Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Ohio: Procter & Gamble denied bifurcation of antitrust and patent misuse counterclaims from its patent infringement suit, (Nov 19, 2013)

By Linda O’Brien, J.D., LL.M.

A consumer product company’s motion to bifurcate the antitrust counterclaims and patent misuse affirmative defenses from its patent infringement claims against a dental strip producer was denied by the federal district court in Cincinnati (Proctor & Gamble Company v. CAO Group, Inc., November 18, 2013, Black, T.).

The Procter & Gamble Company (P&G), a consumer product company, filed a patent infringement claim against CAO Group, Inc. for making, selling, offering to sell, and/or importing various dental strip products. CAO produces dental strip products that whiten teeth, deliver fluoride, and desensitize teeth. CAO responded by filing affirmative defenses that two of the patents were unenforceable due to alleged patent misuse and counterclaims alleging violations of Section 2 of the Sherman Act for attempted monopolization of the dental strip treatment market. P&G’s motion to dismiss CAO’s affirmative defenses and counterclaims was denied on September 24, 2013. P&G moved to bifurcate the antitrust counterclaims from the patent misuse affirmative defenses from the patent infringement suit and stay all related proceedings until the underlying patent suit was resolved.

Judicial economy. In determining that bifurcation would only serve to increase the burdens of litigation, the court found that there was a considerable overlap between the issues of inequitable conduct of patent misuse and the fraud necessary to establish a Walker Process antitrust claim. Due to the overlapping evidence, if the defendant were to prevail on either its affirmative defense or counterclaim, the court would be forced to conduct a separate trial to consider the same alleged misrepresentations made regarding the same patents. Additionally, bifurcation could increase discovery disputes regarding which discovery requests were directed at patent issues and which were directed at antitrust issues. In these circumstances, bifurcation would not promote efficiency and convenience, according to the court.

Prejudice. The court also found that bifurcation and staying discovery would prejudice the defendant. CAO’s patent misuse and antitrust counterclaims have scienter elements that would require direct testimony from witnesses who were present during the events in question. Similarly, witnesses who provide testimony regarding market and sales data would be required to provide testimony regarding both patent damages and market share relevant to the antitrust claims. Hence, the defendant would be subject to increased costs associated with two separate trials and trial preparation. Finally, if the defendant were to prevail on its claims, it may be impossible to quantify the harm caused by lost market opportunities.

The case is No. 1:13-cv-337.

Attorneys: David M. Maiorana (Jones Day) for Procter & Gamble Co. Edgar R. Cataxinos (Traskbritt, PC) for CAO Group, Inc.

Companies: Procter & Gamble Co.; CAO Group, Inc.

Cases: Antitrust OhioNews