Antitrust Issues in Litigating Intellectual Property

• Pages: 109-179

109

I. Introduction

An owner of intellectual property rights necessarily has the right to demand

compliance with those rights and to seek to enforce them through litigation

as needed. Without more, threatened or actual litigation to enforce intellec-

tual property rights does not violate antitrust laws. For example, a patent

holder has a legally sanctioned right to exclude others from making, using,

selling, offering to sell, or importing a patented article.1 The policy basis for

this right is the public good served by “bring[ing] new designs and technol-

ogies into the public domain through disclosure.”2 This right permits a pat-

ent holder to ‘“exact royalties as high as he can negotiate” from the patent

grant,3 and even refuse to license an invention entirely.4

Nevertheless, owning intellectual property rights does not provide an

absolute shield to antitrust liability.5 Claims or defenses based on anti-

trust law may arise, for example, when intellectual property owners obtain

rights by fraud, as in Walker Process Equipment, Inc. v. Food Machinery

& Chemical Corp.6 Such claims may also arise when intellectual property

owners seek to overstep their rights or exercise them in bad faith, or when

1. 35 U.S.C. §271(a); see also Zenith Radio Corp. v. Hazeltine Rsch., Inc., 395 U.S. 100,

135 (1969).

2. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151 (1989).

3. Brulotte v. Thys Co., 379 U.S. 29, 33 (1964).

4. Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1215 (9th Cir. 1997).

5. Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990).

6. 382 U.S. 172 (1965).

chapter 4

Antitrust Issues in Litigating

Intellectual Property

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CHAPTER 4

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intellectual property owners (or challengers) make agreements (including

settlement agreements) or take other action that is harmful to competition.

In the sections that follow, we first introduce examples of how courts

and other authorities have addressed these issues. Then, we discuss some

of the procedural questions that arise. Next, we address several circum-

stances in which courts have addressed whether antitrust claims brought

in this context can survive a motion to dismiss, a motion for summary

judgment, or another motion for judgment as a matter of law. We conclude

with a discussion of various industry-specific topics, available remedies,

and the defenses of patent, copyright, and trademark misuse.

II. Illustrative Authorities

4.1 The Humira AbbVie Litigation

The Seventh Circuit’s recent opinion in Mayor and City Council of Balti-

more v. AbbVie Inc. illustrates antitrust claims that can be raised in this

context.7 This lawsuit concerns the popular and lucrative drug Humira.

AbbVie owned the base patent for Humira, which expired in 2016. AbbVie

also “obtained 132 additional patents related to the medicine, for details

such as manufacturing or administering the drug,” the terms of some of

which extend to 2034.8 The plaintiffs, “welfare-benefit plans that pay for

Humira on behalf of covered beneficiaries,” alleged that amassing a “pat-

ent thicket” of this nature—and settling ensuing patent litigation on terms

that prevent competitors from offering biosimilar drugs in the United

States until 2023—violated sections 1 and 2 of the Sherman Act.9

The District Court for the Northern District of Illinois granted AbbVie’s

motion to dismiss, and the Seventh Circuit affirmed. The Seventh Circuit

noted that plaintiffs did not allege that AbbVie obtained any of the addi-

tional patents by fraud, which could have given rise to a Walker Process

antitrust claim, or that all of the patents were invalid.10 The court rejected

the theory that, in the absence of fraud or other misconduct, collecting a

large number of patents would violate section 2 of the ShermanAct:11

But what’s wrong with having lots of patents? If AbbVie made 132

inventions, why can’t it hold 132 patents? The patent laws do not

7. Mayor & City Council of Baltimore v. AbbVie Inc. (“Humira AbbVie”), No. 20-2402,

Slip. Op. (7th Cir. Aug. 1, 2022).

8. Id., Slip. Op. at 2, 4.

9. Id.

10. Id.

11. Id. at 4 (internal citations omitted).

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Antitrust Issues in Litigating Intellectual Property111

set a cap on the number of patents any one person can hold—in

general, or pertaining to a single subject. Tech companies such as

Cisco, Qualcomm, Intel, Microsoft, and Apple have much larger

portfolios of patents. Thomas Edison alone held 1,093 U.S. patents.

When the FTC challenged Qualcomm’s patent practices, it objected

to licensing terms rather than the sheer size of the portfolio—and

the FTC lost in the end.

Regarding the settlement agreements that delayed entry of biosimilars

into the U.S. market until 2023, the court held that the settlements did not

involve “reverse payments,” from the companies whose entry was delayed,

which the Supreme Court has held could give rise to an antitrust claim.12

4.2 The SanDisk Cases

As in the Humira AbbVie litigation, the assertion of a large portfolio of

patents involving technology relating to flash memory devices by patent

holder SanDisk has been the source of several antitrust claims and coun-

terclaims in patent litigation.

In PNY v. SanDisk,13 the district court granted SanDisk’s motion to

dismiss for failure to satisfy Federal Rule of Civil Procedure 8 regarding

sufficiency of allegations of antitrust injury plead in PNY’s complaint.

The case involved SanDisk’s “extensive patent portfolio” (more than 1,400

patents) relating to flash memory technology, and specifically targeted

SanDisk’s alleged practice of requiring “multitiered licensing and royal-

ties in the downstream market.”14 These practices included a “uniform,

nonnegotiable license” giving SanDisk control over pricing for flash mem-

ory devices. Specific acts alleged by PNY as the basis for its antitrust

allegations, on grounds sounding in sections 1 and 2 of the Sherman Act,

included: payment of multiple royalties from flash memory manufacturers

and upon sale of the final product; payment of royalties worldwide that

include sales from countries where SanDisk has no patent protection;

requiring licensing of SanDisk’s entire patent portfolio, rather than the

specific patents that cover alleged infringing devices; and a grantback

cross-license to later-developed technologies (which PNY alleged inhibited

efforts to design around SanDisk’s patents). In addition, PNY complained

that SanDisk’s practices forced competitors to pay royalties directly to

12. Id. at 7–11 (citing Fed. Trade Comm’n v. Actavis, Inc., 570 U.S. 136, 155–56 (2013)).

The Humira AbbVie court rejected plaintiffs’ theory that a kind of reverse payment existed

here because some of the same companies settled in Europe on terms that allowed entry into

the market sooner, finding the theory too speculative to state a viable claim.

13. PNY Techs., Inc. v. SanDisk Corp., No. C-1104689 YGR, 2012 WL 1380271 (N.D. Cal.

Apr. 20, 2012).

14. Id. at *1.

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