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Alleging Patent Infringement in Good Faith

Posted by James Juo | Feb 21, 2023 | 0 Comments

“[A] patentee, acting in good faith on its belief as to the nature and scope of its rights, is fully permitted to press those rights ‘even though he may misconceive what those rights are.'” Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891, 897 (Fed. Cir. 1998) (quoting Kaplan v. Helenhart Novelty Corp., 182 F.2d 311, 314 (2d Cir. 1950)). Giving such notice of patent rights is governed by federal law. Id. at 896.

“[F]ederal patent law preempts state-law tort liability for a patentholder's good faith conduct in communications asserting infringement of its patent and warning about potential litigation.” Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1374 (Fed. Cir. 2004).

But Not in Bad Faith

Such state-law claims “can survive federal preemption only to the extent that those claims are based on a showing of ‘bad faith' action in asserting infringement.” Globetrotter, 362 F.3d at 1374; see also Energy Heating, LLC v. Heat On-The-Fly, LLC, 889 F.3d 1291, 1304 (Fed. Cir. 2018) (“State tort claims based on enforcing a patent, including for tortious interference, are preempted by federal patent laws, unless the claimant can show that the patent holder acted in bad faith.”); Mikohn Gaming, 165 F.3d at 898 (“[F]ederal law requires a showing of bad faith in order to bar such communications.”); GP Industries, Inc. v. Eran Industries, Inc., 500 F.3d 1369, 1375 (Fed. Cir. 2007) (approaching “the bad-faith threshold” is not enough); Myco Industries, Inc. v. BlephEx, LLC, 955 F.3d 1, 10 (Fed. Cir. 2020) (finding the district court had abused its discretion when it granted a  preliminary  injunction  enjoining  patentee  speech without a finding of bad faith); SSI Technologies, LLC v. Dongguan Zhengyang Electronic Mechanical, Ltd., — F.4th —-, 2023 WL 1944133, at *7 (Fed. Cir. Feb. 13, 2023) (affirming summary judgment of no tortious interference because the alleged infringement claims were not objectively baseless).

“Although bad faith in this context has both objective and subjective elements, the former is a threshold requirement.” Judkins v. HT Window Fashion Corp., 529 F.3d 1334, 1338 (Fed. Cir. 2008). Thus, “a bad faith standard cannot be satisfied in the absence of a showing that the claims asserted were objectively baseless.” GP Industries, 500 F.3d at 1374; see also Globetrotter, 362 F.3d at 1377.

A patent-infringement allegation is objectively baseless only if “no reasonable litigant could realistically expect success on the merits.” GP Industries, 500 F.3d at 1374 (internal quotation marks omitted) (quoting Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 60 (1993)). Subjective bad faith must be addressed if allegations are determined to be objectively baseless, but not otherwise. Id. at 1375 (“Subjective considerations of bad faith are irrelevant if the assertions are not objectively baseless”); see also Judkins, 529 F.3d at 1338.

The requirement of showing bad faith as a prerequisite to applying state tort law to speech about infringement rests partly on First Amendment principles. Globetrotter, 362 F.3d at 1375–77; see also GP Industries, 500 F.3d at 1373–74 (noting “the rarity of an injunction being granted against communicating with others concerning one's patent rights”). Under the First Amendment, restrictions on protected speech must meet tailoring requirements aimed at ensuring that they do not burden speech more than necessary. See, e.g., Tory v. Cochran, 544 U.S. 734, 738 (2005); Douglas v. Brownell, 88 F.3d 1511, 1520 (8th Cir. 1996); Sindi v. El-Moslimani, 896 F.3d 1, 32–34 (1st Cir. 2018); United States v. Local 560 (I.B.T.), 974 F.2d 315, 342–46 (3d Cir. 1992).

Preliminary Injunction Against Patent-Related Speech

In Lite-Netics, LLC v. Nu Tsai Capital LLC, Lite-Netics asserted patents entitled “Magnetic Light Fixture,” which covered string lights held by magnets to a metal roof edge. The light assembly had a magnetic base at the light socket for mounting the assembly to a metal surface.

Lite-Netics brought a patent-infringement action against Nu Tsai Capital d/b/a Holiday Bright Lights (“HBL”), but also sent two notices, one before filing suit and one after, to stores that sell the lights. The first notice stated Lite-Netics's intent to enforce its patent rights against unidentified competitors. In the second, notice, Lite-Netics identified HBL as an allegedly infringing competitor.

After the second notice was sent, HBL filed counterclaims including state-law claims of tortious-interference and defamation, in the pending in the infringement lawsuit. HBL also moved for a preliminary injunction, based on the two state-law counterclaims, against Lite-Netics sending certain notices about its patents.

Finding that Lite-Netics's patent infringement allegations were “objectively baseless,” the district court issued a preliminary injunction that bars Lite-Netics from suggesting that HBL is a patent infringer, that HBL has copied Lite-Netics's lights, or that HBL customers might be sued. Lite-Netics, LLC v. Nu Tsai Capital LLC, 2022 WL 15523245 (D. Neb. Oct. 27, 2022).

Appeal Vacates Preliminary Injunction

On appeal, the Federal Circuit held that at this stage of the litigation (before, e.g., full claim-construction proceedings or possible expert reports on infringement), Lite-Netics's infringement position did not appear to be objectively baseless. Lite-Netics, LLC v. Nu Tsai Capital LLC, No. 2023-1146 (Fed. Cir. Feb. 17, 2023).

Without resolving the underlying disputes about claim construction, prosecution history estoppel, or other issues, the Federal Circuit vacated the preliminary injunction.

For example, the Federal Circuit held that it was reasonable, or at least not objectively baseless, for Lite-Netics to argue that “a magnet” in the patent claims encompassed an arrangement of two magnetic pieces that together functioned as a magnet having the claimed pull strength.

            On the record before us, we see no basis for deeming objectively unreasonable an assertion that two such pieces would be understood by a relevant artisan as a single “magnet,” whether as a matter of claim construction or as a matter of application. . . . Independently of that possibility, decisions of this court lend strong support to the proposition that, “in patent parlance,” at least in an openended “comprising” claim, use of “a” or “an” before a noun naming an object is understood to mean to “one or more” unless the context sufficiently indicates otherwise. Convolve, Inc. v. Compaq Computer Corp., 812 F.3d 1313, 1321 (Fed. Cir. 2016); see, e.g., TiVo, Inc. v. EchoStar Communications Corp., 516 F.3d 1290, 1303 (Fed. Cir. 2008); Baldwin Graphic Systems, Inc. v. Siebert, Inc., 512 F.3d 1338, 1342 (Fed. Cir. 2008); KCJ Corp. v. Kinetic Concepts, Inc., 223 F.3d 1351, 1356 (Fed. Cir. 2000).

* * *

The patent never shows embodiments with more than one magnet, but we have generally rejected an inference of claim limitation on such a basis, where the embodiments are merely illustrative. See, e.g., Cross Medical, 424 F.3d at 1309; Phillips, 415 F.3d at 1319–20. . . . Importantly, and more generally, nothing in the '779 patent indicates that the evident purpose of the magnet on the socket base (to attach the light string to a metal surface) can be achieved only, or with specified effectiveness, through a single (or single-piece) magnet, rather than a plurality of magnets collectively having the specified pull force. See Corning Glass Works v. Sumitomo Electric U.S.A., Inc., 868 F.2d 1251, 1257 (Fed. Cir. 1989) (interpreting a patent to include “additional structural limitations . . . defined in the specification” based on restrictive specification language describing the purpose of the claimed invention).

The Federal Circuit also stated that, even if the claimed magnet was construed to be a single magnet, there was nothing unreasonable about Lite-Netics's allegation that two half-disk magnets could satisfy the function-way-result formulation for equivalence.

Thomas P. Howard, LLC litigates patents nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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