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From Antitrust Law Daily, April 10, 2015

Monopoly claims stayed pending resolution of training pants patent litigation

By Greg Hammond, J.D.

The manufacturer of Huggies Pull-Ups brand disposable training pants for children successfully obtained a stay of antitrust counterclaims, alleging that the manufacturer engaged in sham patent litigation to monopolize the disposable training pants market. Although the federal district court in Green Bay, Wisconsin, partially denied the manufacturer’s request to dismiss and strike the antitrust counterclaims, it nevertheless separated and stayed the counterclaims, pending resolution of the underlying patent infringement action (Kimberly-Clark Worldwide Inc. v. First Quality Baby Products LLC, April 9, 2015, Griesbach, W.).

Background. First Quality Baby Products LLC and Kimberly-Clark Worldwide Inc., the manufacturer of Huggies disposable training pants, are competitors in the disposable training pants market. After Kimberly-Clark filed various patent infringement suits, First Quality filed antitrust counterclaims under the Sherman and Wisconsin Antitrust Acts, alleging Kimberly-Clark unlawfully acquired and maintained a monopoly in the market by, among other actions, threatening to sue and suing private label manufacturers such as First Quality on patents that Kimberly-Clark knew were invalid, unenforceable, not infringed, and/or procured by fraud on the Patent Office. Kimberly-Clark moved to (1) separate and stay the antitrust counterclaims; and (2) dismiss the antitrust counterclaims and to strike First Quality’s collateral estoppel affirmative defense.

Res Judicata. In its first argument, Kimberly-Clark asserted that First Quality’s antitrust claims are barred under the doctrine of res judicata by final judgment entered in an earlier litigation. The court disagreed, however, noting that a limited release in the settlement agreement reached in the earlier litigation preserved Kimberly-Clark’s right to pursue claims for infringement under a certain patent. In so doing, Kimberly-Clark also preserved First Quality’s antitrust claims pertaining to the same product. The antitrust claims were therefore not barred under the doctrine of res judicata.

Noerr-Pennington Immunity. Kimberly-Clark also argued that the antitrust counterclaims must be dismissed because it is entitled to immunity for its patent litigation under Noerr-Pennington. Conversely, First Quality asserts that the “sham” litigation exception to Noerr immunity applies. The court first agreed that Kimberly-Clark is immune from liability for previous lawsuits brought against First Quality, finding that they were not a series of unsuccessful lawsuits brought with no hope of success. First Quality’s argument that Kimberly-Clark attempted to enforce patents that should never have been issued, absent allegations of fraud or inequitable conduct on Kimberly-Clark’s part when obtaining its patents, were more of a complaint against the U.S. Patent and Trademark Office than Kimberly-Clark.

The motion to dismiss and strike the antitrust counterclaims concerning the current litigation were denied, however, because the court has not yet ruled on validity of the patent at issue.

Compulsory counterclaims. In its third argument, Kimberly-Clark claimed that the antitrust counterclaims should be dismissed under Federal Rule of Civil Procedure 13(a), which states that a pleading “must” state as a counterclaim any claim that, at the time of its service, the pleader has against an opposing party if the claim arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require adding another party over whom the court cannot acquire jurisdiction. However, the court noted that the fact a counterclaim is “compulsory” is a reason for granting leave to amend, and Kimberly-Clark’s argument that First Quality has not and cannot show good cause to amend its pleading was deemed untimely. Because the court previously granted First Quality’s motion to amend, adding the antitrust claims, the court declined to revisit the decision and denied Kimberly-Clark’s motion to dismiss.

Collateral estoppel. The motion to strike First Quality’s collateral estoppel affirmative defense also was denied, despite Kimberly-Clark’s argument that judgment on an earlier patent does not preclude it from litigating the current patent at issue. The affirmative defense was not insufficiently pleaded, the court determined, given the similarity in the patents. Further, Kimberly-Clark’s argument went to the merits of the defense, the court stated, which will be decided in a forthcoming summary judgment motion.

Antitrust counterclaims stayed. Lastly, the court granted Kimberly-Clark’s motion to stay the antitrust counterclaims until the underlying patent dispute is decided. The court noted two reasons for its belief that expediency and judicial economy favor bifurcation: (1) antitrust claims add significant discovery costs, and the validity of the patent-in-suit is a logical predicate to the antitrust counterclaims; and (2) although there is some overlap between the antitrust issues and the issues in the patent suit, the patent case is still relatively simple. The court additionally noted that resolution of the patent disputes would “become the law of the case,” and would therefore eliminate or reduce some of the proof that would be necessary at trial on the antitrust counterclaims. Lastly, resolution of the patent infringement action would alleviate any additional harm to First Quality.

The case is No. 14-CV-1466.

Attorneys: Daniel T. Flaherty (Godfrey & Kahn SC) and Marc S. Cooperman (Banner & Witcoff Ltd.) for Kimberly-Clark Worldwide Inc. and Kimberly-Clark Global Sales LLC. Matthew J. Duchemin (Quarles & Brady LLP) for First Quality Baby Products LLC, First Quality Retail Services LLC, and First Quality Consumer Products LLC.

Companies: Kimberly-Clark Worldwide Inc.; Kimberly-Clark Global Sales LLC; First Quality Baby Products LLC; First Quality Retail Services LLC; First Quality Consumer Products LLC

MainStory: TopStory Antitrust WisconsinNews

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