Customer Infringement Notices and Free Speech

James Madison once said: And if we, the people, are to govern ourselves, we must have these rights, even if they are abused by minorities. ’ Such lofty constitutional principles seldom intersect with patent litigation.However, the Federal Circuit’s decision Lite-Netics, LLC vs. Nu Tsai Capital, LLC, No. 2023-1146 (Fed. Cir. Feb. 17, 2023), a strong free speech advocate for patent owners. This lawsuit addresses an issue of frequent concern to both outside and in-house patent attorneys. How much can (or should) the market say about patent disputes?

Lite-Netics—ABC’s shark tank Fame—We sell Christmas string lights with an innovative mounting mechanism. The company alleged that its competitor Nu Tsai, doing business as Holiday Bright Light (HBL), infringed its US patent. After the parties exchanged letters explaining their positions regarding infringement or non-infringement, Lite-Netics filed suit in the United States District Court for the State of Nebraska. Shortly thereafter, Lite-Netics distributed a notice to customers in which both parties competed.

The notice informed customers that another company was attempting to “copy” Lite-Netics’ patented product. Lite-Netics filed a “patent infringement lawsuit against HBL” to stop the “manufacturing and sale of infringing products.” Lite-Netics also states that it is “considering the inclusion of known companies that use or resell HBL products as co-defendants in this lawsuit.” Shortly after the notice was circulated on the market, HBL decided to take countermeasures. The Company immediately asserts counterclaims against his Lite-Netics for unfair competition, false advertising, deceptive trade practices, tortious interference, defamation, bad faith, and against the continuation of such communications from Lite-Netics. A preliminary injunction was sought in the district court.

The district court agreed with HBL. Do not make statements in the marketplace against Lite-Netics that suggest “copying” by HBL, that HBL’s customers will bear the burden as defendants in any litigation, or that HBL is an infringer. ordered to refrain. lightnetics, No. 8:2022cv00314 (D. Neb. 27 October 2022). However, Lite-Netics appealed to the Federal Circuit and won under the First Amendment.

freedom of speech comes first

The Federal Circuit has clarified that First Amendment protection applies to communications of the type published to the market by Lite-Netics.The federal government awarded a patent to Lite-Netics, [its patent] right [in the marketplace] nevertheless [it] You may misunderstand what those rights are. 2023-1146 Judgment at 14-15. Further, “Federal patent law preempts state law tort liability for the good faith conduct of a patent owner in correspondence alleging patent infringement and warning of potential litigation.” identificationat 11. The Court therefore held that HBL would have to prove “bad faith” to support its claims, and even if it could prove bad faith, the injunction against Lite-Netics’ statements would be “unnecessarily probable.” We need to make adjustments so that our remarks are not burdensome.” ” identification. 13:00.

The Federal Circuit found that the district court abused its discretion and that HBL did not even meet the bar for free speech on Lite-Netics’ patent rights. Specifically, “bad faith” in this context. requires proof of both objective and subjective malice. The court explained that objective bad faith requires showing that Lite-Netics’ claims are “objectively baseless.” i.e.“Reasonable litigants could not have realistic expectations of success on the merits.” identificationat 11. Courts must treat “objective lack of evidence” as a “threshold requirement.”[s]If the allegation is determined to be objectively baseless, objective bad faith must be addressed. but otherwise” identification13. (emphasis added). Thus, litigants may subjectively know that their position on their patent is wrong, but still have objectively reasonable grounds for doing so. False notices in the marketplace, if any, are protected under the First Amendment.

Lite-Netics’ notice to customers easily satisfied scrutiny under this criterion. HBL raised several issues of technology patent law, ranging from claim construction to prosecution history estoppel, and argued that its products were non-infringing. However, courts have repeatedly found Lite-Netics’ response reasonable. Even though Lite-Netics may ultimately lose, the court highlighted how the market notice was sent very early in the litigation.

[W]e. Lite-Netics’ position on all three of these disputes is objectively unfounded at this stage of litigation (e.g., before full claim construction proceedings or possible expert reports on infringement). We conclude that it has not been proven that That conclusion requires withdrawal of the preliminary injunction without conclusively resolving the underlying disputes regarding claim construction, prosecution history estoppel, or other issues.

identification. 15 (emphasis added).

“Can” vs. “Should”

Christmas lights serve as tangible symbols of holiday cheer and goodwill.Perhaps that symbol in this case is what can What is done under the First Amendment to the United States Constitution may not necessarily match what is done. should do it end. on the other hand, lightnetics This decision provides strong and clear guidance on the legal landscape, and a variety of long-term business, strategic, ethical and reputational factors come into play when advising on market infringement notices. As Madison observes, people themselves are responsible for managing liability for potential “misuse” of their right to “say what we want.” We provide the necessary freedom to communicate, but it is up to an experienced and responsible counselor to consider all factors in the best interest of the client’s goals and values.

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Author: kasezo2