Tuesday, May 24, 2011

Monopoly Claims Were Adequately Alleged Against Diaper Maker Kimberly-Clark

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Last week, the federal district court in Harrisburg, Pennsylvania, refused to dismiss monopoly claims against Kimberly-Clark brought by competitor First Quality Baby Products, LLC. First Quality—a manufacturer of “private label” or store-brand diapers and training pants—adequately alleged that Kimberly-Clark used its more than 300 patents to disrupt competitors and to maintain a monopoly in the disposable baby diaper and training pants market.

First Quality claimed that Kimberly-Clark:

(1) Maintained a 35 percent share of the market for disposable baby diapers and a 75 percent share in the training pants market and

(2) Engaged in anticompetitive conduct to maintain its monopoly.
Sham Patent Litigation

Kimberly-Clark allegedly threatened patent lawsuits and then engaged in sham litigation to drain the resources of “private label” or store brand manufacturers, thereby reducing their ability to compete.

According to First Quality, Kimberly-Clark enforced patents that it knew to be invalid, procured through fraud on the Patent and Trademark Office (PTO), or not infringed. Further, Kimberly-Clark allegedly misrepresented the nature of the litigation in order to threaten retail outlets to make it the exclusive supplier of store-brand training pants.

Product Disparagement

First Quality also contended that Kimberly-Clark engaged in product disparagement through false claims and coercively acquired licensing agreements through settlements of secret arbitration proceedings.

Each of these acts in isolation might not itself not rise to the level of anticompetitive conduct, but in the aggregate it represented anticompetitive activity tied to the relevant markets that raised a plausible claim for relief, the court decided.

Conspiracy Claims

The court rejected Kimberly-Clark's contention that it was immune from antitrust liability under the Noerr-Pennington doctrine. The doctrine immunizes from antitrust liability those who petition the government. While prosecuting a patent infringement action was the type of activity protected by Noerr-Pennington, exceptions existed for activities that were mere “sham” and conduct before the PTO that was fraudulent.

Kimberly-Clark's conduct could fall within the exception for fraud on the PTO, also known as Walker Process fraud, according to the court. First Quality alleged that Kimberly-Clark deliberately and intentionally withheld material prior art in connection with the prosecution of a patent-in-suit, and, as a result, the PTO issued a patent that was invalid.

The text of the May 17 decision in Kimberly-Clark Worldwide, Inc v. First Quality Baby Products, LLC, appears at 2011-1 Trade Cases ¶77,452.

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