Expanded Standing, or "Back to Basics"? Flash Memory Direct Purchasers Found to Have Standing to Assert Walker Process Claims

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In Ritz Camera & Image, LLC v. SanDisk Corporation, et al., United States District Court, ND Cal., Case No. 5:10-CV02787-JF/HRL, the court denied a motion to dismiss in a Walker Process "fraud on patent office" case, and allowed standing to a direct purchaser. Is this an extension, or is it "business as usual"? A step by step analysis is in order.

Ritz Camera & Image, LLC ("Ritz") filed an action under Section 4 of the Clayton Act alleging that SanDisk Corp., ("SanDisk") and its founder, Harari, violated Section 2 of the Sherman Act. Ritz alleged that SanDisk and Harari conspired to monopolize, and actually monopolized the market for NAND/memory products, through the assertion of and prosecution of patents which were a fraud on the United States Patent and Trademark Office ("USPTO"). NAND/memory is a form of digital storage technology used in consumer electronics devices.

In a second amended complaint, ("SAC"), Ritz alleged that Harari tortiously converted flash memory technology owned by Harari's former employer, and then prosecuted fraudulent "crown jewel" patents. Allegedly, Harari intentionally failed to disclose invalidating prior art, and made affirmative misrepresentations to the USPTO. Further, defendants allegedly threatened competitors through harassing litigation and sales tactics, and caused the elimination of a major NAND competitor, in an anti-competitive settlement of bad faith litigation. Ritz alleged that it was injured in its "business or property" as a result. The defendants' overt acts allegedly reduced market competition, thus allowing for an increase in prices. Ritz was a direct purchaser of NAND/memory from defendants.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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