Denial of injunction against sending letters asserting infringement affirmedApril 10, 2008

In a decision Tuesday, the Federal Circuit affirmed the denial of a preliminary injunction seeking to prevent a patentee from representing to the defendant's customers that the defendant's product potentially infringed the plaintiff's patent. The patent at issue had a lengthy and complicated prosecution history that included an interference proceeding. In that proceeding, the BPAI ruled another party properly had priority in the invention. The patentee filed an action pursuant to § 146, and the parties eventually settled, with the party that prevailed at the BPAI conceding priority and receiving a license under the patent. In another proceeding in which the patentee was not a party, a district court held that the patentee had abandoned, suppressed, or concealed his invention.

The defendant argued that because of the issues relating to priority and abandonment, suppression, and concealment (as well as inequitable conduct issues), the plaintiff's assertions of infringement were in bad faith, and sought an injunction to prevent the plaintiff from representing to the defendant's customers that its products potentially infringed. The district court rejected this, finding the four-factor test did not warrant an injunction.

The Federal Circuit affirmed, finding the action not objectively unreasonable, as the case was not so clear-cut to make the district court's decision an abuse of discretion. However, while the court noted the defendant's chances on appeal were "slim," the appeal was not "clearly hopeless," and declined to award the plaintiff its fees for the appeal.

Judkins holds a patent for a method of manufacturing window coverings. He conceived of the invention in 1990, has his patent attorney draft a patent application in 1991, but did not file the application until 1995. In 1996, another inventor filed an application for a similar product, and a patent issued the next year and was assigned to Newell Window Furnishings.

Newell filed an infringement suit under that patent in 1998 against Springs Window Fashions, and during that proceeding, Judkins and his attorney were called as witnesses. In 1999, during that proceeding, the district court held Newell's patent could not be anticipated by Judkins' invention, because he had abandoned, suppressed, or concealed it, and it was therefore not prior art under § 102(g). However, the court held the patent invalid on other grounds, and that conclusion was affirmed on appeal.

While that case was pending, Judkins sought an interference between his pending application and the Newell patent. The interference was granted in January 1999, and in 2001, the BPAI held that Judkins had abandoned his invention, awarding priority to Newell. As a result, at this time, the Newell patent was held invalid, and Judkins had lost the priority battle before the BPAI. In November 2001, two months after the BPAI's ruling, Judkins filed suit under § 146, seeking to overturn its decision. In November 2002, Newell filed a motion to dismiss the case. In September 2003, after the motion was fully briefed (including reference to the Springs litigation), the parties settled the dispute, with Newell conceding priority and receiving a fully paid, perpetual license under any patent that would issue based on Judkins' application. The district court entered the parties' proposed order, which included a statement that Judkins had not suppressed or concealed the invention, and vacated the BPAI's determination to the contrary. On remand, the BPAI granted Judkins priority, and he eventually received the patent-in-suit in February 2007.

Shortly thereafter, Judkins began sending letters to customers of HT Window Fashions (HT), asserting that one of HT's products likely infringed the patent. Eventually, the parties ended up in litigation, with Judkins asserting infringement and HT asserting unfair competition based on Judkins' sending the letters. HT sought a preliminary injunction against further sending of the letters, which the district court denied, noting that patentees are permitted to warn the marketplace of infringement in order to protect their inventions. HT appealed this denial.

The Federal Circuit affirmed. The primary issue was the first prong of the traditional four-factor injunction test, namely the likelihood of success on the merits. In order for HT to prevail on its Lanham Act claim, it must show bad faith. As stated by the court (internal citations and quotations omitted):

A patentee has a right to inform potential infringers of a patent and potentially infringing activity unless the communication is made in bad faith. Although bad faith in this context has both objective and subjective elements, the former is a threshold requirement: a bad faith standard cannot be satisfied in the absence of a showing that the claims asserted were objectively baseless, meaning no reasonable litigant could realistically expect to prevail in a dispute over infringement of the patent.

Here, HT asserted that Judkins committed two prior "bad acts" that led to the patent-in-suit: "sham" litigation with Newell to get the BPAI's priority determination reversed and supposed failure to disclose the abandonment finding in the Springs litigation to the USPTO.

The court first rejected HT's contention that the 2001 litigation seeking review of the BPAI's priority decision was a "sham." There was no evidence in the record that Judkins did not believe he would win on the merits. Further, the case went on for almost two years, with Newell filing a motion to dismiss that was "capably briefed." Instead of a sham, the court characterized the settlement as a "constructive, mutually beneficial resolution to a legitimate dispute." As a result, the court held the 2001 case was not a "sham," and did not warrant a finding of unenforceability.

The court also rejected HT's contention that finding of abandonment, suppression, or concealment in the Springs litigation was per se material. The court noted that the district court took this finding and balanced it against the contrary result in the interference. Further, while the district court noted that the status of the patent was "open to reasonable debate," the holding in the Springs case was not binding on Judkins, a nonparty to that dispute.

The court also noted that while the district court may not have used exactly the right words, it applied the proper standard of objective unreasonableness when assessing the underlying claim. As a result, the Federal Circuit affirmed the denial of the preliminary injunction.

The court did not, however, award Judkins his attorney fees on appeal. Judkins argued that because the Federal Circuit "almost never" reverses the denial of a preliminary injunction, HT should have known it would not prevail. The court rejected this, noting that while HT's chances may have been "slim," they were not nonexistent. As a result, because the appeal was not "clearly hopeless," the court declined to award fees.

To read the full decision in Judkins v. HT Window Fashion Corp., click here.

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