The District Court for the Northern District of California granted defendant SanDisk’s motion for summary judgment in Giuliano, et al v. SanDisk Corp., et al, 4:10-cv-02787 (N.D. Cal. April 29, 2016). The plaintiffs had alleged that SanDisk monopolized the market for NAND flash memory by fraudulently obtaining a patent on the technology, a claim typically referred to as a Walker Process claim. The court rejected the plaintiffs’ claim, and granted summary judgment for the defendants, because the plaintiffs could not show SanDisk had misrepresented material facts to the patent office with intent to deceive.
One of the patents at issue involved improving performance of NAND flash memory by using inhibitory latches in the memory’s circuitry. The patent was reexamined pursuant to an investigation by the United States International Trade Commission in 1996 after SanDisk alleged that Samsung infringed it. The Patent and Trademark Office (“PTO”) ultimately upheld the patent, and noted that a crucial component of the patent, latch 721, “is a one way resettable latch.” This is significant because whether the latch is “one-way” or “two-way” could affect the latch’s function, and consequently, the patent application. The patent again came under attack in a lawsuit filed by SanDisk against STMicroelectronics in 2004; STMicroelectronics asserted a Walker Process counterclaim, and the judge held that “there were questions of fact regarding SanDisk’s intent to deceive the PTO.” The suit settled out-of-court in September 2009.
The Giuliano lawsuit was filed in 2010, and alleged the same Walker Process claim as STMicroelectronics did. Plaintiff alleged that contrary to SanDisk’s representations to the PTO, latch 721 was a two-way latch and therefore could not perform the function claimed in the patent. The plaintiffs also claimed that SanDisk withheld prior art during the reexamination of the patents, and the disclosure of the prior art would have required the patent examiner to reject the application for lack of novelty.
The court held that in order to succeed on a Walker Process claim, a party must show “first, that the antitrust defendant obtained the patent by knowing and willful fraud on the patent office and maintained and enforced the patent with knowledge of the fraudulent procurement; and second, all the other elements necessary to establish a Sherman Act monopolization claim…In addition to intent, the plaintiff must demonstrate materiality; that is, a clear showing of reliance, i.e., that the patent would not have issued but for the misrepresentation or omission.” In this case, the court never had to reach the monopolization claim because the plaintiffs failed to prove that SanDisk fraudulently obtained the patent. While SanDisk argued to the PTO that ambiguously-drawn latch 721 functioned as a one-way latch, such an argument is not a “factual representation,” and therefore could not form the basis of a Walker Process fraud claim as a matter of law. Additionally, plaintiffs’ fraud claim based on lack of disclosure of prior art failed because plaintiffs failed to provide expert testimony on how the prior art would have affected the validity of the patent. Instead, the plaintiff tried to rely on the judge’s decision in the STMicroelectronics case to prove both the materiality and intent prongs on their Walker Process claim. The court called plaintiffs’ reliance on the earlier case “wholly misplaced” because “neither [the] ruling nor any of the findings therein is evidence for purposes of summary judgment in this action.” Given the lack of “independent and clear evidence of deceptive intent,” the court granted SanDisk’s motion for summary judgment.
While the plaintiffs made some clear mistakes while litigating their claims, this case still illustrates the difficulty of succeeding on a Walker Process claim. Before a court will even reach the Sherman Act, a plaintiff must prove that a defendant misrepresented facts; that the disclosure of the true facts would have led to the patent being held invalid; and that there is clear and convincing evidence that the defendant intended to defraud the PTO. Litigants looking to bootstrap an antitrust violation onto a patent dispute face a steep uphill climb.
