Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Tex.: Patent infringement may constitute anticompetitive conduct for antitrust claim, (Sep 11, 2013)

By Tobias J. Gillett, J.D., LL.M.

A medical device company may proceed with antitrust claims based on a rival company’s alleged patent infringement, the federal district court in Marshall, Texas has ruled (Retractable Technologies, Inc. v. Becton, Dickinson and Co., September 9, 2013, Davis, L.). The court adopted a magistrate’s report and recommendation refusing to find, as a matter of law, that patent infringement could not serve as anticompetitive conduct for purposes of a claim under Section 2 of the Sherman Act.

The court denied the motion by the competitor—Becton, Dickinson and Co. (BD)—for partial summary judgment on the patent infringement-based antitrust claims filed by Retractable Technologies, Inc. (RTI) for the reasons set forth in the magistrate’s report.

As framed by the magistrate, the issue presented by BD was “whether patent infringement cannot, as a matter of law, ever be considered exclusionary conduct.” The magistrate explained that “[l]iability under Section 2 of the Sherman Act requires some affirmative conduct,” but cited longstanding Supreme Court precedent that the 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 were clothed.” Exclusionary conduct “(1) tends to impair the opportunities of rivals, but also (2) either does not further competition on the merits or does so in an unnecessarily restrictive way.”

The magistrate rejected BD’s argument that “[n]o court, anywhere, has ever found patent infringement to be an ‘anticompetitive’ act for purpose of Section 2.” Even assuming BD was correct, the lack of any such precedent did not demonstrate that patent infringement could never be anticompetitive conduct. The magistrate cited the D.C. Circuit’s 1998 decision in Caribbean Broad. Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080, in which the court stated: “’Anticompetitive conduct’ can come in too many different forms, and is too dependent upon context, for any court or commentator ever to have enumerated all the varieties.”

Moreover, the magistrate found cases that BD cited as rejecting claims like RTI’s to be “inapposite.” District court cases cited by BD turned on whether the plaintiff had asserted patent infringement as anticompetitive conduct in the appropriate pleading, or on the scope of releases, not on whether patent infringement could be considered anticompetitive conduct. Similarly, the Fifth Circuit’s decision in Kinnear-Weed Corp. v. Humble Oil & Refining Co., 214 F.2d 891 (1954), turned on the complaint’s failure to allege “facts which show injury to the public,” not on whether patent infringement could be anticompetitive conduct.

The magistrate also declined to follow BD’s argument that RTI’s claim made “no economic sense” because “patent infringement actually increases competition by making more products available to consumers.” Although that proposition might be true for “the vast majority of cases,” the allegations in the present case were unique, the magistrate explained. Here, RTI alleged that “[i]nstead of increasing the ‘flow of such products in commerce’ BD used patent infringement to suppress, impede, and impair any rapid adoption of ‘such’ products (retractable syringes) by purposefully keeping bad ones in the market.” Therefore, RTI alleged patent infringement that led to a decrease rather than an increase in competition.

Finally, the magistrate rejected BD’s contention that RTI was “collaterally estopped from showing that BD acted willfully in this case because of the finding of no willful infringement in the prior patent case.” The court found that the difference between the standard for willful infringement in a patent case (clear and convincing evidence) and the standard in the present case (preponderance of the evidence) was “enough to defeat BD’s argument.”

The case is No. 2:08-CV-16-LED-RSP.

Attorneys: Bradley Carroll Weber (Locke Lord LLP) for Retractable Technologies, Inc. Robert A. Atkins (Paul Weiss Rifkind Wharton & Garrison) for Becton, Dickinson and Co.

Companies: Retractable Technologies, Inc.; Becton, Dickinson and Co.

Cases: Antitrust TexasNews