Antitrust Counterplaintiff May Recover Attorneys' Fees For Defending Infringement Of Fraudulently Obtained Patent

Antitrust and intellectual property practitioners with an interest in trivia have been known to ask, "When is the last time an appellate court has upheld a finding of antitrust liability for a claim alleging fraud on the U.S. Patent Office?" The Federal Circuit has now supplied an easy answer to that question: February 2016, in TransWeb, LLC v. 3M Innovative Properties Co., No. 2014-1646, WL 520238 (Fed. Cir. Feb. 10, 2016).

In Walker Process Equipment Inc. v. Food Machinery & Chemical Corp., the U.S. Supreme Court established that a patent infringement plaintiff who knowingly asserts a patent fraudulently procured from the Patent Office may be subject to antitrust liability if the patent infringement defendant/antitrust plaintiff can satisfy all other elements necessary to establish liability under the Sherman Act. Since then, such claims have been asserted frequently but rarely have been successful. The Federal Circuit dealt with multiple issues in its recent TransWeb decision, but two stand out as worthy of special attention: (i) what key facts led the court to the highly unusual result of affirming antitrust liability for fraud on the Patent Office; and (ii) should attorneys' fees incurred by the patent infringement defendant be recoverable, indeed subject to trebling, as an element of antitrust injury and damages?

In TransWeb, 3M sued TransWeb for allegedly infringing several 3M patents relating to improved methods for manufacturing filters for respirators. TransWeb claimed it had distributed samples of the filters publicly, including to 3M, more than one year before the 3M patents' priority date. During prosecution of the 3M patents, 3M had persuaded the Patent Office—through what the court characterized as "dubious" evidence—that a sample of TransWeb's filter did not qualify as prior art because 3M had obtained the sample pursuant to a confidentiality agreement with TransWeb.

The District Court found that 3M representatives "strategically delayed" for several years before informing the Patent Office of the TransWeb prior art and then, at "the last possible moment, when a notice of allowance had already been mailed," they "intentionally made an inaccurate disclosure of that material." The jury found the 3M patents to be invalid as well as unenforceable due to inequitable conduct, and further found that 3M committed a Walker Process violation and that attorneys' fees incurred by TransWeb were appropriate antitrust damages. The District...