In Ritz Camera & Image LLC v. SanDisk Corp., the Federal Circuit held that the purchasers of a patented produce may file a monopolization suit based on the claim that the defendant obtained the patent by defrauding the U.S. Patent & Trademark Office. The decision allows a class action challenging a SanDisk Corp. flash memory patent to proceed.
In the Walker Process case, the U.S. Supreme Court held that a licensee can prove an antitrust claim by showing that a patent was obtained by fraud along with the other elements of an antitrust violation. SanDisk argued that purchasers should not be permitted to bring such a claim because they did not face a threat of an infringement challenge and thus could not file a declaratory judgment action attacking the validity of the patents.
The Federal Circuit rejected the defendant’s arguments, explaining that “[n]othing 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.” Although antitrust claims are often filed by competitors, the consumers of a firm’s products are the intended beneficiaries of the antitrust laws. Here, for example, Ritz Camera argues that SanDisk’s patent enforcement activities against its competitors caused Ritz to pay higher prices. The court thus held that it would make no sense to deny purchasers the right to pursue an otherwise legitimate antitrust theory.
SanDisk also argued that permitting this sort of claim would “open the floodgates” to litigation against patent holders. But the Federal Circuit responded that Walker Process claims require “demanding proof” of intentional fraud. Few plaintiffs would be likely to meet that standard absent serious concern about the appropriateness of a patent.
The court did not reach the merits of the claim, remanding to the district court.