Recently, the U.S. Court of Appeals for the Federal Circuit issued a decision in Lite-Netics, LLC v. Nu Tsai Capital LLC et al, 2023-1146 (Feb. 17, 2023), reversing a preliminary injunction entered against the patentee enjoining communications about the lawsuit.
Lite-Netics, LLC owned two patents (Nos. 7,549,779 and 8,128,264) claiming inventions to magnetic holiday lights, which included a magnetic backing to permit attachments to metal surfaces. It sued Nu Tsai Capital LLC, d/b/a Holiday Bright Lights (HBL), for alleged patent infringement based on HBL’s sale of magnetic holiday string lights sold under the name “Magnetic Cord”. Lite-Netics sent two cease and desist letters to third parties, both before and after filing suit.
In its first cease and desist letter, sent to Lite-Netics’ customers (some of whom were also HBL customers) about allegedly infringement products, Lite-Netics did not mention HBL at all. Rather, it merely notified customers of “recent attempts by other companies to make and sell similar products” to those protected by the asserted patents. In its second cease and desist letter, sent after the lawsuit against HBL was filed, Lite-Netics noted the patent infringement lawsuit filed against HBL to “stop it from ‘making and selling infringing products’” and noted it was actively considering joining additional companies selling HBL products in the lawsuit.
Following the second letter, HBL filed a motion to dismiss and asserted various counterclaims arising under state law. It also filed a motion for a temporary restraining order and for a preliminary injunction prohibiting further statements by Lite-Netics accusing HBL of infringement or suggesting HBL customers might be subject to suit. The district court issued the TRO and, after an evidentiary hearing, granted the preliminary injunction. Lite-Netics appealed.
The Federal Circuit relied on previous authority for the proposition that federal 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,” and that such preemption only fails where “claims are based on a showing of ‘bad faith’ action in asserting infringement.” This requirement showing of bad faith rests, partly, on First Amendment principles. Turning to the patents and communications at issue, the Court engaged in a partial claim construction and doctrine of equivalents analysis and determined Lite-Netics’ patent claims were not objectively baseless. Accordingly, the Court vacated the district court’s order granting the preliminary injunction and remanded the case for further proceedings.