Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Alleged patent infringer lacked standing to assert antitrust counterclaims against patent holder, (Mar 31, 2014)

By Jody Coultas, J.D.

Viatek Consumer Products Group, Inc. could not state Sherman Act or Lanham Act counterclaims against Radiancy, Inc. based on a lack of standing and failure to sufficiently plead the claims, the federal district court in New York City has held (Radiancy, Inc. v. Viatek Consumer Products Group, Inc., March 28, 2014, Roman, N.).

Radiancy, a skincare products company, manufactured and sold the no!no!^® Hair, a handheld hair removal device that uses heat. Viatek—which develops, manufacturers, and markets home goods and personal care products—manufactured and sold the Pearl^TM Hair Remover and the Samba^TM, a hot wire hair removal device that does not use a pulsed heating source. Radiancy alleged that Viatek’s falsely advertised its hair removal products and disseminated misleading information to confuse consumers, including directly lifting photographs and videos from Radiancy’s advertising materials and using them to promote the Pearl Hair Remover.

To state a claim for attempted monopolization, a plaintiff must allege that a defendant (1) engaged in anticompetitive or predatory conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power. The plaintiff must also establish an antitrust injury to have standing. An antitrust injury is one that the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.

Viatek lacked standing to bring its antitrust claim, according to the court. Viatek alleged that Radiancy attempted to monopolize the hot wire hair cutting device market in the United States in violation of Section 2 of the Sherman Act by defrauding the USPTO in order to obtain patents for devices, knowingly filing “sham” lawsuits to enforce those patents, and interfering with Viatek’s business relationships. However, there was no evidence of how Radiancy’s actions caused an antitrust injury. Radiancy’s actions did not have had an adverse effect on competition market-wide. There was no evidence Radiancy increased prices, competitors left the market, or anything else that could substantiate the injury necessary to have standing to sue under the antitrust laws.

A claim under Sections 1 and 2 of the Sherman Act must allege a relevant geographic and product market in which trade was unreasonably restrained or monopolized. Viatek defined the relevant market as both “bladeless non-laser heated hair element hair remover device,” “trade in hot wire hair cutting devices in the United States.” The market definitions provided were too vague to allow the court to address the antitrust claims and there was also no evidence of a dangerous probability of Radiancy obtaining market power, according to the court.

The court dismissed the antitrust counterclaims with prejudice. A patentee who brings an infringement suit may be subject to antitrust liability for the anti-competitive effects of that suit if the alleged infringer proves (1) that the asserted patent was obtained through knowing and willful fraud or (2) that the infringement suit sham litigation. Under Walker Process Equip., Inc. v. Food Mach. & Chemical Corp., 382 U.S. 172 (1965), a patent holder is liable under Section 2 of the Sherman Act if it obtained the patent by knowing and willful fraud, had market power in the relevant market, and used its fraudulently obtained patent to restrain competition.

Viatek failed to allege anything more than generalities regarding Radiancy’s fraud on the USPTO, market power, or restraint of trade in the defined market. There was no evidence that Radiancy had filed the patent infringement suit to deliberately push Viatek out of the market, or that the litigation was objectively baseless considering the '034 patent was presumptively valid. Viatek had amended its counterclaims twice, and failed to remedy the deficiencies.

Viatek failed to state a claim for unfair competition under the Lanham Act, according to the court. To state an unfair competition claim, Viatek was required to show a likelihood of confusion or deception of the public as to the source of the allegedly infringing product and bad faith on the part of Radiancy. There was no evidence, or even allegations, that Radiancy misappropriated Viatek’s goods, how the parties’ products competed and would therefore confuse the public, or that Viatek sustained damages because of Radiancy’s conduct.

The court also dismissed the tortious interference claim.

The case is No. 13-cv-3767(NSR).

Attorneys: Baldassare Vinti (Proskauer Rose LLP) for Radiancy, Inc. Anthony H. Handal (Handal & Morofsky) for Viatek Consumer Products Group, Inc.

Companies: Radiancy, Inc.; Viatek Consumer Products Group, Inc.

Cases: Antitrust NewYorkNews