would have better informed the PTO if it had clarified that elsewhere in the prior art, such service arguably existed, but again, the statement was true. The problem was not with its falsity but with its incompleteness. 35 Ultimately, the defendants' fraud case here is built only upon DDI's omission of the Festival Market sales from the prosecution record. While Walker Process intent may be inferred from the facts and circumstances of a case, [a] mere failure to cite a reference to the PTO will not suffice. Nobelpharma, 141 F.3d at 1071. This is not to say that an omission always reduces to mere failure to cite. We acknowledged in Nobelpharma that omissions, as well as misrepresentations, may in limited circumstances support a finding of Walker Process fraud . . . because a fraudulent omission can be just as reprehensible as a fraudulent misrepresentation. 141 F.3d at 1070. We believe, though, that to find a prosecution omission fraudulent there must be evidence of intent separable from the simple fact of the omission. A false or clearly misleading prosecution statement may permit an inference that the statement was made with deceptive intent. For instance, evidence may establish that a patent applicant knew one fact and presented another, thus allowing the factfinder to conclude that the applicant intended by the misrepresentation to deceive the examiner. That is not the case with an omission, which could happen for any number of nonfraudulent reasons — the applicant could have had a good-faith belief that disclosure was not necessary, or simply have forgotten to make the required disclosure. In this case, DDI argues that it did not disclose the Festival Market sales to the PTO because it believed that the product there was made without practicing the storing, bringing, or serving steps of the claim within the specified temperature ranges, and that therefore the Festival Market sales were merely cumulative to other prior art references which also lacked those three steps. The jury was of course allowed to disbelieve or discount evidence tending to support this claim. However, the defendants submitted no evidence of their own — aside from the absence of the Festival Market sales from the prosecution record — which affirmatively shows DDI's fraudulent intent. That intent cannot be shown merely from the absence of evidence which would come about from the jury's discounting DDI's explanation. 36 Nobelpharma serves as a good example of the sort of facts that do prove Walker Process fraud by omission. In that case, the inventors had transmitted to their Swedish patent agent a draft patent application which included a citation to a book written by the patentee in 1977. 141 F.3d at 1062. That book was eventually held to anticipate the patent. Id. at 1072. The agent deleted all reference to the 1977 Book from the patent application that was ultimately filed in Sweden and then also failed to mention the book in the U.S. application that led to the patent at issue. Id. at 1062. When pressed on the issue at trial, the agent could not explain, even in retrospect, why he deleted all reference to the 1977 Book. Id. at 1072. We found that the evidence of actual deletion by the patent agent gave the jury reasonable ground to find intent to defraud by the patentees. Id. 37 There is no similarly strong evidence that the omission in this case was fraudulent. It might be argued that because the omitted reference was so important to patentability, DDI must have known of its importance and must have made a conscious decision not to disclose it. That argument has some force, but to take it too far would be to allow the high materiality of the omission to be balanced against a lesser showing of deceptive intent by the patentee. Weighing intent and materiality together is appropriate when assessing whether the patentee's prosecution conduct was inequitable. Molins, 48 F.3d at 1178. However, when Walker Process claimants wield that conduct as a sword to obtain antitrust damages rather than as a mere shield against enforcement of the patent, Nobelpharma, 141 F.3d at 1070, they must prove deceptive intent independently. The defendants have not done so here to the extent necessary for a reasonable jury to find Walker Process fraud. The finding of fraud on the PTO is therefore reversed. 38 DDI also argues that the antitrust judgment must be reversed because the jury was not presented with sufficient evidence of the definition of the relevant market. Fraudulent acquisition of the asserted patent strips the Walker Process defendant 5 of its antitrust immunity, but that is the beginning, not the end, of the inquiry. The counterclaimant must also show the basic elements of an antitrust violation defined by the regional circuit's law, including that the patentee's behavior was directed to a relevant product market. Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1363 (Fed. Cir.2004), rev'd on other grounds, 546 U.S. 394, 126 S.Ct. 980, 163 L.Ed.2d 974 (2006). 6 In this case, DDI's antitrust immunity remains intact due to insufficient evidence of fraud. We therefore reach neither DDI's argument on this point nor the defendants' argument that DDI waived the market definition issue by failing to raise it below.