Westlake Services LLP v. Credit Acceptance Corp.

Antitrust

Central District

U.S. District Judge James S. Otero

Defense Lawyers: Jonathan L. Frank, Jason D. Russell, Patrick G. Rideout, James A. Keyte (former), Douglas R. Nemec, Marti A. Johnson, Douglas A. Smith, Zachary Faigen, Maximillian W. Hirsch, Andrew Gish, Catherine H. Thompson, Mayra Felix, Christopher R. Fredmonski, Jeremy B. Koegel, Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

Plaintiff’s Lawyers: Ekwan E. Rhow, Timothy B. Yoo, Ray S. Seilie, Emerson H. Kim, Julian C. Burns, Bird Marella Boxer Wolpert Nessim Drooks Lincenberg & Rhow PC

In its unsuccessful monopoly case against Credit Acceptance Corporation, plaintiff Westlake Services LLC sought nearly $1 billion in lost profits, claiming that the defendant fraudulently obtained a patent that negatively affected Westlake’s ability to compete in the used car sales financing business.

Westlake claimed that Credit Acceptance brought sham litigation against it to enforce the patent and that the defendant was violating antitrust laws. Westlake also sought $6 million in legal fees.

Credit Acceptance prevailed, and U.S. District Judge S. James Otero of the Central District of California granted complete summary judgment on claims of actual and attempted monopolization in December. Westlake Services LLP v. Credit Acceptance Corp., 15-CV07490 (C.D. Cal., filed Sept. 24, 2015).

Westlake’s claims were based on Walker Process fraud, an antitrust claim brought when a patent is procured through intentional fraud on the U.S. Patent and Trademark Office, Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965).

But Otero held that the statute of limitations and antitrust immunity each barred Westlake’s claims.

For the first time in an antitrust case involving alleged patent fraud, according to the defendants, Otero held that “specific intent to deceive” the U.S. Patent and Trademark Office must be “the single most reasonable inference able to drawn from the evidence,” and “where there are multiple inferences that may be drawn, intent to deceive cannot be found.”

The ruling was also the first case to hold that the U.S. Court of Appeals for the Federal Circuit’s decision in Clock Spring, L.P., v. Wrapmaster, Inc., 2008-1332 (Fed. Cir., Mar. 25, 2009) did not limit the public use exception when such experimental use is part of contemplation of seeking a patent.

“Tests that only concern the commercial feasibility of the invention do not qualify as experimental use for the purpose of negating the public use bar,” Otero wrote.

The case, which Otero described in his order as a “long and oftentimes obstreperous action,” involved the interplay of antitrust and patent law.

The defense team from Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates leveraged its experience in both areas to craft winning legal arguments. For example, Skadden drew on case law regarding the patent law defense of inequitable conduct and applied it to Walker Process antitrust claims.

Skadden attorney declined to comment on the case, citing client confidentiality.

Co-lead trial counsel for the plaintiffs, Timothy Yoo of Bird Marella Boxer Wolpert Nessim Drooks Lincenberg & Rhow PC, said his team disagrees with the order and is preparing to appeal the verdict.

— L.J. Williamson