Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Food packaging manufacturer allegedly used sham patent litigation to eliminate competitors, (Aug 3, 2015)

By Linda O’Brien, J.D., LL.M.

A leading manufacturer of food packaging for microwaveable foods has engaged in anticompetitive conduct to foreclose smaller competitors from the food packaging market by offering discounted packaging bundles to food company customers and aggressively pursuing patent litigation, according to a complaint filed in the federal district court in Minneapolis (Inline Packaging, LLC v. Graphic Packaging International, Inc., July 31, 2015).

Inline Packaging manufactures susceptor food packaging, a type of active packaging that converts energy in microwave ovens to high-surface temperatures that crisp and brown food. Graphic Packaging is the one of the largest paperboard packaging companies in the United States that competes with Inline in the susceptor food packaging industry for supply contracts to major food companies. Graphic maintains a 95 percent share of the susceptor food packaging market and has annual susceptor food packaging revenues of $210 million. Inline has susceptor food packaging revenues of $4 million each year.

The complaint states that, in December 2014, Graphic had a portfolio of over 1,900 U.S. and foreign patents related to food packaging. To maintain its monopoly, Graphic offers packaging bundles to large food companies, which include both paperboard and susceptor food packaging sold at a discount in very large quantities, Inline charged. Since buyers for food companies commonly purchase greater volumes of paperboard than susceptor food packaging, smaller competitors cannot profitably offer susceptor food packaging at a low enough price to compete with the discounts available through Graphic’s bundles, the lawsuit claimed.

Graphic allegedly maintained its dominant market position by engaging in aggressive and predatory patent litigation against smaller rivals and potential new market entrants. Graphic has threatened competitors and food company buyers with patent infringement of, at times, expired or inapplicable patents. This misuse of its intellectual property as a means to monopolize the market has increased costs to its competitors, both financial and reputational, according to the complaint.

Inline also alleges that Graphic’s tactics have been successful in deterring competitors and food company buyers from moving forward with a new deal, making an offer or bid to supply susceptor food packaging, or continuing operations. Potential new entrants also are deterred by the threatened patent litigation. Due to reliance on Graphic for susceptor and other food packaging, food company buyers are extremely reluctant to openly resist or disregard Graphic’s threats against Graphic’s smaller competitors, since Graphic is often a “one stop shop” for many food company buyers.

Graphic allegedly has foreclosed competition from existing smaller competitors by misrepresenting to food company buyers that it alone holds the patent rights to certain susceptor food packaging. This has dissuaded food company buyers from even negotiating or dealing with Graphic’s smaller competitors or potential new market entrants. This conduct has reduced the ability of Inline and other smaller competitors from receiving business from food company buyers, has harmed Inline in the form of lost business, and has harmed consumers in the form of higher prices and lower quality packaging, the complaint alleges.

The plaintiff assert claims for tortious interference with prospective business relations, tortious interference with existing contractual relations, misappropriation of trade secrets, unfair competition, and monopolization in violation of Section 2 of the Sherman Act. The action seeks treble damages, pre-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 0:15-cv-03183-ADM-LIB.

Attorneys: Robert R. Weinstine and Justice Ericson Lindell (Winthrop & Weinstine, P.A.) for Inline Packaging, LLC.

Companies: Inline Packaging, LLC; Graphic Packaging International, Inc.

News: Antitrust MinnesotaNews