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From Antitrust Law Daily, February 21, 2014

Sears’ antitrust counterclaims against Weber for monopolization of gas grill market dismissed

By Linda O’Brien, J.D., LL.M.

In an action by grill manufacturer Weber-Stephen Products against Sears for patent and trade dress infringement of its outdoor gas grill, Sears failed to allege sufficient facts to pursue counterclaims against Weber for engaging in unlawful monopolization by terminating the parties’ business agreement and withdrawing its products from Sears stores, the federal district court in Chicago has ruled (Weber-Stephen Products, LLC v. Sears Holding Corporation, February 20, 2014, Chang, E.). However, Sears adequately pleaded that the grill patent was invalid and unenforceable due to Weber’s inequitable conduct.

Weber-Stephens Products is a leading designer and manufacturer of outdoor gas, charcoal, and electric grills and grilling accessories. In 1998, Weber agreed to supply merchandise to Sears Holding Company’s subsidiary, Sears, Roebuck and Company. The agreement also authorized Sears to offer service contracts in connection with sales of Weber grills, in which Sears would replace or repair Weber grills and parts for up to five years after purchase. In 2012, Weber notified Sears of its intent to terminate the parties’ business dealings due to lack of sufficient resources dedicated to the Weber brand. Sears was allowed to sell the balance of inventory on hand but would not be supplied with a new inventory of grills or accessories.

Weber owned U.S. Patent No. 8,347,874 (the '874 patent), which disclosed a fuel tank blocking structure to prevent storage of a second fuel tank inside the grill frame and grease management cup brackets to support the grease drip pan. After the termination of the business agreement with Weber, Sears developed and marketed a competing grill under its Kenmore Elite brand.

Weber filed suit for patent infringement and trade dress infringement, alleging that Sears Kenmore Elite brand grill infringes the '874 patent by featuring propane tank blocking structures and grease collection cup brackets. Sears filed counterclaims alleging that the patent was invalid and unenforceable due to Weber’s inequitable conduct and that Weber engaged in anticompetitive conduct in violation of federal and state antitrust laws. Weber moved to dismiss the inequitable conduct and antitrust counterclaims.

Monopoly counterclaims. The court determined that Sears failed to state unlawful monopolization and attempted monopolization claims under the Sherman Act and Illinois Antitrust Act. The Sherman Act requires that, to pursue a claim for monopoly, there must be the possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power. Although Sears adequately defined the relevant market and asserted Weber’s dominant market share, the retailer did not allege sufficient facts of anti-competitive behavior or abuse of market power. The ground for Sears’ counterclaim was Weber’s withdrawal of its products from Sears stores and company’s website, which fell squarely within “refusal to deal” case law and did not give rise to antitrust liability, according to the court. Upon the termination of the business agreement, there was no restraint on competition because no product was withdrawn from the market and Sears could access Weber products the same as any other consumer. Additionally, Sears retained its ability to compete in the grill market by offering third-party grills or developing its own grills.

Further, Sears arguments that Weber lacked business justification for terminating the business agreement was insufficient to show “willful acquisition or maintenance of [monopoly] power.” Absent requisite factual allegations of intent, Sears counterclaims were merely a contractual dispute, the court concluded.

Inequitable conduct. In denying Weber’s motion to dismiss the counterclaim, the court found that Sears sufficiently plead inequitable conduct by Weber due to its withholding known prior art from a prior patent application. A claim of inequitable conduct requires a showing that information material to patentability was withheld from the U.S. Patent & Trademark Office (USPTO) with an intent to deceive the patent examiner. Sears claimed that the individuals responsible for prosecuting the patent failed to disclose prior art to the USPTO that would have affected the purported invention’s patentability. A patent application (the '071 patent), later abandoned, disclosing a caster with a kickstand to prevent the grill from tipping over, was filed on behalf of Weber in 2006. With the application, Weber submitted the American National Standards Institute (ANSI) standards for outdoor cooking gas appliances: (1) Standard 1.3.7, stating that an outdoor cooking gas appliance shall be constructed so it cannot be tipped over by any reasonable pressure and (2) Standard 1.3.10, stating that outdoor grills should be designed to prevent to storage of a spare tank. The same individuals filed the application for the '874 patent on behalf of Weber four months later but submitted no prior art with that application.

Sears identified three specific individuals who filed both the '084 and '071 patent applications within four months and disclosed the ANSI standards as prior art only in the '071 application, according to the court. Moreover, PTO Office Actions and responses by Weber during the pendency of the '874 application show the PTO initially rejected claims of the application in light of another patent disclosing a similar grill frame assembly. At no time during the correspondence did Weber disclose the industry standards to the PTO. In the court’s view, the correspondence indicated the relevance and materiality of the ANSI standard to the prosecution of the '874 patent. Thus, it was reasonable to infer that the individuals acting on behalf of Weber were aware of the importance of the industry standards to patentability and failed to disclosure it with deceptive intent.

The case is No. 1:13-cv-01686.

Attorneys: Raymond Pardo Niro, Jr. (Niro, Haller & Niro, Ltd.) for Weber-Stephen Products, LLC. Paul R. Garcia (Kelley Drye & Warren LLP) for Sears Holdings Corporation.

Companies: Weber-Stephen Products, LLC; Sears Holding Corporation

MainStory: TopStory Antitrust IllinoisNews

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