Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Tex.: Semiconductor technology company states valid Walker Process claim against competitor, (Jun 26, 2015)

By Greg Hammond, J.D.

A supplier of photo-modulated reflectance systems for process control of semiconductor chip manufacturing has stated a valid Walker Process claim against a competitor, based on the fraudulent procurement of a certain patent. In denying the competitor’s motion to dismiss, the federal district court in Austin, Texas determined that the competitor “enforced” the patent at issue for purposes of a Walker Process claim and failed to disclose all relevant material to the U.S. Patent and Trademark Office (PTO) in prosecuting the patent (Xitronix Corp. v. KLA-Tencor Corp., June 24, 2015, Sparks, S.).

Xitronix Corp. filed suit against KLA-Tencor Corp., based on KLA’s alleged attempts to illegally prohibit Xitronix from competing in the dopant activation metrology marketplace through the use of patent law. The patented technology involves a system that provides high resolution, non-destructive evaluation of semiconductor wafers as they pass through various semiconductor manufacturing stages.

Xitronix first sued KLA in 2008, seeking declaratory judgment of noninfringement on two patents. A jury found that the majority of claims were invalid as anticipated by prior art, or based on anticipation and obviousness. After KLA’s previous patents were deemed invalid, it obtained a new patent that Xitronix alleges is identical. Xitronix filed suit again, alleging a Walker Process antitrust claim based on KLA’s alleged fraudulent procurement of the new patent—U.S. Patent No. 8,817,260 (the ’260 patent).

KLA moved to dismiss, arguing: (1) it never “enforced” the ’260 patent for purposes of a Walker Process claim; and (2) it disclosed all relevant material to the PTO in prosecuting the ’260 patent, including the court’s final order and judgment from the previous lawsuit.

Enforcement. The standard for determining the minimum level of “enforcement” necessary to state a Walker Process claim is the same as the standard for determining jurisdiction in a declaratory judgment action—a totality-of-the-circumstances approach, focused on whether there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

Xitronix alleged that KLA purchased a company active in the semiconductor optical inspection market; modified an already-existing patent application with the express purpose of capturing Xitronix’s technology, after Xitronix introduced a supposedly superior competing product with more advanced technology; and actively asserted the now-invalid patent against Xitronix, causing Xitronix to file a declaratory judgment of non-infringement. A jury subsequently found the asserted claims of the previous patent invalid on anticipation and obviousness grounds and KLA allegedly went back to the PTO and was able, through fraud, to obtain the ’260 patent, which is essentially identical to the previous patent. While KLA has taken no action with regard to the ’260 patent, the effect of its existence—within the context of the two parties’ history—is a variety of exclusionary consequences for Xitronix in the marketplace, Xitronix alleges. The court found these allegations sufficient to survive Rule 12 scrutiny.

Fraud on PTO. KLA additionally moved for dismissal on the ground that Xitronix failed to allege fraud. The court disagreed, however, finding that Xitronix presented an affirmative misrepresentation theory and a fraud-by-omission theory. First, Xitronix’s allegations supported a theory in which KLA’s patent attorney told the PTO there was no prior art teaching a probe beam wavelength of 360 to 410 nm, when he was fully aware of references that taught those wavelength ranges and the court’s final judgment that the previous patent was invalid as obvious due to those references, the court found. Second, the court determined that KLA’s patent attorney remained silent and failed to inform the patent examiner that his suggested language was previously ruled invalid for indefiniteness in a final judgment. Xitronix consequently stated a claim that KLA’s patent attorney fraudulently omitted material information and did not comply with his duties of candor, honesty, and good faith. The motion to dismiss was therefore denied.

The case is No. A-14-CA-1113-SS.

Attorneys: Michael S. Truesdale (Law Office of Michael S. Truesdale, PLLC) and Steve Hershberger (Law Office of Steve Hershberger) for Xitronix Corp. Brian K. Erickson (DLA Piper LLP) for KLA-Tencor Corp.

Companies: Xitronix Corp.; KLA-Tencor Corp.

Cases: Antitrust TexasNews