The Federal Circuit yesterday reversed a preliminary injunction that barred a patent holder from threatening potential infringers with litigation.  GP Industries, Inc. v. A Gutter Solution, LLC, No. 07-1087 (Fed. Cir. Sept. 20, 20007).

The patent holder, Eran Industries, sent letters in which it vowed to take "all necessary steps to stop the infringement" of its patent rights and accused companies of engaging in "criminal" and "racketeering" activity by using Eran’s intellectual property.  The district court preliminarily enjoined Eran from "communicating" similar "information" to customers, distributors, contractors, and others.

The Federal Circuit vacated the injunction because, it held, the evidence didn’t show that Eran acted in "bad faith".  The court noted that bad faith requires a finding that the patent holder asserted "objectively baseless" claims and concluded that the evidence didn’t support such a finding.  Nor had the district court found objective baselessness.  The panel accordingly determined that the district court abused its discretion.

Blawgletter marvels at the court’s overweening concern about a patentee’s "right to inform potential infringers of a patent and potentially infringing activity unless the communication is made in bad faith."  Slip. op at 7.  The court set a high threshold for bad faith, concluding that accusations of "criminal" and "racketeering" activity don’t amount to it so long as the patent holder has some objective basis for believing that infringement of a valid patent may have occurred. 

We regret that the court said nothing to discourage verbal bomb-throwing in the guise of protecting patent rights.  To us, as to the district court, the deliberate use of inflammatory language to frighten businesses objectively signals an improper motive and ought to require the inflamer to justify using it — say, by showing a prima facie case of criminality instead of hiding behind a presumption of a good faith basis for validity and infringement.

Barry Barnett

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Copyright 2007 Barry Barnett