Allegations of Wrongful Patent Assertion in the U.S. and South Africa

One of my current projects is a book-length treatment of wrongful patent assertion, the manuscript of which I hope to submit by June 30, 2025.  In this regard, I'm particularly interested in these two recent decisions. 

First, on Friday of last week, the U.S. Court of Appeals for the Federal Circuit issued its decision in Lite-Netics, LLC v. Nu Tsai Capital LLC, dba Holiday Brights Lights (opinion by Judge Taranto, joined by Judges Lourie and Stark).  The case involves an action brought by Lite-Netics alleging infringement of two patents relating to light-fixture assemblies (e.g., for holiday lights held in place by magnets).  The defendant, a competitor, filed various state-law counterclaims, alleging that Lite-Netics engaged, inter alia, in unfair competition, tortious interference with prospective business advantage, and defamation, by informing customers that Holiday’s products infringe these patents, and that the customers themselves could be liable for infringement.  In addition, it filed a motion for a preliminary injunction.  The district court granted the motion, forbidding Lite-Netics “from making statements . . . suggesting ‘copying’ by HBL, suggesting HBL customers will be burdened as additional defendants in this or any lawsuit, or suggesting that HBL is a patent infringer” (pp. 8-9).  In particular, the court found that HBL was likely to succeed on the merits of its tortious interference and defamation claims, notwithstanding Federal Circuit precedent that requires a person asserting such claims based on allegedly false statements about patent infringement to prove that the statements are both objectively baseless and made in subjective bad faith. The Federal Circuit reverses, concluding that at this stage of the litigation—before claim construction, etc.—"the district court abused its discretion at least in finding that Lite-Netic's infringement allegations with respect to the '779 patent are objectively baseless" (p.14).  (The court does not address the other patent in suit or other issues, see id. & n.2.) 

The case has already been discussed at some length on both Patently-O and IP Watchdog, so I won’t go into further detail here, except to note that, as others have previously observed, requiring proof of objective baselessness and subjective bad faith imposes what is often an insurmountable obstacle to the successful assertion of business-tort claims premised on allegations of wrongful patent enforcement.  Although the Federal Circuit could be right that these requirements, derived in part from the Supreme Court’s Noerr-Pennington antitrust/First Amendment case law and in part from other case law on patent preemption, are constitutionally necessary in the present context, they do go beyond the comparatively narrow privileges that the common law recognized for falsely accusing a competitor of infringement--and also can make the successful assertion of anti-patent troll statutes, which many states have enacted in the past decade, very difficult as well.  

As for South Africa, I’d like to note Chijoke Okorie’s post on IPKat, titled Common law doctrines and patent infringement in South Africa:  Villa Corp Protection (Pty) v Bayer Intellectual Property GmbH.  The post discusses, and links to, a recent 6-3 decision of South Africa’s Constitutional Court, which appears to allow the defendant to proceed with two related defenses that seem to resemble the U.S. doctrine of inequitable conduct.  The first is based on § 61(1)(g) of the Patents Act, under which “a false statement or representation which is material and which the patentee knew to be false at the time when the declaration was made” can be a ground for invalidating an issued patent.  The second is based on the common-law doctrine of unclean hands.  In the case under consideration, Bayer allegedly made statements to the South African Patent Office concerning the novelty of its claimed plant protection product, which contradict its seeking of an SPC from the EPO concerning the same product.  The decision also cautions, however, that it may be rare for unclean hands to amount to an abuse of process resulting in unenforceability.  How significant this may be remains to be seen, if § 61(1)(g) provides an independent ground for invalidating an issued patent; but maybe it’s possible for one to apply and not the other, and in any event (as the majority notes) litigants often make redundant claims.