Antitrust Treble Damages for Patent Infringement? Yes, According to Groundbreaking Decision

by BakerHostetler

The Eastern District of Texas recently held that patent infringement can constitute anticompetitive conduct for monopolization claims under Section 2 of the Sherman Act, in Retractable Technologies Inc. v. Becton Dickinson & Co., No 2:08-cv-00016 (E.D. Tex.).

After an eight-day trial, the jury for Retractable Technologies found that Becton Dickinson had attempted to monopolize the market for safety syringes, as well as committed false advertising under the Lanham Act. The jury awarded $113.5 million in damages. Last week, Retractable Technologies announced it will seek to treble the damages award.

At the close of evidence, the trial court instructed the jury that, in order to find that Becton Dickinson had monopolized or attempted to monopolize any market, it must find that Becton Dickinson committed an anticompetitive act. The trial court then listed the anticompetitive acts Retractable Technologies had alleged in its complaint, which included Becton Dickinson infringing Retractable Technologies’ patents for safety syringes.

Becton Dickinson had tried to prevent that theory from going to the jury by moving for partial summary judgment on the argument that patent infringement, for purposes of a monopolization claim, cannot be an anticompetitive act. In support of its motion, Becton Dickinson argued that no court has ever found patent infringement to be an anticompetitive act. Becton Dickinson further argued that courts have found patent infringement does not constitute an antitrust injury, which demonstrates that patent infringement does not injure competition and, thus, is outside the Sherman Act. Finally, Becton Dickinson argued that patent infringement increases, not decreases, competition because it makes more products available to consumers.

The magistrate judge recommended that the court deny Becton Dickinson’s motion. Retractable Technologies had argued that Becton Dickinson’s patent infringement constituted anticompetitive conduct because its infringing safety syringes prevented competing products from gaining a foothold in the market. The magistrate judge viewed Retractable Technologie’s allegations as “unique,” but also found them credible and supported by the record.

The magistrate judge acknowledged no case had held that patent infringement could be an anticompetitive act for purposes of a claim under Section 2 of the Sherman Act, while also noting that no case had ever held that patent infringement could not be an anticompetitive act. Relying on the “longstanding law that Sherman Act covers every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts are clothed,” United States v. American Tobacco Co., 221 U.S. 106, 181 (1911), the magistrate judge accepted Retractable’s theory that Becton Dickinson’s patent infringement could amount to anticompetitive conduct.

The trial judge adopted the magistrate judge’s recommendation and reasoning over Becton Dickinson’s objections. The trial judge appeared unconcerned that no other court had ever found patent infringement to be anticompetitive conduct. Rather, the trial court, like the magistrate judge, quoted the Supreme Court’s admonition in American Tobacco that the antitrust laws apply to all forms anticompetitive conduct, no matter how imaginative or novel.

The trial court’s groundbreaking decision has the potential to alter litigation of cases involving both patent and antitrust issues. The ruling likely will encourage plaintiffs to add Sherman Act claims in patent cases, particularly in cases against companies with large market presence. In addition, the ruling may add exposure to treble damages for such companies accused of patent infringement. If found to infringe, companies may become the target of additional follow-on suits in which plaintiffs argue that, by keeping the infringing product in the market, the accused infringer maintained its market power in violation of Section 2 of the Sherman Act. We will follow litigation developments flowing from Retractable Technologies and provide updates here.

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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