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Archived updates for Friday, January 26, 2007

Minimum Requirements for Antitrust Allegations in Patent Cases

In Hydril Company, LP, et al. v. Grant Prideco LP, et al. (January 25, 2007), the Federal Circuit reversed the dismissal of an antitrust claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a valid claim for relief.

The district court had dismissed the antitrust claim because Hydril "failed to allege the minimum level of enforcement necessary to state a Walker Process claim against Grant Prideco," since it did not "allege enforcement activity by Grant Prideco which would create an objectively reasonable apprehension that Grant Prideco intended to enforce the ’631 patent against Hydril." Hydril II at 612.

According to the opinion by Senior Circuit Judge Friedman:
It is unclear whether the defect the court discerned in Hydril’s complaint was a
failure to allege sufficient enforcement activity by Grant Prideco, i.e., such
as would create a "reasonable expectation" that Grant Prideco would file patent
infringement litigation, or a failure to threaten such activity against Hydril
itself rather than against Hydril’s customers. Neither ground, however,
justifies dismissal of the complaint at what the district court described as the
"very early stages" of the case. Id.

Hydril’s complaint also alleged that Grant Prideco had fraudulently obtained its ’631 patent by "fail[ing] to disclose to the USPTO material prior art of which [it] was aware" (which the complaint described) and that "[t]he ’631 Patent as issued would not have been granted to Grant Prideco had Grant Prideco not omitted from its disclosures such known information on the prior art." According to the opinion:
If Hydril can prove these allegations, they would ground a claim of
monopolization in violation of § 2 of the Sherman Act because they "would be
sufficient to strip [Grant Prideco] of its exemption from the antitrust laws"
its patent would otherwise provide. Walker Process, 382 U.S. at 177 (footnote

The complaint also alleged that Grant Prideco obtained its patent by knowingly and deliberately concealing from the Patent Office prior art that it knew would have resulted in a denial of its application.
Since neither the patent application nor the prosecution history is before us,
we cannot tell whether it is contended that in obtaining the patent Grant
Prideco made affirmative misstatements to the Patent Office about the prior art.
Cf. Walker Process, where the complaint "alleged fraud on the basis that Food
Machinery had sworn before the Patent Office that it neither knew nor believed
that its invention had been in public use in the United States for more than one
year prior to filing its patent application when, in fact, Food Machinery was a
party to prior use within such time." 382 U.S. at 174. In any event, the
complaint’s allegations here go far beyond a simple failure to disclose to the
Patent Office prior art that the examiner would have deemed material.

Under our precedent, the conduct alleged in Hydril’s complaint would
constitute Walker Process fraud. Cf. Nobelpharma AB v. Implant Innovations,
Inc., 141 F.3d 1059, 1070 (Fed. Cir. 1998) ("We agree that if the evidence shows
that the asserted patent was acquired by means of either a fraudulent
misrepresentation or a fraudulent omission and that the party asserting the
patent was aware of the fraud when bringing suit, such conduct can expose a
patentee to liability under the antitrust laws. We arrive at this conclusion
because a fraudulent omission can be just as reprehensible as a fraudulent
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