New worry for patent infringement defendants: antitrust claims

September 20, 2013

Patents are by their very nature anticompetitive. Patent holders, after all, enjoy a limited-time monopoly on their products, during which they and they alone are legally permitted to profit from their innovation. When antitrust claims rear up in the context of patent law, they’re almost always brought against patent holders that supposedly abused their monopoly power to stifle competition, whether by falsely asserting patents to scare off rivals or by refusing to license their technology. But a counterintuitive $113 million (before trebling) verdict Thursday by federal-court jurors in Marshall, Texas, shows that patent holders can successfully wield allegations of infringement to bolster their own antitrust claims.

The verdict came in an antitrust and false advertising case that Retractable Technologies brought against Becton Dickinson, its much-larger rival in the market for syringes, catheters and other disposable medical products. For more than a decade, Retractable has asserted that BD engaged in illegal tactics to squelch demand for Retractable’s superior products. The two companies reached an antitrust settlement in 2004, but a few years later Retractable returned to court with a new set of accusations. In addition to antitrust claims, the new suit included allegations that BD infringed Retractable’s patents on a safety syringe. The case tied the two sets of claims together with an argument that one of BD’s anticompetitive tactics was to flood the market with a cheaper knockoff of Retractable’s syringe.

The patent infringement and antitrust cases were eventually severed, which gave BD’s lead counsel at Paul, Weiss, Rifkind, Wharton & Garrison an opportunity to argue in a motion for partial summary judgment in the antitrust case that no federal court has ever countenanced antitrust claims based on patent infringement – which, by definition, increases competition by introducing additional products to the market. (Unfortunately, all of the briefing directly addressing this point is sealed, but you can get a flavor for BD’s argument in a motion for leave to file the summary judgment brief.) “To permit the jury to consider patent infringement as a form of anticompetitive conduct under the Sherman Act would break from precedent and directly contradict 5th Circuit law,” BD asserted. “No court in any jurisdiction has ever found that patent infringement is anticompetitive conduct for purposes of the antitrust laws. Rather, every court to have considered whether patent infringement can harm competition for antitrust purposes has rejected that claim as a matter of law.” In particular, BD pointed to the 5th Circuit’s 1978 ruling in Northwest Power Products v. Omark, which quoted an even older 5th Circuit holding that “patent infringement is not an injury cognizable under the Sherman Act precedent.”

But last month, U.S. Magistrate Judge Roy Payne said in a report and recommendation that BD was asserting too broad a reading of the case law. The 5th Circuit and other courts have held that infringement doesn’t constitute an antitrust injury, he said, but they have not ruled that infringement can’t be an element of anti-competitive conduct. Payne said he certainly wasn’t going to issue a sweeping decision that infringement cannot be the basis of an antitrust cause of action. In the “vast majority of cases,” he said, infringement does increase competition so it fails as an antitrust theory, but Retractable’s allegation was that BD infringed its patent as part of an anticompetitive scheme to reduce Retractable’s market share. “This court is not entitled to disregard the actual theories and evidence set forth by (Retractable) in favor of the abstract approach advanced by BD, especially in the context of a motion for summary judgment,” Payne held. Earlier this month, U.S. District Judge Leonard Davis adopted the magistrate’s recommendation and denied BD’s motion for partial summary judgment on Retractable’s infringement-based antitrust claims.

While the antitrust case was under way, Retractable’s severed patent infringement case went to trial. A federal jury in the Eastern District of Texas found that BD had infringed various valid Retractable patents in 2010. The Federal Circuit Court of Appeals partially affirmed and partially reversed the judgment of infringement in a 2011 decision that remanded some of the patent claims to the trial court. In any event, despite BD’s best efforts, the antitrust trial this month featured evidence that BD had misappropriated Retractable’s IP.

That point was underlined in Davis’s charge to the jury: “You have heard evidence that in a prior lawsuit, Retractable recovered damages from BD for patent infringement,” he instructed jurors. “The fact that BD has been found to have infringed RTI’s patent does not necessarily mean BD acted anticompetitively unless you also find that each element I have instructed you on for a given claim has been met.” Davis also explained to jurors that they could award damages stemming from the infringement – not for infringement itself, but for “harm caused by BD’s alleged restriction in competition by allegedly selling retractable syringes with known design flaws, allegedly tainting the market with respect to all retractable syringe products.”

The jury form doesn’t specify the extent to which the infringement evidence introduced by Retractable’s counsel at Locke Lord influenced the jury’s decision to award $113.5 million for BD’s attempt to monopolize the market for safety syringes. All of the damages, however, came for “deception regarding safety syringes,” which seems to implicate the supposedly infringing and inferior BD products. (The verdict is subject to trebling under antitrust law.)

BD counsel at Paul Weiss referred my call to a company representative, who sent along BD’s announcement that it intends to appeal the verdict. I asked the BD rep whether the appeal would focus on Retractable’s introduction of patent infringement evidence, but she didn’t have an immediate response. Retractable counsel Roy Hardin of Locke Lord didn’t return a call for comment.

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