When a patent holder identifies an infringer, one of the first questions the patent holder must ask is “what strategy should I use to enforce my rights?” Options include:
- filing a lawsuit (expensive, but effective), and
- drafting a letter notifying the infringer (cheap, but risks a declaratory judgment action by the infringer).
In some situations, the patent holder may want to notify distributors or customers of the infringement. When this happens, the accused infringer may cry foul, arguing that the action interferes with business relationships and is an unfair trade practice. Can the accused infringer claim tortious interference with contractual relationships in this situation?
The Federal Circuit recently issued an opinion stating that “the answer is now well established.” In 800 Adept, Inc. v. Murex Securities, Inc., the Federal Circuit explained that state tort claims against a patent enforcer are preempted by federal patent law unless the patent holder acted in “bad faith.” As explained by the Federal Circuit:
- The “bad faith” standard has subjective and objective components.
- The objective component requires a showing that the infringement allegations are “objectively baseless.”
- Infringement allegations are objectively baseless if “no reasonable litigant could realistically expect success on the merits.”
- The subjective component relates to a showing that the patentee in enforcing the patent demonstrated subjective bad faith [i.e., intent].
- Absent a showing that the infringement allegations are objectively baseless, it is unnecessary to reach the question of the patentee’s intent.
- [A] party attempting to prove bad faith on the part of a patentee enforcing its patent has a heavy burden to carry.
In the 800 Adept case, the accused infringer claimed the patent holder (Targus) knew that its patents were invalid in view of certain prior art. The accused infringer also argued that Targus’ sale of the invention more than one year before filing the patent application demonstrated bad faith. However, the Court found a record indicating that (a) Targus waited until after a USPTO reexamination proceeding before enforcing the patents, thus indicating a reasonable belief of validity, and (b) Targus reasonably believed that its prior “sale” was an experimental use. On this basis, the Court barred the accused infringer’s tortious interference claim.
Despite the patent-favorable ruling in 800 Adept, patent holders should use caution before sending infringement notices to an infringer’s customers or distributors. To ensure that a reasonable belief of infringement exists, a patent holder should consider obtaining an opinion of counsel before sending a notice letter or initiating any other enforcement activity. In addition, notice letters can, in some cases, trigger declaratory judgment actions by the accused infringer.
Finally, a word of caution about notice letters outside of the United States: Many countries impose strict obligations on notice letters. For example, in the United Kingdom, notice letters sent to a secondary infringer (i.e., a customer) instead of primary infringer (i.e., a manufacturer) are generally actionable and can create liability for the author of the notice letter. Before sending a notice letter to a non-U.S. infringer, a patent holder should consult with counsel in the country to which the notice letter will be directed.