On March 23, 2004, in Globetrotter Software v. Elan Computer Group and Rainbow Inc., at http://www.fedcir.gov/opinions/03-1179.doc, the U.S. Court of Appeals for the Federal Circuit removed any doubt that federal patent law preempts state laws imposing tort liability for good faith communications about patent infringement and potential litigation. A patent holder can not be held liable for making wrongful allegations of patent infringement unless those claims are "objectively baseless, either because those patents were obviously invalid or plainly not infringed." However, the decision still leaves open the question of "whether the objectively baseless standard applies in the context of publicizing a patent through means other than pre-litigation communications."

The case involved a corporate acquisition during which Globetrotter, a third-party patentholder, sent an e-mail message to Rainbow, the buyer, suggesting that they investigate whether Elan's, the seller's, products infringe certain aspects of its patents before completing the purchase. The patentholder also sent letters to the seller, with copies to the buyer, identifying several patents that were being infringed. The buyer abandoned the planned purchase and later acquired the company at a much lower price. The patentholder then sued the new owner for infringement of just one of the patents, and the seller counterclaimed for tortious interference with prospective economic advantage and unfair competition under California law. On summary judgment, the lower court dismissed the tortious interference claim for lack of proof that the e-mail caused the seller's initial withdrawal, dismissed the unfair competition claim for lack of proof that the public was deceived, and held that there was no infringement of the patent.

The Federal Circuit took these facts as an opportunity to address the lingering uncertainty created by Cardtoons LC v. Major League Baseball Players Ass'n, at http://www.kscourts.org/ca10/cases/2000/04/98-5061.htm, where the Tenth Circuit, en banc, refused to apply the "bad faith" standard in a non-antitrust context. The Federal Circuit specifically held that the bad faith standard enunciated in its earlier opinion for Zenith Elecs v. Exzec, at http://www.ll.georgetown.edu
/federal/judicial/fed/opinions/98opinions/98-1288r.html, can not be satisfied in the absence of a showing that the claims asserted were objectively baseless. It then went on to vacate the lower court's decision on noninfringement and affirm the decision on no tortious interference or unfair competition. In the opinion of the Federal Circuit, the timing of the e-mail and letters, the failure to litigate two of the allegedly infringed patents, and statements by the patentholder concerning the validity of the asserted patent merely demonstrated Globetrotter's "subjective" bad faith and did not show that there were and an objectively baseless allegations of patent infringement.

Still, touting your patents with anything other than appropriate product marking continues to remain quite risky. Although exactly what constitutes bad faith remains to be determined on a case by case basis, the Federal Circuit has also noted that it can encompass subjective as well as objective considerations, and that the patentee's particular statements themselves are not irrelevant to determining bad faith. For example, statements to the effect that a competitor is incapable of designing around the patent are "inherently suspect."

For more information on pre-enforcement considerations for your client's intellectual property portfolio, contact the author of this issue of the "APLF Updates," Bill Heinze (bill.heinze@tkhr.com), at Thomas, Kayden, Horstemeyer & Risley LLP in Atlanta, Georgia USA. Or, better yet, introduce yourself at his firm's reception during the INTA Annual Meeting at the Hyatt Regency Atlanta on May 3 and 4, at 2:00-5:00 PM.

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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