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Issue 235 | August 5, 2004
Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc.

In Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., the Federal Circuit addressed a Walker Process claim under Federal Circuit law and Sherman Act violations under 10th Circuit law.

In sum, the Court affirmed the district court's summary judgment that Swift-Eckrich's patent was invalid and unenforceable for prior use and prior sale (by Unitherm) under section 102(b). Because the Federal Circuit found ample evidence to support the jury's finding that the patentee knew of the prior use/sale and obtained the patent via fraud on the Patent Office, the Court upheld the jury verdict stripping the patentee of the antitrust immunity afforded patent holders. Under the 10th Circuit’s Sherman Act analysis, however, the Federal Circuit held that the district court erred in allowing the jury to decide the plaintiff’s antitrust claims because the plaintiff failed to provide adequate evidence (namely, economic evidence) of the relevant market.

In particular, Unitherm based its antitrust allegations on a Walker Process claim. As explained by the Supreme Court in Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 174 (1965):

The enforcement of a patent procured by fraud on the Patent Office may be violative of § 2 of the Sherman Act provided the other elements necessary to a § 2 case are present. In such event the treble damage provisions of § 4 of the Clayton Act would be available to an injured party.

Once a court determines procurement by fraud, a Walker Process analysis proceeds by considering the exclusionary power of an illegal patent claim with respect to the relevant market for the product involved.

According to the Federal Circuit in Unitherm, a Walker Process antitrust analysis can be framed by five factors, including whether: (1) the patentee attempted to enforce the patent at issue; (2) the patent fraudulently issued; (3) the Walker Process claimant suffered antitrust damages (had standing); (4) the attempted enforcement threatened to lessen competition in a relevant antitrust market; and (5) all other elements of attempted monopolization are met. Factors (1) and (2) are to be analyzed under Federal Circuit law, and factors (3), (4), and (5) are to be analyzed under the law of the regional circuit.

The Unitherm court held that the plaintiff met the first factor, attempted enforcement, even though the Walker Process claim was raised as ancillary to the plaintiff's declaratory judgment action, rather than as a counterclaim to an allegation of patent infringement.

In analyzing the second factor, fraudulent issuance, under concepts of common law fraud, the Federal Circuit held clear and convincing evidence supported the jury's finding of the requisite material misrepresentation and intent to deceive. The Court first considered that the applicant signed the required inventor's declaration (attesting to his inventorship) and then assigned the application/resulting patent to the defendant (invoking agency principles of liability). The Court next considered that both the named inventor and assignee of the patent knew of the prior use and public sale of the invention, by at least viewing demonstrations of the claimed invention by Unitherm some four years before the critical date.

Regarding the third factor, the Federal Circuit found antitrust standing, in part, because of the patent owner's illegal enforcement of the patent and its fraudulent conduct in procuring the patent.

The Unitherm court collapsed its analysis of factors four and five into the question of whether plaintiff presented evidence that could support its definition of the relevant market. In vacating the jury's findings regarding the relevant market, the Federal Circuit held that under Tenth Circuit law, the relevant product market hinges on economic evidence of reasonable interchangeability. Because the plaintiff offered only evidence of technical interchangeability, and not evidence of economic interchangeability, the Court ruled that the antitrust claims should never have made it to the jury.

In vacating the jury's finding of antitrust liability, the Federal Circuit also vacated the jury's award of $18 million in trebled antitrust damages (plus an additional $1,022,445 in attorney's fees).

The full decision can be viewed at: http://fedcir.gov/opinions/03-1472.doc

For more information, please contact the author, Eric R. Moran of McDonnell Boehnen Hulbert & Berghoff LLP, at (312) 913-3302 or at moran@mbhb.com.

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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