Kimberly-Clark Must Face Monopoly Claim

PHILADELPHIA (CN) - "Huggies" manufacturer Kimberly-Clark Worldwide must answer an allegation that it knowingly used invalid patents to monopolize the market for disposable baby diapers.

In March 2009, the company sued First Quality Baby Products, a "private label" diaper-seller producing Wal-Mart- and Walgreen's-branded diapers, claiming First Quality's products infringed on Kimberly-Clark's patents.

In April 2009, First Quality fired back with counterclaims, accusing Kimberly-Clark of trying to enforce invalid patents.

"First Quality alleges that KC [Kimberly-Clark Worldwide] uses its patents to disrupt competitors and to maintain a monopoly in the disposable baby diaper and training pants market. KC first threatens a patent lawsuit and then engages in sham litigation to drain the resources of private label manufacturers, thereby reducing the ability of private labelers to compete," U.S. District Judge William Caldwell wrote in a 12-page opinion denying Kimberly-Clark's motion to dismiss the counterclaims.

"It accomplishes this goal by enforcing patents that, according to First Quality, KC knows to be invalid, procured through fraud on the Patent and Trademark Office, or not infringed," the judge noted, referring to First Quality's accusation that Kimberly-Clark withheld prior art from the Patent and Trademark Office during patent prosecution.

"KC then misrepresents the nature of the litigation in order to threaten retail outlets, such as Walmart, with 'empty shelves' of diapers if it does not make KC the exclusive supplier of training pants...or forces private label manufacturers to enter into secret settlement agreements that involved the purchasing of unnecessary licences," he said.

"As a result, consumers are forced to pay more for disposable baby diapers and training pants, and competitors efforts to enter and compete in the market are hindered," Caldwell continued.

"Each of these acts in isolation may itself not rise to the level of anticompetitive conduct," Caldwell notes, but taken as a whole, First Quality's allegations amount to a plausible claim of anticompetitive conduct under the Sherman Act, the judge ruled.

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