Shearman & Sterling LLP | IP Blog | Federal Circuit Transfers <em >Walker Process</em > Appeal To Regional Circuit<br >  
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  • Federal Circuit Transfers Walker Process Appeal To Regional Circuit

    On February 9, 2018, the United States Court of Appeals for the Federal Circuit (“CAFC”) entered an order transferring the appeal in a Walker Process antitrust action to the United States Court of Appeals for the Fifth Circuit.  Xitronix Corp. v. KLA-Tencor Corp., ___ F.3d ___ (appeal no. 2016-2746).  Despite language in earlier decisions suggesting the contrary, and over both sides’ objections, the CAFC held that patent law is not a necessary element of a Walker Process claim, and that therefore the CAFC lacked subject-matter jurisdiction over the appeal.

    The single cause of action that was the subject of the appeal was Xitronix’s claim that KLA-Tencor (KLA) had “engaged in exclusionary conduct by fraudulently prosecuting” a patent application to issuance, with specific intent to monopolize.  It appears from the opinion that Xitronix’s monopolization claim was made as a freestanding, affirmative claim, unaccompanied by any request for a declaratory judgment of patent invalidity.

    In the course of the appeal, the CAFC sua sponte requested briefing on the question of whether the CAFC had subject-matter jurisdiction over the appeal, or if the appeal should instead be transferred to the regional circuit court.  Both parties asserted that the CAFC had jurisdiction, but the CAFC disagreed.

    The CAFC could have had jurisdiction over this appeal only if the underlying claim was one “arising under” the patent laws.  28 U.S.C. § 1295.  Two earlier CAFC opinions had appeared to hold that Walker Process claims do arise under the patent laws.  In one of those cases, the CAFC had held that, “[w]hether conduct in the prosecution of a patent is sufficient to strip a patentee of its immunity from the antitrust laws is one of those issues that clearly involves our exclusive jurisdiction over patent cases,” and in the other case it had held that Walker Process claims are “subject to exclusive federal court jurisdiction under 28 U.S.C. § 1338(a) [the statute assigning original jurisdiction in patent cases to the federal district courts] because the determination of fraud before the PTO necessarily involves a substantial question of patent law.”

    In the Xitronix case, however, the CAFC distinguished those earlier opinions, pointed to an intervening Supreme Court opinion—Gunn v. Minton, 568 U.S. 251 (2013)—and held that, even though Xitronix’s claim “will almost certainly require some application of patent law,” the claim did not arise under the patent laws.  The CAFC therefore found that it lacked jurisdiction and transferred the appeal to the regional circuit court.

    Beyond the jurisdictional holding, one of the CAFC’s observations about Xitronix’s claim is of particular interest.  In distinguishing its earlier cases, the CAFC stated that, in the Xitronix case, “[t]here is no dispute over the validity of the [patent] claims . . . .”  This suggests that a Walker Process claim can lie even in a case where the alleged misrepresentations during prosecution did not result in the wrongful issuance of the patent—that is, even in a case where the claims would have been allowed even without the misrepresentations to the patent office.  Thus, actual fraud would not be required in order to state a Walker Process claim, which would make such claims easier to plead and win.  Practitioners should watch for future developments in this area.