Judicial ‘Ping-Ponging’ Over Patent-Antitrust Disputes Heats Up

The nation’s top patent court and another federal appeals court are at loggerheads over a batch of cases involving the intersection of intellectual property and antitrust law—a rare example of a circuit clash the Federal Circuit was established to prevent.

The US Court of Appeals for the Federal Circuit has jurisdiction over all appeals arising under the patent laws of the US, while the New Orleans-based Fifth Circuit hears other appeals from the patent-heavy Eastern and Western districts of Texas. A string of antitrust cases involving patents has tested the boundaries of the Federal Circuit’s domain, with the Fifth Circuit and Federal Circuit disagreeing on which must take cases involving the Walker Process doctrine, which imposes antitrust liability on companies that use ill-gotten patents to obtain a monopoly. Each court says it’s not the proper forum for the disputes.

Now, after the circuit quarrel was on display again last month, the jurisdictional “ping-ponging” could draw in the US Supreme Court, patent attorneys said.

“Each of the circuits think it’s a settled question,” said Mel Bostwick, a partner at Orrick, Herrington & Sutcliffe LLP in Washington, “but they each have their own views on what their answer is.”

Implausibility Standard

The issue first bubbled up in a case between a rifle manufacturer and a former employee. The employee had brought an antitrust action against Colt Industries Inc. after the company told potential customers that the former worker was illegally misappropriating Colt’s trade secrets with the sale of rifle parts similar to Colt’s patented guns.

The Federal Circuit found it lacked jurisdiction to hear the appeal—which had only hinted at patent issues—and kicked the suit over to the Seventh Circuit in Chicago. The Seventh Circuit disagreed, saying the Federal Circuit was “clearly wrong,” and bounced the case back.

The Supreme Court stepped in, and in 1988 held that the Federal Circuit didn’t have jurisdiction because the issue didn’t arise under patent statutes. The high court established in the decision that if the reasons for a transfer are “plausible,” then the court receiving the transferred case must hear it.

“The Supreme Court said we have to end this at one point,” said Ryan Vacca, a law professor at the University of New Hampshire Franklin Pierce School of Law. “If it’s plausible that one of you has jurisdiction, then keep it.”

Under that standard, the Fifth Circuit in August begrudgingly accepted the transfer from the Federal Circuit and decided that Phoenix Services LLC won’t have to face antitrust claims in a suit alleging Phoenix obtained a patent fraudulently and asserted it in bad faith.

Different Conclusions

Fifth Circuit Judge Stuart Kyle Duncan noted the court’s disagreement with the Federal Circuit over who has jurisdiction over cases arising under the Walker Process doctrine.

The Fifth Circuit panel didn’t find the Federal Circuit’s transfer to be implausible, according to the decision. “That does not mean, we hasten to add, that it is correct,” Duncan wrote.

The Federal Circuit had kicked the case over because the patent had already been declared invalid, meaning there was no longer a “live patent issue”—while the Fifth Circuit contended that only the Federal Circuit can hear standalone Walker Process appeals.

Whether a “live patent issue” is at the core of the dispute seems to be the line the Federal Circuit is drawing in these cases, Vacca said.

“That’s not the law but that seems to be the trend,” he said. “That seems to be a factor the Federal Circuit is gravitating towards, but there’s supposed to be more to it than that.”

The Federal Circuit’s attempts to narrow its own jurisdiction in patent-adjacent cases may not end with antitrust. In at least one other case, the Federal Circuit was at odds with the San Francisco-headquartered Ninth Circuit on which court is the proper venue for a dispute over a potential license for standard-essential patents.

Chance for Clarity

In 2019, the justices were asked to clarify who has appellate jurisdiction in Walker Process cases—the Federal Circuit, or other appellate courts. Two separate petitions for review were filed in Xitronix Corp v. KLA-Tencor Corp., one arising from the Federal Circuit case and the other from the Fifth Circuit.

Xitronix sued KLA for allegedly obtaining a patent involving computer circuits through fraud, based on misleading statements to the US Patent and Trademark Office. The Federal Circuit first ruled that the patent law question wasn’t substantial, throwing the case to the Fifth Circuit, and the case bounced back and forth from there.

Ultimately, the full Federal Circuit in 2018 declined to resolve the jurisdiction clash, drawing a dissent from Judges Pauline Newman and Alan D. Lourie. Newman wrote that she was concerned for the “conflicts and uncertainties created by this unprecedented change” in the Federal Circuit’s jurisdiction.

The high court refused to step in, though it may be asked again as the Phoenix case works its way through the appeals process. An attorney involved in that case said they are considering further appeals.

“We have this category of cases where the facts may be different, but they’re all going to raise the same basic scenario, and patent law is going to be playing essentially the same role in all of them,” Bostwick said. “So at least tell us the answer for these types of cases.”

Clarity from either the full Federal Circuit or the Supreme Court is needed to resolve the split and prevent further games of judicial hot potato, Vacca said. There’s obvious confusion, he said, since both the Fifth and Federal circuits have come to different conclusions in the same cases.

“If the courts don’t resolve this issue, I think it’s going to result in a fair amount of wasteful litigation,” Vacca said. “It’s just, ‘which court are we supposed to go to?’”