The Federal Circuit has affirmed a jury verdict finding that Ingevity was liable for unlawful patent tying under antitrust laws.
As the court explained,
Ingevity and BASF both manufacture carbon honeycombs, an activated carbon structure that can be used to filter airborne pollutants in a variety of applications. Both companies market carbon honeycombs for use in automobile air-intake systems and fuel vapor canisters. Air-intake products control emissions by filtering incoming air before it enters the engine, while fuel vapor canisters control emissions by capturing gasoline vapors released from a vehicle’s gas tank before they escape into the atmosphere.
Ingevity owns US Patent RE38,844, which claims systems and methods for reducing emissions from a car’s gas tank.
Specifically, the ’844 patent is directed to a dual-stage fuel-vapor canister system that combines a higher-capacity gas-tank-side adsorbent with a lower-capacity vent-side adsorbent. Notably, said the court, carbon honeycombs used in air-intake systems do not come within the scope of the ’844 patent, but honeycombs used in fuel vapor canisters do.
In 2016, BASF began marketing its EvapTrap XC, a carbon honeycomb with dimensions and cell density comparable to Ingevity’s honeycomb products but produced using different materials and manufacturing processes.
In 2018, Ingevity sued BASF, asserting infringement of the ’844 patent by testing and marketing EvapTrap XC.
BASF responded by arguing that the patent was not infringed, was invalid on multiple grounds, and was unenforceable due to patent misuse.
BASF also brought counterclaims for unlawful tying and exclusive dealing under federal antitrust laws.
BASF alleged that Ingevity conditioned licenses to the ’844 patent (the tying product) on customers’ agreements to fulfill their honeycomb product needs by exclusively purchasing Ingevity’s unpatented honeycomb products (the tied products) in violation of the Sherman Act, 15 U.S.C. §§ 1 or 2.
At trial, the jury heard evidence of unlawful tying, including testimony from an Ingevity executive that “in order to obtain a license [to the ’844 patent,] Ingevity requires that customers buy the honeycombs only from Ingevity.”
The district court later the jury that “[a] patent owner has the right to control the market” for “nonstaple goods” but “has no right to control the market for” staple goods—those suitable for actual and substantial non-infringing uses.
The jury found that BASF had proven that Ingevity had engaged in the unlawful tying of its ’844 patent licenses to sales of its carbon honeycombs.
The court explained that
the essential characteristic of an invalid tying arrangement lies in the seller’s exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms.” … Indeed, “[e]ven if a seller has obtained a monopoly in the tying product legitimately (as by obtaining a patent), courts have seen the expansion of that power to other product markets as illegitimate and competition-suppressing.”
Further,
Tying is defined as selling one good (the tying product) on the condition that the buyer also purchase another, separate good (the tied product).” … Under Third Circuit law, to prove an unlawful tying under the Sherman Act, one must show that “(1) a defendant seller ties two distinct products; (2) the seller possesses market power in the tying product market; and (3) a substantial amount of interstate commerce is affected.”
Ingevity’s position patent misuse defense was based on 35 U.S.C. § 271(d), which shields conduct that would otherwise be characterized as tying or exclusionary when it is undertaken to prevent contributory infringement as defined in § 271(c).
Section 271(c) limits contributory infringement to the sale of a “material or apparatus . . . especially made or especially adapted for use in an infringement . . . and not a staple article or commodity of commerce suitable for substantial non-infringing use,” and § 271(d) correspondingly provides that a patent owner shall not “be denied relief or deemed guilty of misuse or illegal extension of the patent right” by deriving revenue from, enforcing rights against, or refusing to license such contributory infringement.
The Federal Circuit agreed with the district court that “there was substantial evidence in the record supporting the jury’s determination that Ingevity’s honeycombs are staple goods.”
The court thus found that Ingevity’s patent misuse-based defense failed.
Just like the haiku above, we like to keep our posts short and sweet. Hopefully, you found this bite-sized information helpful. If you would like more information, please do not hesitate to contact us here: https://aeonlaw.com/contact-us/.
