Federal Circuit: Walker Process Claims do not Arise Under US Patent Law

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

8 thoughts on “Federal Circuit: Walker Process Claims do not Arise Under US Patent Law

  1. 3

    Ned, there is a lesson here of far broader import. One can deduce from the complaint allegations that the continuation prosecuting attorney could have avoided the recited IC accusations against him [which OED is likely to read] by avoiding the [all to common] prosecution mistake of saying on the record that “the prior art does not teach X” instead of saying “The art cited by the examiner does not teach X.” The former statement can trigger such an accusation of affirmative misrepresentation if a prosecuting attorney accusedly knows, or should known, of OTHER prior art that has been held to teach X. Its a lot easier than later trying to argue “oh, that’s what I really meant.”

    1. 3.1

      P.S. There is, of course, a substantial difference between what may be IC and what may be Walker Process fraud, in both conduct and potential consequences.

  2. 2

    I’d love to hear a bit more about the “attorney argument” in this case which totally wasn’t a fraud on the PTO.

    1. 2.1

      I agree. (no snark)

      The line of “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.” smells bad, and more details are warranted.

      1. 2.1.1

        Check out the decision (the link is provided). Taken in context, there doesn’t even seem to be any misstatement. The prosecuting attorney was implicitly referring to particular cited art in the statement in question.

        Nothing smells bad here, I think it was a bad choice of words for the court to say even assuming there was a “misstatement” since what was at issue was essentially an imperfect statement which was subject to misinterpretation.

        1. 2.1.1.1

          You are quite right Anon2 – it appears that I fell for the 587 nm journalism and the soundbite that misrepresented the quote and cast that quote out of context.

          In context then:

          However, even assuming these statements misstated the state of the prior art, Staliman’ s remarks may fairly be viewed as attorney argument and not factual misrepresentations. The law prohibits a prosecuting attorney from misrepresenting material facts; it does not prevent an attorney from making arguments in favor of patentability. Indeed, where a prior art reference has been submitted to the examiner, the examiner is free to reach his own conclusion and does not have to solely rely on the prosecuting attorney’s arguments. See Young v. Lumenis, Inc., 492 F.3d 1336, 1348 (Fed. Cir. 2007); Innogentics v. Abbott Laboratories, 512 F.3d 1363, 1379 (Fed. Cir. 2008).

          Note to self: when in agreement with Malcolm, ALWAYS check the source material.

  3. 1

    Why of course Dennis, the reasons for so many posts on this topic is that the issue of Walker Process Claims is one of the major topics that concerns all patent attorneys.

    1. 1.1

      This one made me laugh! :)

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