By Dennis Crouch
Xitronix Corp. v. KLA-Tencor Corp (Fed. Cir. 2018)
Acting sua sponte, the Federal Circuit has transferred this appeal to the Fifth Circuit – holding that the Walker Process monopolization case does not arise under the U.S. Patent Laws as required by the appellate court’s jurisdiction statute 28 U.S.C. § 1295(a)(1). This decision reverses the court’s position from In re Ciprofloxacin Hydrochloride (Cipro) Antitrust Litigation, 544 F.3d 1323 (Fed. Cir. 2008) based upon the intervening Supreme Court decision of Gunn v. Minton, 568 U.S. 251 (2013). The court (Judge Moore) was also clearly perturbed by both parties’ failure to cite or discuss Gunn in their requested supplemental briefs.
Walker Process lawsuits get their name from the 1965 Supreme Court decision Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 176–77 (1965). The case stands for the proposition that federal antitrust liability (Sherman Act) can stem from attempts to enforce a patent procured through fraud (inequitable conduct). Here, Xitronix allegation is that KLA-Tencor obtained United States Patent No. 8,817,260 by “intentional and willful misrepresentations and omissions” in a way that created “an artificial impediment to competition.” Complaint. The district court dismissed the case on summary judgment – holding that, “even assuming [he] misstated the state of the prior art,” the prosecuting attorney’s “remarks may fairly be viewed as attorney argument and not factual misrepresentations.” [XitronixSJ]
Pre Gunn: In its 2008 Cipro decision, the Federal Circuit explained that a Walker Process claim arose under U.S. patent law “because the determination of fraud before the PTO necessarily involves a substantial question of patent law.” In Nobelpharma, the Federal Circuit specifically held that the patent-specific issues lead the court to apply Federal Circuit law to Walker Process claims (rather than the default of regional circuit law). Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed. Cir. 1998).
Impact of Gunn: In 2013, the Supreme Court altered course in Gunn – holding that that the Federal Circuit’s approach to arising-under jurisdiction had been too loose. In that case, the Court held that a legal malpractice case did not arise under U.S. patent law even though the claim necessarily required application of U.S. patent law. The court explained that, even though necessary, “the federal issue in this case is not substantial.” In Gunn and the prior decision Grable & Sons, the Supreme Court was clear that our system of Federalism requires a “balance of federal and state judicial responsibilities.”
For Xitronix, the state-federal balance is not an issue as it was in Gunn and Grable but rather a question of which Federal Appellate court has jurisdiction. However, the Federal Circuit followed the same approach that the Supreme Court did in Gunn – finding the one-off outcome here unlikely to impact or undermine the court’s “uniform body of patent law.”
Holding: Federal Circuit does not Have Jurisdiction. Case Transferred to 5th Circuit