Lite-Netics, LLC v. Nu Tsai Capital LLC, Holiday Bright Lights (“HBL”)
Docket No. 2023-1146 (h https://cafc.uscourts.gov/opinions-orders/23-1146.OPINION.2-17-2023_2082508.pdf)
LOURIE, TARANTO, STARK
February 17, 2023
Brief Summary: DC grant of PI vacated and remanded based on the DC’s abuse of discretion in its determining Lite-Netics infringement allegations were objectively baseless. Summary: Lite-Netics (“LN”) sued HBL for infringement of US 7,549,779 and 8,128,264 directed to magnetic decorative light fixture assemblies that can be attached a surface such as metal at a roof edge. LN also sent two notices to its customers (e.g., stores that sell the lights), some that also bought from HBL, “informing them of allegedly infringing competitors in the market and stating Lite-Netics’s intent to enforce its patent rights.” The first notice did not name HBL as the alleged infringer, but the second letter did. HBL then “filed counterclaims, including for state-law torts, and moved for a temporary restraining order and a preliminary injunction, based on two of the statelaw counterclaims, against certain speech by Lite-Netics about its patents” which the DC granted, barring LN from “suggesting that HBL is a patent infringer, that HBL has copied Lite-Netics’s lights, or that HBL customers might be sued.” Lite-Netic’s appealed the DC’s PI “against its patent-related speech”, which the FC panel vacated and remanded as “the applicable speech-protective legal standards are not met.” HBL owns its own patent (US 11,333,309) that was issued in 2022 based on a 2021 application and its Magnetic Cord product “uses two half-disk magnets, rather than the single, full-disk magnet shown in Lite-Netics’s figures, at the socket base.” HBL distinguished its claims from Lite-Netic’s ‘779 patent by including “drain holes in its socket base and of at least two magnets protruding below the socket base, with a channel between them to help drain moisture—features that assertedly reduce the risk of corrosion and short circuiting.” HBL also sells a second product, the “Magnetic Clip” that “converts a non-magnetic light string to a magnetic one.” In 2017, Lite-Netics sent HBL a cease-and-desist letter regarding the Magnetic Clip product, after which the parties did not communicate for almost five years. In April 2022, Lite-Netics sent HBL another cease-and-desist letter alleging infringement by HBL’s Magnetic Cord and Magnetic Clip products, to which HBL responded by asking Lite-Netics to explain its infringement arguments. Lite-Netics responded “with evidence” to which HBL responded that is “one-versus-two position” and “the non-protrusion” element supported its non-infringement position. Lite-Netics then sued HBL in the DC, asserting willful “direct infringement, induced infringement, and contributory infringement under 35 U.S.C. § 271(a), (b), and (c).” Lite-Netics then sent the letters that are the subject of this appeal. HBL’s request for a PI from the DC was granted based on its conclusion “that HBL’s state-law tort claims were not preempted here, centrally because it held that Lite-Netics’s infringement allegations were so clearly meritless that their assertion was in bad faith” (Energy Heating, FC 2018). The FC panel explaining that “a showing of bad faith as prerequisite to applying state tort law to speech about infringement rests partly on First Amendment principles” and “injuctions…must meet tailoring requirements aimed at ensuring that they do not burden speech more than necessary” (“particularly significant when an injunction against speech is at issue” (Globetrotter, FC 2004; GP Industries, FC 2007; Tory, US 2007); “an injunction against communication [is] a much more serious matter” than against infringement (Myco, FC 2020); “no basis for a weaker tailoring requirement in the present context”). HLB presented an “all-or-nothing defense” of the PI (including the First Amendment grounds), and the FC panel found that the DC abused its discretion in finding Lite-Netics’ allegations objectively baseless, which is at the core of the PI (e.g., “The patent uses ‘the’ or ‘said’ when referring back to an antecedent ‘a’ phrase, but that usage does not itself suffice to demand the singular meaning because if the ‘a’ phrase means ‘one or more,’ so would the subsequent reference-back phrases…The patent never shows embodiments with more than one magnet, but we have generally rejected an inference of claim limitation on such a basis, where the embodiments are merely illustrative”, DC’s “discussion of the specification does not identify anything sufficient to make Lite-Netics’s [doctrine of] equivalence assertion baseless”) The DC decision was therefore vacated and remanded.