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From Antitrust Law Daily, February 26, 2015

Sears’ monopolization counterclaim scorched in Weber grill patent infringement suit

By Greg Hammond, J.D.

Sears Holding Corp. failed to allege that a grill manufacturer used its patent to gain monopoly power, the federal district court in Chicago determined. Consequently, a reasonable jury could not find that the manufacturer used its patent to dominate a certain grill market and to drive all or most substitutes from it, in violation of federal antitrust law, and the court partially granted the manufacturer’s motion for summary judgment (Weber-Stephen Products LLC v. Sears Holding Corp., February 24, 2015, Chang, E.).

Background. Weber-Stephen Products LLC 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 Corporation’s subsidiary, Sears, Roebuck & Co. The agreement also obligated Weber to sell certain parts to Sears for a certain amount of time at wholesale prices. 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 make a final bulk order of replacement parts, at below-retail prices, but Sears was required to make future purchases at retail prices.

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 allegedly 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 Weber obtained its ’874 patent by fraud and then used the patent to monopolize the market for premium gas grills (the Walker Process counterclaim), and that Weber breached the supply agreement. Weber moved for summary judgment on both counterclaims.

Walker Process counterclaim. In support of its motion for summary judgment on Sears’ Walker Process counterclaim, Weber argued that Sears could not demonstrate monopolization by patent—that Weber engaged in exclusionary conduct by using the ’874 patent to exclude Sears from selling grills. The court agreed, finding that Sears never actually argued that Weber used the ’847 patent to gain monopoly power. Instead, Sears alleged that Weber caused it antitrust injury by filing a patent infringement suit. However, the court noted that antitrust injury is not the same as willful acquisition of monopoly power. Consequently, a reasonable jury could not conclude that Weber used its patent to dominate the market and drive Sears from it, and the motion for summary judgment was granted as to the Walker Process counterclaim.

Breach of contract. Sears’ breach of contract counterclaim survived the motion for summary judgment because, although Weber-Stephen Products Co. was acquired by Weber-Stephen Products LLC, a reasonable jury could conclude that the company assigned the supply contract to the LLC or that the LLC succeeded to the company’s contractual obligations by express or implied agreement. However, summary judgment was partially granted with regard to damages. The court found that Sears could not obtain damages for lost profits of grills because the alleged breach pertained to the “parts” provision of the agreement, which said nothing about grills. Nevertheless, Sears’ claim for damages based on the difference between what it paid for replacement parts and the wholesale cost of those parts survived the motion.

The case number is 1:13-cv-01686.

Attorneys: Raymond Pardo Niro, Jr. (Niro, McAndrews, Dowell & Grossman, LLC) for Weber-Stephen Products LLC. Paul R. Garcia (Partridge & Garcia PC) and Catherine E. James (Kelley Drye & Warren LLP) for Sears Holdings Corp. and Sears, Roebuck & Co.

Companies: Weber-Stephen Products LLC; Sears Holding Corp.; Sears, Roebuck & Co.

MainStory: TopStory Antitrust IllinoisNews

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