Antitrust counterclaims in patent case beat motion to dismiss

April 1, 2020

GCR USA

Spencer Parts

Photo: Shutterstock/Ody_Stocker

A federal judge in Delaware has denied auto emissions cleaning technology company Ingevity’s bid to dismiss chemical company BASF’s claims of anticompetitive patent licensing practices.

BASF adequately alleged that Ingevity violated antitrust laws by giving favourable licensing terms on an important emissions-cleaning patent to companies that purchase its products, Judge Richard Andrews of the US District Court for the District of Delaware held last week.

He also found that BASF stated adequate exclusive dealing claims, based on Ingevity’s supply and licensing agreements with key manufacturers of emissions cleaning products.

The dispute between the companies began in 2018 when Ingevity sued BASF for infringement of a patent for a multi-stage system for cleaning vehicle emissions. At one stage, honeycomb-shaped “scrubbers” trap harmful emissions produced by a vehicle’s engine.

Ingevity also produces honeycomb scrubbers and other carbon absorbents used in emissions-cleaning canisters. Under patent licence agreements with canister manufacturers, it charged license fees only to those that did not purchase carbon adsorbents from Ingevity, according to a report by magistrate judge Sherry Fallon on Ingevity’s motion to dismiss.

Ingevity performs random checks on the licensees to make sure they are not using another company’s carbon adsorbents, she noted.

Judge Fallon recommended BASF be allowed to continue its antitrust case last October. Judge Andrews adopted that report and recommendations and unsealed it last week. He also bifurcated BASF’s antitrust claims from the underlying patent infringement claims.

BASF began marketing a competing honeycomb scrubber in 2015. After Ingevity claimed that BASF infringed its patents, BASF fired back with antitrust claims, alleging that Ingevity illegally tied the licence of its patents to sale of its carbon adsorbents.

Judge Andrews said that as in his analysis of the tying claims, BASF’s allegations that the honeycomb scrubbers can be considered separately from the Ingevity patent were enough to keep the claims alive.

He rejected Ingevity’s argument that BASF failed to allege substantial foreclosure in the market for honeycomb scrubbers. BASF’s allegations of an anticompetitive agreement with “one of the largest” manufacturers of a certain category of canister were enough to state a claim of substantial foreclosure, he found.

The Department of Justice’s antitrust division has recently advocated deference to the rights of patent holders under assistant attorney general Makan Delrahim’s “New Madison” approach to intellectual property.

Last week, the DOJ urged dismissal of a lawsuit by Intel and Apple against patent aggregator Fortress Investment Group. The agency argued that Intel and Apple failed to allege that Fortress’s ownership of various patents harmed competition.

Last summer, the agency opposed the Federal Trade Commission’s case against Qualcomm over allegedly anticompetitive patent licensing practices.
Ingevity said the ruling was “within the bounds of what was expected” and noted that because the claims have been bifurcated, it will be able to pursue its patent

infringement case separately from the antitrust claims.
“Ingevity continues to believe in the strength of its intellectual property and the merits of its case against BASF,” the company said.

The patent trial is scheduled to begin on 14 September. In an order on Monday, Judge Andrews vacated deposition and dispositive motion deadlines in the antitrust trial due to circumstances surrounding covid-19. He said that the schedule will be set after the patent trial.

Counsel to Ingevity

Shaw Keller

Karen Keller, John Shaw and Nathan Hoeschen in Wilmington, Delaware

Gibson Dunn & Crutcher

Jeffrey Thomas, Frank Coté, Eric Syu, Taylor King and Nathaniel Scharn in Irvine, California; Stuart Rosenberg in Palo Alto, California; Brian Buroker and Omar Amin in Washington, DC

Mangum Ririe

Rustin Mangum and Spencer Ririe in Ladera Ranch, California

Counsel to BASF

Morris Nichols Arsht & Tunnell

Rodger Smith II and Anthony Raucci in Wilmington, Delaware

King & Spalding

Thomas Friel in Palo Alto, California; James Brogan, Brian Eutermoser, Angela Tarasi and Kevin Lake in Denver, Colorado; Bobby Burchfield, Norman Armstrong Jr and Christopher Yook in Washington, DC

Ingevity aimed to convince the Delaware federal court to apply Supreme Court precedent on patent misuse to BASF’s case, while BASF argued that its claim should be assessed under antitrust case law.

In her report and recommendations, Judge Fallon agreed with BASF that its claims should be assessed as antitrust claims.