Developments in Consumer Standing in Walker Process Claims

I recently wrote an article for the American Intellectual Property Association's (AIPLA) Antitrust Newsletter which I have included below in its entirety.

Developments in Consumer Standing in Walker Process Claims

The Supreme Court held in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), that “the enforcement of a patent procured by fraud on the Patent Office may be violative of § 2 of the Sherman Act provided the other elements necessary to a § 2 case are present.”[2] The Supreme Court did not specify who could assert such a claim and two views have developed on the matter.  The first view finds that the Sherman Act exists to protect competitors from monopolistic practices in the market place and would only give standing to competitors who face a risk of suit for patent infringement. In re Remeron Antitrust Litigation.[3]  The second view finds that consumers can face higher prices as a result of a merchant’s fraud upon the patent office scaring off competition from the marketplace which is an injury courts may address. Ritz Camera & Image v. SanDisk.[4]  This article compares the reasoning of each approach.

I.                   Constitutional and Statutory Standing Requirements

As a constitutional matter, a plaintiff must have standing in order to sue.  Constitutional standing exists where a plaintiff 1) suffers an injury in fact 2) which is caused by the defendant and 3) can be remedied by a favorable court decision.[5]    However, “the focus of the doctrine of ‘antitrust standing’ is somewhat different from that of standing as a constitutional doctrine. Harm to the antitrust plaintiff is sufficient to satisfy the constitutional standing requirement of injury in fact, but the court must make a further determination whether the plaintiff is a proper party to bring a private antitrust action.”[6]  Antitrust standing requires a plaintiff to show a favorable balance of five factors:  "(1) the nature of the plaintiff's alleged injury; that is, whether it was the type the antitrust laws were intended to forestall; (2) the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages."[7]  At issue in direct purchaser cases is the second element.

Walker Process claims are commonly asserted as a counterclaim to a claim of patent infringement.  Courts have allowed anyone sued for infringement to have standing to counterclaim with Walker Process, even consumers.[8]  The two seminal Federal Circuit decisions involved defendants directly sued for patent infringement, rather than a plaintiff seeking declaratory judgment of invalidity or non-infringement.[9]  The sued consumers face an extremely palpable injury – infringement damages or licensing fees if they settle – which conferred them standing to raise a Walker Process claim.

To the contrary, the Supreme Court has foreclosed antitrust standing to indirect purchasers.  In Illinois Brick v. Illinois the State brought an antitrust action against a concrete block manufacturer from whom it had indirectly purchased concrete blocks.[10]  In rejecting the action for lack of standing, the Supreme Court interpreted federal antitrust law to prevent indirect purchasers from seeking antitrust damages except in certain limited circumstances.[11]  Those limited circumstances have not been found in Walker Process litigation.[12]  In Relafen a set of plaintiffs sued GlaxoSmithKline alleging that it unlawfully delayed the marketing of a generic version of the anti-inflammatory drug nabumetone though suits alleging infringement of an invalid and unenforceable patent.  Citing Illinois Brick, the court found that indirect purchasers had no standing and dismissed their case.  However, this left the question of direct purchaser consumer standing open, and the Federal District Courts have reached different results.

II.                The New Jersey Approach to Walker Process Standing

The New Jersey approach is what I call the legal theory espoused by former Federal Judge Stephen Orlofsky, sitting as a special master in In re K-DUR Antitrust Litigation.[13]  Mr. Orlofsky consolidated the case law at the time and determined that the injury caused by the antitrust violation is best litigated a competitor who is the party closest to the harm.[14]

To get there, Mr. Orlofsky begins with a litany of cases that have answered the same question, albeit differently.  The first word on the matter was Judge Neal Peters McCurn in Indium Corp. of America v. Semi-Alloys, Inc..[15]  That case involved a declaratory judgment action where the plaintiff also raised a Walker Process claim.  The court extended Walker Process standing to producers who "were ready, willing, and able to produce the article and would have done so but for the exercise of exclusionary power by the defendant."[16] However, two years later, Judge Anne E. Thompson in Carrot Components Corp. v. Thomas & Betts Corp., reached the exact opposite conclusion. Carrot Components, much like Indium, was seeking a declaratory judgment of invalidity of two of the defendant’s patents and damages under a Walker Process claim.[17]  The court ruled that with respect to declaratory judgment claims, only parties that have been directly threatened with suit or who can demonstrate that they reasonably anticipate a patent infringement suit or some effort by the patent holder to enforce the subject patent against them will have standing to bring such a claim for relief. 

Next to speak on the matter was Judge Richard Posner, sitting by designation in Asahi Glass Co., Ltd. v. Pentech Pharma., Inc..[18]  In Asahi Glass, the plaintiff was a supplier of the paroxetine, active ingredient in a generic version of the drug Paxil.  Asahi sued the defendant, GlaxoSmithKline (Glaxo) in a declaratory judgment action similar to Carrot Components in an effort to have the patent for Paxil declared invalid.   To show the directness of injury requirement Asahi argued that its potential customers were not purchasing its paroxetine product because they feared being sued by Glaxo.[19]  Judge Posner observed that if plaintiff's potential customers were deterred by Glaxo's threat of suit, then those customers had a cause of action against Glaxo.  However, Asahi had no right to bring an action on that basis.  Asahi Glass notes in dicta that direct purchasers who face suit have standing to pursue Walker Process claims, but a supplier who is not the target of a suit by a patent holder, does not have standing to bring a Walker Process claim.

Mr. Orlofsky noted that Remeron consolidated Indium and Carrot Components to create what would become the majority rule: “Plaintiffs, as direct purchasers, 1) never had the '099 patent enforced against them, 2) were never threatened with such enforcement, and 3) were not in a position to manufacture a competing generic version of mirtazapine.”[20] Essentially, one of those is required for Walker Process standing, otherwise the plaintiffs are “donning the cloak of a Clayton Act monopolization claim….”[21]

The only case Mr. Orlofsky could find that cut the other way was Molecular Diagnostics Labs. v. Hoffman-LaRoche, Inc., which departed from all existing case law at that moment.[22]  In Molecular Diagnostics, the plaintiff, a direct purchaser of the subject patented product, brought suit under Section 1 of the Sherman Act charging that it had been forced to pay artificially inflated prices for the product as a result of defendants' enforcement of the patent, which plaintiffs allege was obtained by fraud on the PTO.  The Court distinguished Carrot Companies because here the customers were plaintiffs and distinguished Remeron by its poor reasoning.[23]  Judge Kennedy explained that the purpose of Illinois Brick was not to limit antitrust plaintiffs, but to ensure the correct one was in court:

   Examining these factors, the court sees no reason to limit standing to competitors. While entities facing enforcement actions are more likely to rely on Walker Process, this reflects more that they are in a stronger position to detect wrongdoing than a Congressional preference. If one believes that one of the primary purposes of a treble damages action is deterrence, then increasing the number of parties scrutinizing the actions of potential monopolists will further that goal. Moreover, because direct purchasers have frequent interactions with the defendants, they have a strong incentive to discover and litigate the offense. See William H. Page, The Scope of Liability For Antitrust Violations, 37 Stan. L. Rev. 1445, 1488 (1985). Those against whom a patent is enforced, by comparison, will generally have limited contact with a defendant unless there is the suspicion of infringement.[24]

The court ruled that direct purchasers and competitors are equally well-suited to pursue Walker Process claims against both patent holders, those whose patents are obtained through fraud or "inequitable conduct" on the PTO and those who collude with them.

            Mr. Orlofsky outright rejected Judge Kennedy’s reasoning.

Against the backdrop of this case law, I conclude that Molecular Diagnostics is an isolated anomaly. The fact that the Molecular Diagnostics court found an exception to the general rule of antitrust standing in that case certainly does not mean that the "rule" has lost sway in cases where antitrust claims are based on Walker Process-type allegations.[25]

So, does Molecular Diagnostics, “create[] an unnecessary [] split of authority, without any compelling reason[?]”[26]  Is it really “an isolated anomaly?”[27] The Northern District of California Court which is the subject of this author’s blog has answered that question in the negative. 

III.             The Northern California Approach

The Northern California Approach is what I call the legal theory Judge William H. Alsup used to grant consumer standing in In re Netflix Antitrust Litigation.[28]  It is interesting that the Northern District would be receptive to those claims since Bourns, Inc., v. Raychem Corp. found that competitor plaintiffs who were not prepared to enter the market did not have Walker Process standing.[29]  Though, the dissent noted that the injury itself was specious, not whether Bourns was a proper plaintiff.[30] 

Nonetheless, the Northern District’s first exposure to the consumer direct purchaser standing issue was In re Netflix Antitrust Litigation.  Netflix operates an online DVD rental business and has two patents that cover it – United States Patents No. 6,584,450 and 7,024,381.  On April 4, 2006 Netflix sued Blockbuster for infringement of the ‘381 patent.  Dennis Dilbeck tried to intervene in the action, but the court denied his request and the parties subsequently settled.  Undaunted, Mr. Dilbeck filed the current action alleging a Walker Process antitrust violation based on the Blockbuster lawsuit.  He claimed that the patents prevented others from entering the market and that the Blockbuster lawsuit was a sham.  Judge Alsup found standing, first distinguishing Bourne on its facts since Bourne did not address consumer standing.  Further, Judge Alsup found Molecular Diagnostics persuasive because some antitrust cases were arranged such that consumers were the ones with the most direct injury.  Finally he found that the New Jersey cases were simply dealing with something else because those cases had better plaintiffs for the actions than the current case.

            This order finds Molecular Diagnostics persuasive. Even though Walker Process claims are predicated on enforcement of a fraudulently-obtained patent, the harm still accrues directly to consumers. Competitors are excluded from the market allowing the patentee to create or maintain an unlawful monopoly.[31]

Judge Alsup ultimately dismissed the claims for failure to plead with the particularity required by Fed. R. Civ. P. 9(b).

A few years after Netflix, the Second Circuit denied Walker Process standing to direct purchasers generally, but not consumers specifically.[32]  Subsequently, the Central District of California adopted the rule in Remeron.[33]  The issue then recently came before the Northern District of California again in Ritz Camera.

In Ritz Camera, the plaintiff alleged that Eliyahou Harari tortuously converted flash memory technology from his former employer which led to SanDisk obtaining U.S. Patents Number 5,172,338 and 5,991,517.  Further, SanDisk failed to disclose prior art to the Patent Office making the patents procured by fraud and its effort to enforce those patents with third parties affected the market and creates a Walker Process claim.  SanDisk moved to dismiss stating that Ritz Camera was not a competitor and had no standing to sue.  Judge Jeremy Fogel disagreed specifically rejecting the reasoning of the Second Circuit:

However, because viable Walker Process claims are rare, it is unlikely that many direct purchasers will be in the same position as Ritz is here.  Moreover, as the Supreme Court observed in Walker Process, “the interest in protecting patentees from ‘innumerable vexatious suits’ [may not] be used to frustrate the assertion of rights conferred by the antitrust laws.” 382 U.S. at 176.  Id at 7.

Further, the court notes, “because of the heightened evidentiary requirements necessary for a showing of fraud, few Walker Process claims survive summary judgment.”  Id. at 6-7.  Judge Fogel cites no authority for this proposition and it is unclear how obvious this statement is.

            The Northern District Cases, Netflix and Ritz Camera, ask who Congress intended to protect with the antitrust statutes.  They have also rekindled a debate about the scope of permissible Walker Process claims that was absent just five years ago.  They have also embraced the reasoning of Molecular Diagnostics notwithstanding K-DUR’s charge that Molecular Diagnostics “is an isolated anomaly.” No other courts have been recently asked the same question and answered it in a meaningful way.

            Until they do, the moral of the story for plaintiffs’ attorneys is to try to obtain venue in the Northern District of California.  Similarly, defense counsel should seek venue in the District of New Jersey.  Attorneys may also follow my blog (www.ndcalblog.com) for the latest developments.

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[1] Editor of the Northern District of California Blog (www.ndcalblog.com).

[2] Id. at 174; Sherman Antitrust Act, 17 U.S.C. § 2.

[3] 335 F.Supp.2d 522 (D.N.J. 2004) (Remeron) (finding a consumer as a direct purchaser does not have standing to pursue a Walker Process claim, rather it is only available as a cross-claim in a patent infringement action).

[4] 5:10-CV-02787 (N.D. Cal. Feb. 24, 2011) (Ritz Camera) (finding a consumer does have standing to pursue a Walker Process claim in the first instance).

[5] Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

[6] Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 535 n.31 (1983).

[7] Amarel v. Connell, 102 F.3d 1494, 1507 (9th Cir.1996) (citing Assoc. Gen. Contractors, 459 U.S. at 535).

[8] Nobelpharma AB v. Implant Innovations, Inc., 141 F. 3d 1059 (Fed. Cir. 1998); Argus Chem. Corp. v.
Fibre Glass-Evercoat Co., 812 F.2d 1381 (Fed. Cir. 1987).

[9] Id.

[10] 431 U.S. 720, 726 (1977) (explaining that the concrete blocks pass from the manufacturer to masonry contractors and to general contractors before reaching the governmental entities).

[11] Id. at 728-29. 

[12] See e.g. In re Relafen Antitrust Litigation, 360 F.Supp.2d 166 (D. Mass. 2005) (Relafen).

[13] no. 01-1652 (D.N.J. Mar. 1, 2007) (K-DUR).

[14] Id. at 17 citing Associated General Contractors, 459 U.S. at 542.

[15] 591 F. Supp. 608 (N.D.N.Y. 1984).

[16] Id. at 614. 

[17] 229 U.S.P.Q. 61 (D.N.J. 1986) ("Carrot Components").

[18] 289 F.Supp.2d 986 (N.D. Ill. 2003) ("Asahi Glass").

[19] Id. at 989. 

[20] Remeron, 335 F.Supp.2d at 529. 

[21] Id.; Clayton Antitrust Act of 1914, 15 U.S.C. §§ 12-27.  The Clayton Act can be used as a vehicle to enforce a Sherman Act monopolization claim, but does not create a claim in itself for fraud upon the USPTO.  Walker Process, 382 U.S. at 178.

[22] 402 F.Supp.2d 276 (D.D.C. 2005) ("Molecular Diagnostics").

[23] Id. at 280 (“The holding cites no controlling precedent, nor offers any compelling justification for its conclusion.) 

[24] Id. at 281-82. 

[25] K-Dur, at 22. 

[26] Fisher v. City of San Jose, 475 F.3d 1049, 1076 (9th Cir. 2007) (Callahan, J. dissent) overruled 558 F.3d 1069 (en banc) (2009). 

[27] K-DUR at 22.

[28] 506 F.Supp.2d 308 (N.D. Cal. 2007).

[29] 331 F.3d 704, 711-12 (9th Cir. 2003).

[30] Id. at 713-14 (Pregerson, J. dissenting).

[31] Id. at 316. 

[32] In re DDAVP, 585 F.3d 677, 689-91 (2d Cir. 2009) (“giving Walker Process standing to… [direct purchaser] plaintiffs … could result in an avalanche of patent challenges, because direct purchasers otherwise unable to challenge a patent’s validity could do so simply by dressing their patent challenge with a Walker Process claim.”)

[33] Kaiser Found. v. Abbot Labs., 02-2443 (C.D. Cal. Oct. 8, 2009) (“Plaintiff is merely a potential customer of one of Defendant's potential competitors and, as such, Plaintiff has not claimed and cannot claim that it did or would have competed with Defendant.”)

Maxtor prevails in putative class action over hard drive defects

Heisler v. Maxtor Corp. is a putative class action where the plaintiffs are alleging that Maxtor sold them defective computer hard disk drives between November 2003 and January 2011.  Maxtor has moved for summary judgment stating that the plaintiffs failed to demonstrate that it violated their warranties.  The plaintiffs deposition testimony was not helpful to their case as Judge Jeremy Fogel pointed out:

Plaintiff Temple alleges that he purchased two hard drives, both of which experienced problems within the warranty period. Temple Decl. at ¶¶ 2-6, Dkt. 171. However, Temple admits that he returned the drives for a full refund and ultimately suffered no loss of data. Stagg Decl., Ex. C 56:2-19; 58:25-59:3. In his deposition testimony, Plaintiff Traub admitted that he was aware that his warranty had expired at the time his hard drive allegedly failed. However, in his declaration filed in support of Plaintiffs’ original motion for class certification, Traub claimed that his hard drive failed within one year of purchase, implying that it had failed during the life of the warranty. Traub Decl. ¶ 6, Dkt. 171.

He was not persuaded by the plaintiffs:

Both Agerton and Traub have admitted under oath that their drives first experienced problems after the warranty had expired. Heisler cannot verify his purchase date, and Temple admittedly was made whole. Accordingly, Plaintiffs have not demonstrated that a breach occurred within the term of the warranty.

Judge Fogel granted summary judgment for the defendants.

Northern California Judges Rule in 1983 Cases

42 U.S.C. § 1983 imposes liability upon anyone "acting under color of" state law who deprives another person of "of any rights, privileges, or immunities secured by the Constitution...."  Here are some of the latest summary judgment orders on 1983 cases from the judges in the U.S. District Court for the Northern District of California.  The first case does not involve a prisoner, and the rest do.

Bolling v. Curry is a prisoner's pro se civil rights complaint where he complains that a nurse refused to treat his stroke because it occurred over a weekend.  It is presently before Judge Phyllis J. Hamilton on the nurse's motion for summary judgment. Judge Hamilton explains:

It is undisputed that on September 17, 2006, plaintiff was seen by the defendant,who was the triage nurse, and that he complained to her that he had a headache and thathis right eye was twitching. She prescribed painkillers and told him to see a doctor the nextday if the pain persisted, which he did.

However, there was no indication that the nurse was aware of Mr. Bolling's stroke, so she could not be deliberately indifferent to it.

The evidence summarized above, however, contains nothing that would show that defendant knew plaintiff had had a stroke – if indeed he did have one – and her actions in caring for him could not have been deliberate indifference.

Judge Hamilton granted the motion for summary judgment.

Lucas v. Silva is another prisoner's pro se civil rights complaint, where the plaintiff claims the warden and others deprived him of a lower bunk in his cell despite his medical need for one. Judge Claudia Wilken explains:

In sum, Plaintiff claims he was not assigned to a lower bunkfor a total of eighty-one days, until his transfer to administrative segregation. Plaintiff was housed in administrative segregation [for battery on a peace officer] from July 8, 2006 to February 28, 2007.

The gravamen of the complaint is that the warden and others knew of the lower back injury and didn't do anything about it.  The defendants claim qualified immunity on grounds that there was a lower bunk shortage and they were following seemingly lawful orders:

A memorandum issued by CTF Chief Deputy Warden P. Barker on December 15, 2005 and addressed to all CTF staff stated, "Central Facility is currently experiencing a severe shortage of housing forinmates with Lower Bunk Chronos." (Grigg Decl., Ex. C.) "During this temporary housing crunch, inmates with Lower Bunk Chronos willbe housed in race-appropriate upper bunks, except for those inmates with documented seizure disorders." (Id. (emphasis in original).

Judge Wilken found this order reasonable and granted summary judgment for the defendants.

Smith v. Bree is also a prisoner's pro se civil rights complaint, where the plaintiff claims that he required a 3,000 calorie per day diabetic diet and that the prison refused to give it to him.  The dietitian and a registered nurse have moved for summary judgment.  Judge Jeremy Fogel Explains:

Hartman and Bree contend that they did not act with deliberate indifference to Plaintiff’s medical needs, as the medical records show that Plaintiff’s diabetes was well-controlled on the diet he received and that his stage of hepatitis-C did not require aspecial diet. (Mot. at 6.) Essentially, Defendants argue that Plaintiff’s alleged dietary needs did not present a “serious medical need” warranting a special diet, or that the diet Plaintiff did receive created a substantial risk of serious harm.

Judge Fogel agreed:

Plaintiff has not shown that his medical condition required peanut butter crackers or other additional snacks, or that a failure to provide such snacks would result in substantial risk of serious harm.

He granted summary judgment for the moving defendants.

Northern California Judges Rule in 1983 Cases

42 U.S.C. § 1983 imposes liability upon anyone "acting under color of" state law who deprives another person of "of any rights, privileges, or immunities secured by the Constitution...."  Here are some of the latest summary judgment orders on 1983 cases from the judges in the U.S. District Court for the Northern District of California.  The first case does not involve a prisoner, and the rest do.

In Dabney v. City of Hayward the plaintiffs allege that Hayward police officers unlawfully forced them to leave their home following a dispute with someone uninvolved with the case depriving them of the right to possess and use their property in violation of the Fourteenth Amendment's Due Process Clause.  At issue is whether the City has a policy or custom of making such deprivations so as to incur liability under Monnell v.  Department of Social Services (U.S. 1978).  Rather than deposing the city officials, seeking city board minutes or investigating sources in newspaper articles, the plaintiffs were prepared to go to trial with only their own testimony.  Judge Bernard Zimmerman said that wasn't enough to preclude summary judgment:

Plaintiffs, however, have failed to produce any evidence that defendant's policies or customs caused their claimed injury. The only evidence submitted by plaintiffs is theirdeclarations, but these declarations do not establish or even discuss any of defendant’s policies or customs. Plaintiffs argue that they will be able to prove, by way of testimony at trial, their allegations from the second amended complaint that the "officers acted in concert with a custom of the Defendant municipality." Opposition at 7. But plaintiffs cannot rely on their pleadings or future testimony to oppose defendant’s summary judgment motion.

He granted the City's motion for summary judgment.

Thomas v. Celaya is a pro se prisoner's excessive force complaint against prison guards which he claims violated his Eighth Amendment right to be free of cruel and unusual punishment.  The guards move for summary judgment stating that force was necessary because Mr. Thomas refused to return to his cell upon being ordered to do so.  Judge Jeremy Fogel agreed:

By his own admission, Plaintiff initially resisted Celaya’s orders to leave the program office. Defendants had a legitimate concern about maintaining discipline as well as the safety and security of the program office where both correctional officers and inmates were present. If Plaintiff was behaving erratically, evenif an unidentified officer was attempting to remove his shoe, it does not appear that Celaya responded unreasonably to subdue Plaintiff quickly and avoid further physical altercation. The amount of force used was no more than was necessary to stop Plaintiff’s erratic flailing; Celaya forced Plaintiff to the floor and did nothing further.

Judge Fogel granted summary judgment for the defendants.

Stelly v. Tootell is a pro se prisoner's complaint against prison physicians for deliberate indifference to his serious medical needs in violation of the Eighth Amendment right to be free of cruel and unusual punishment.  Mr. Stelly complains that he has a variety of medical ailments that were left untreated.  However, the doctors submitted evidence that 1) the ailments were treated and 2) the treatment was not constitutionally deficient.  Judge Claudia Wilken found that there was no genuine issue of material fact.

First, as with his epilepsy and depression claims, Plaintiff's allegations that Defendants failed to act when informed of his medical conditions are wholly lacking in specific detail or documents, failing to amount to evidence that Defendants' response to his grievance was unconstitutionally late or inadequate.

She granted summary judgment for the defendants.

Harris v. Thom is a pro se prisoner's excessive force complaint against a prison guard where he claims the guard violated his Eighth Amendment right to be free of cruel and unusual punishment.  The plaintiff was at a hearing as to whether he should be placed in a Behavior Modification Unit due to his numerous violations of prison policy.  The committee decided he should be so placed and the plaintiff threw a fit and refused to leave the room.  Officer Thom removed the plaintiff from the room and a tussle later ensued resulting in the plaintiff being thrown on the ground which is the subject of the current lawsuit.  Judge Jeremy Fogel found that the guard's behavior was reasonable.

The situation admittedly became more complicated when Plaintiff and the escorting officers reached the entrance to C-section, where Plaintiff claims Thom tripped and slammed him to the floor. However, even viewing this evidence in the light most favorable to Plaintiff, the Court cannot conclude that Thom acted inappropriately under the circumstances. The declarations offered by Thom give consistent accounts of Plaintiff’s resistance from the hearing room to the entrance of C-section, where Plaintiff attempted to stop the escort by placing his feet on the floor and pushing his body backwards.

He granted summary judgment for Officer Thom.

Estrada v. McBride is a pro se prisoner at Pelican Bay State Prison's complaint that he was improperly validated as a gang member which resulted in his indefinite placement in the Secure Housing Unit (SHU).  The SHU is a kind of solitary confinement that NPR covered a few years ago.  Under prison policy, there must be three items of evidence that a person is in a gang:

It is undisputed that the three pieces of evidence upon which the validation was based were (1) small pieces of paper found in plaintiff’s possession containing Mexican Mafia "micro-writing"; (2) a cup found among plaintiff’s property that had a hand-drawn Mexican Mafia gang symbol on it; and (3) his address book containing the name and prisoner number of a validated Mexican Mafia member.

Judge Phyllis J. Hamilton found that this was sufficient evidence to believe Mr. Estrada was a gang member.

Each of these last two items might not be particularly convincing standing alone, but that is not the question; the question is whether the three items of evidence were sufficient to show that the decision to validate plaintiff was not arbitrary, and the answer clearly is "yes." There was no due process violation.

She granted summary judgment for the defendants.

Northern California Courts rule in Social Security Appeals

Three judges recently released summary judgment orders in Social Security appeals.  This blog has previously explained how these cases work:

Each of these cases if for disability benefits under Title II of the Social Security Act and supplemental income benefits under Title XVI. Procedurally, the Commissioner of Social Security (named defendant Michael Astrue) makes a determination of benefits. If rejected, the claimant can request reconsideration. If denied again, the claimant can request a hearing before an Administrative Law Judge (ALJ). If denied again, the claimant can appeal to the Appeals Council. If denied there, the claimant can file suit in federal district court under 42 U.S.C. § 405(g). That is where each of the underlying cases occurred.

The federal judge reviews each case to determine if the ALJ's decision is supported by substantial evidence and made with the correct application of the law. In particular, compliance with the procedure in 20 C.F.R. § 404.1520(a). That procedure involves five steps:

At Step One, the Commissioner considers whether the claimant is engaged in "substantial gainful activity." If so the claimant is not disabled. At Step Two, the Commissioner considers whether the claimant has "a severe medically determinable physical or mental impairment" that has lasted, or is expected to last, at least twelve continuous months. That is, an impairment that prevents the claimant from working. At Step Three, the Commissioner considers whether the claimant’s impairment "meets or equals" one of the listed impairments that the Social Security Administration has designated as disabling.

At Step Four, the Commissioner considers whether the claimant can continue to perform work he has performed in the past. The ALJ first determines the claimant’s residual functional capacity ("RFC"). That is, "the most [the claimant] can still do despite [his] limitations," based on all relevant evidence in the record. If the RFC assessment indicates that the claimant can perform his past work, the Commissioner will find the claimant not disabled.

At Step Five, the Commissioner carries the burden of considering the claimant’s RFC, age, education, and work experience and determining whether the claimant can "make an adjustment to other work" that "exists in significant numbers in the national economy."

Thomas v. Astrue involved a claimant with a history of depression, bipolar disorder and methamphetamine use which resulted in his incarceration in 2006.  The ALJ found that Mr. Thomas was disabled from June 12, 2007 to March 28, 2008, but that failed to meet the twelve month durational requirement for benefits under 42 U.S.C. § 423(d)(1)(A). Judge Lucy H. Koh agreed:

Aside from the medical evidence, the record also supports the ALJ’s determination that, despite moderate difficulties, Plaintiff could perform activities of daily living such as making himself food, performing household chores, and doing his own laundry. Tr. 40. Plaintiff could also function socially with others including family, friends, and even with strangers in support groups. Tr. 310-12.

She granted summary judgment for the Commissioner.

Serrano v. Astrue involved a claimant who worked as a housekeeper until she had a stroke and developed depression.  Her disability case went back and forth between the ALJ and Social Security Appeals Counsel for a while mostly because a plethora of physicians had rendered opinions ranging from malingering to an inability to work with mild mental disabilities.  The Commissioner finally found that Ms. Serrano was disabled, but not before July 22, 2008 she wanted benefits from 2005, so she appealed.  Judge Jeremy Fogel agreed with the ALJ that Ms. Serrano was not credible.

[A]lmost all of the physicians who evaluated or treated Serrano following her first hospitalization in August 2005 suspected her of malingering. See AR 113 (Dr. Laster noted that Serrano’s symptoms were ["]embellished"); AR 347 (Dr. Lopez found inconsistencies and signs of poor cooperation and malingering); AR 385 (Dr. Guisado determined that her symptoms were "psychogenic" after conducting various medical tests); AR 455-58 (Dr. Bilbrey administered a malingering test to Serrano and she performed poorly on it).

He granted summary judgment for the Commissioner.

Godar v. Astrue involved a claimant who worked as a truck driver, sales scheduler and electronics technician before injuring his back.  Before the Agency, the ALJ discounted much of Mr. Godar's evidence, including his own testimony, that of his former wife. Of course it probably did not help to tell his doctors that the pain went away.

The ALJ’s decision further notes December 2004 medical records in which plaintiff reported that he no longer had pain in his left knee, as well as an October 2005 medical record in which plaintiff reported that while the lower grade pain was still present with hip and testicular pain, "the pain in his back is considerably better," that he walks about 100 yards fromeight to ten times a day; he does pool therapy; and "his pain is a 3/10." (AR 11, 200, 219).

Magistrate Harold R. Lloyd agreed with the ALJ and granted the Commissioner summary judgment.

Northern California Judges Rule in Mortgage Cases

Two judges recently released orders in mortgage fraud cases.

Quinto v. JP Morgan Chase Bank is the rare case where a bank has modified a debtor's loan balance and interest rate, about which the debtor is claiming the original transaction was fraudulently obtained.  

In exchange for this modification, Plaintiff agreed to pay the amount she owed under the agreement and warranted that the original note "is valid and enforceable in all respects and is not subject to any claims, defenses or right of offset or credit except as herein specifically provided."

Waiver is a pretty good defense, and Judge Jeremy Fogel wrote that it will probably carry the day, but he gave Ms. Quinto a chance to amend anyway.

Sencion v. Saxon Mortgage Services is also a mortgage fraud complaint where the plaintiff obtained a modification.  Here, instead of allowing the plaintiff to pay the new mortgage, Saxon foreclosed on the property and sold it off anyway.  After a few rounds of pleading, the First Amended Complaint survived a motion to dismiss, now Mr. Sencion would like to file a Second Amended Complaint and add a few more causes of action into the fray before discovery begins.

The big one is that Mr. Sencion wants to add a claim for a violation of California's Unfair Competition Law (UCL) against Deutsche Bank (for whom Saxon worked) presumably to get damages from another source.  However, Magistrate Paul S. Grewal noted that UCL cannot lie based on a theory of vicarious liability.  However he allowed claims of negligence and declaratory relief to go forward.

Judge Grewal granted in part and denied in part the motion to dismiss.

Interestingly (at least to me), Judge Grewal put all of his citations in footnotes as opposed to the rest of the District judges who use citations in text.

Northern California Judges Rule in Patent Cases

A drawing from the '338 patent

Two Judges on the U.S. District Court for the Northern District of California recently ruled in patent cases.

Ritz Camera & Image v. SanDisk is a Walker Process claim that SanDisk conspired with Eliyahou Harari to monopolize the NAND flash memory devices. Specifically, Mr. Harari stole trade secrets from his former employer to procure two patents 5,172,338 which deals with circuitry in NAND memory and 5,991,517 which deals with cell-by-cell storage in NAND memory.  The motion to dismiss raises the interesting question of whether a direct purchaser has standing to sue under a Walker Process claim.  In re Remeron Antitrust Litigation (D.N.J. 2004) is the only other court to consider the issue.  The Court in Remeron found that standing was lacking for direct purchasers.  The ruling has been a subject of scholarly debate.

Judge Jeremy Fogel sided with Ritz Camera:

Defendants argue that, “giving Walker Process standing to... [direct purchaser] plaintiffs... could result in an avalanche of patent challenges, because direct purchasers otherwise unable to challenge a patent’s validity could do so simply by dressing their patent challenge with a Walker Process claim.” [In re DDAVP Direct Purchaser Antitrust Litigation (2d. Cir. 2009)] (discussing concerns raised by Defendants). However, because viable Walker Process claims are rare, it is unlikely that many direct purchasers will be in the same position as Ritz is here. Moreover, as the Supreme Court observed in Walker Process, “the interest in protecting patentees from ‘innumerable vexatious suits’ [may not] be used to frustrate the assertion of rights conferred by the antitrust laws.”

and he allowed the Walker Process claim into discovery.

Microsoft v. TiVo is a patent infringement case.  At this stage, TiVo would like to enter a counterclaim to add its own patent into the fray.  Patent No. 6,792,195 covers a method and device for implementing time functions on data.  A drawing from the patent is shown to the right.

The legal issue is whether Judge Lucy H. Koh would allow TiVo to amend the complaint.  Microsoft has accused TiVo of infringing seven of its patents and would like to proceed in discovery with invalidity concerns on those which are scheduled for May.  Judge Koh allowed the amendment and changed the briefing schedule for the '195 patent so that the tutorials will begin in June.