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Patent Owners Allowed to Warn Buyers about Competitor's Infringing Products: Judkins v. HT Window Fashion Corp.
Judkins v. HT Window Fashion Corp.
No. 2007-1434 , Court of Appeals for the Federal Circuit, 04/08/2008
Companies Mentioned: HT Window Fashion Corp.
Holding
In this case about a patent relating to window coverings, the Federal Circuit upheld the right of a patent holder to warn customers of his competitor that the product they purchase may be infringing. In so ruling, the Federal Circuit affirmed the district court’s order that denied defendant-appellant HT Window Fashion Corp.’s (“HT”) application for injunctive relief. HT sought to restrain patent owner Ren Judkins (“Judkins”) from sending out warning letters to HT’s customers about the infringing products they buy. However, the Federal District held that HT failed to establish likelihood of success on the merits of its Lanham Act claim. Despite HT’s assertions that Judkins knew that his patent was unenforceable, the Federal Circuit ruled that HT failed to show that Judkins acted in bad faith. Therefore, there was no error in denying HT’s motion.
Detailed Summary
Plaintiff-appellee Judkins filed an infringement suit against defendant-appellant HT over his patent relating to window coverings. HT filed counterclaims, alleging among others, unfair competition under Section 43(e) of the Lanham Act, 15 U.S.C. Section 1125(a), by sending HT’s customers and potential customers letters to warn them that an HT product infringed his patents.
The U.S. District Court for the Western District of Pennsylvania denied HT’s motion for a preliminary injunction on the counterclaim. Judkins v. HT Window Fashions Corp., 514 F. Supp. 2d 753, 765 (W.D. Pa. 2007). HT then appealed this denial before the Court of Appeals for the Federal Circuit. HT argued that Judkins acted in bad faith when he sent the letters because he knew that his ‘120 patent, which the letters suggested was infringed by HT’s Polaris product, was unenforceable.
The factual background of this case is as follows. Judkins was the inventor of the T19 process for manufacturing window coverings in the early 1990s and had his lawyer draft a patent application in 1991. But he did not file the application (‘875 application) until 1995. In 1996, another inventor filed a patent application for a similar product that issued the next year as ‘550 patent. Newell Window Furnishings, Inc. (“Newell”) was the assignee of the ‘550 patent. Newell filed a patent infringement case involving the ‘550 patent before the district court for the Northern District of Illinois (“Springs” case). Judkins was not a party to this case, but his T19 invention was analyzed as prior art. He and his counsel testified in that case.
In early 1998, Judkins filed an Interference between the ‘550 patent and his own ‘282 application, which was a continuation of his ‘875 application. In October 1999, the district court in the Springs case held that the defendant in that case could not rebut the inference, drawn from Judkin’s four-year delay in applying for a patent, that he had suppressed, concealed, or abandoned his invention. The court ruled that the ‘550 patent was invalid, though on unrelated grounds. The Federal Circuit affirmed this district court’s ruling in 2001.
In 2001, the Board of Patent Appeals and Interferences (“BPAI”) ruled that Judkins had abandoned his invention and awarded priority against him. The result of all these circumstances meant that Judkins was precluded from being issued a patent, while Newell similarly had no patent since the Federal Circuit had affirmed the finding of invalidity in the Springs case.
In November 2001, Judkins filed suit (2001 case) before the Western District of Pennsylvania to overturn BPAI’s decision and to seek a ruling that the invention under the ‘550 patent was derived from his invention. In September 2003, Judkins and Newell entered into a settlement agreement. The judge in the 2001 case entered an order, stating that Judkins did not suppress or conceal the invention and vacated BPAI’s finding that Judkins was not entitled to a patent. The BPAI thus gave priority to Judkins’s ‘282 application over the ‘550 patent. Hence, Judkins secured the ‘120 patent in February 2007.
Shortly before the ‘120 patent issued, Judkins sent letters to HT’s customers and potential customers warning them of likely infringement. Judkins filed the instant case shortly after issuance. HT filed counterclaim to stop Judkins from sending letters of warning to its customer. The district court could not find that HT “had a likelihood of prevailing.” The district court also declared that “the irreparable harm balance does not weigh in (HT’s) favor” because patentees in Judkins’s position have a right to protect their inventions by, among other things, warning the marketplace against infringement. In contrast, the court found any harm to HT was not “particularly irreparable” because it would only take the form of lost sales compensable through monetary relief. The district court thus denied HT’s motion for preliminary injunction. Hence, HT filed the instant appeal.
The rule is that a “patentee has a right to inform potential infringers of a patent and potentially infringing activity unless the communication is made in bad faith.” GP Indus., Inc. v. Eran Indus., Inc., 500 F.3d 1369, 1374 (Fed. Cir. 2007) (citing Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1386 (Fed. Cir. 1998) and 35 U.S.C. § 287). Here, the Federal Circuit disagreed with HT’s argument that the district court abused its discretion when it denied its request for a preliminary injunction. The district court did not err in weighing the relevant factors, and did not rely on erroneous legal or factual premises when it concluded that HT failed to show a likelihood of success on the merits of its Lanham Act claim.
In arguing that Judkins had acted in bad faith, HTpointed to two “prior bad acts” by Judkins that were “but-for causes” of the ’120 patent’s issuance: “sham litigation” in the 2001 case aimed at overturning BPAI’s decision awarding priority against Judkins, and Judkins’s supposed failure to disclose the abandonment finding in the Springs case to the patent office or the Western District of Pennsylvania in the 2001 suit he brought to overturn the Board’s interference decision. These acts, HT asserted, constituted a breach of the duty of candor owed by patent applicants under 37 C.F.R. § 1.56.
However, the Federal Circuit disagreed. It held that the 2001 case was not a “sham.” Judkins was entitled to seek review of the BPAI’s decision awarding priority to the Ford patent, as well as all issues raised by that decision, in a district court pursuant to 35 U.S.C. § 146. Gen. Instrument Corp., Inc. v. Scientific-Atlanta, Inc., 995 F.2d 209, 211 (Fed. Cir. 1993). Nothing in the record suggested that Judkins believed that he stood no chance of prevailing outright in that action. Indeed, he pursued just that result for nearly two years before reaching a settlement with Newell—hardly a span of time one would expect sham litigants to wait to reach a collusive bargain.
For these reasons, “the evidence relating to the 2001 suit does not suggest that the district court clearly erred in evaluating the facts HT asserts establish its likelihood of success on the merits.”
HT’s assertion of a conspiratorial settlement of the lawsuit similarly failed to persuade the Federal Circuit that the district court overlooked a breach of the duty of candor or other glaringly obvious misconduct. “The fact that both Judkins and Newell took from the settlement something of value points to a constructive, mutually beneficial resolution to a legitimate dispute,” the Federal Circuit wrote. The district court in this case did not clear err when it failed to find that the settlement was collusive and therefore treat it as irrefutable evidence of Judkins’s bad faith in later asserting the ’120 patent.
HT further argued that the district court improperly discounted the materiality of the finding in the Springs case that Judkins had abandoned, suppressed, or concealed his invention. But the Federal Circuit again did not agree. Rather, the court took the finding as a given but said “it was not dispositive of bad faith in light of other evidence.” Indeed, the district court said “the effect of [the finding] on the validity of the ’120 Patent can reasonably be questioned,” not that “the finding can reasonably be questioned.” The Federal Circuit did not find any error on this point.
On HT’s argument that the district court committed error in not using the “objective baselessness” standard for bad faith, the Federal Circuit held that it was not persuaded that the court applied the wrong legal standard to the evidence. The district court’s discussion expressly invoked the proper standard and cited to the Federal Circuit’s leading case linking bad faith to objective baselessness. Judkins, 514 F. Supp. 2d at 762 (citing Globetrotter Software v. Elan Computer Group, Inc., 362 F.3d 1367, 1375, 1377 (Fed. Cir. 2004)).
Moreover, the district court at several points in its opinion indicated that “Judkins’s claims were not objectively baseless, albeit without using that exact phrase.” For example, the district court made clear its unwillingness to hold that “(Judkins’s) belief that the ’120 patent was, or would be, valid and enforceable was objectively unreasonable.” Id. at 765. The district court unquestionably evaluated Judkins’s assertion of his patent rights from an objective standpoint and determined that Judkins “had not acted in an objectively baseless way.”
The Federal Court once held in Mikohn Gaming Corp. v. Acres Gaming, Inc. that bad faith may have both subjective and objective elements. 165 F.3d 891, 897 (Fed. Cir. 1998). Indeed, once the court concludes that the claims of infringement are objectively baseless, the court must then consider whether the claims were made in subjective bad faith. Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993). In sum, the district court applied the correct legal standard, the Federal Circuit ruled.
On the basis of the foregoing analysis, the Federal Circuit affirmed the district court’s order denying HT’s motion for preliminary injunction.
View a PDF of the judicial opinion.Patent Law Commentary
Read the related Patent Law commentary: Judkins v. HT Window Fashion: Can’t Stop a Patent Holder from Contacting Your Clients About, by John R. Carr, Esq.
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