Earlier this month, the Court heard oral argument in a patent case we have been following because it attracted three amicus briefs. The case, Micron Technology, Inc. v. Longhorn IP, LLC, raises questions relating to Idaho’s Bad Faith Assertions of Patent Infringement Act. Katana, the patent owner, sued Micron for infringement in federal district court. Longhorn, its licensing affiliate, was then sued by Micron in Idaho state court under the Act. Longhorn and Katana now appeal the district court’s order requiring an $8 million bond as a precondition to Katana pursuing its patent infringement claims. This is our argument recap.
Scott W. Breedlove argued for Longhorn IP LLC and Katana Technologies LLC. He opened by asserting that “what’s happening with patent litigation in Idaho is extraordinary.” He explained that other patent-owners, like LongHorn and Katana, “are being hauled into Idaho state court to retaliate against federal ongoing patent litigation occurring in other states and at the PTAB.” A judge asked whether Idaho’s Act was an “anomaly.” Breedlove answered that while many states have statutes related to bad faith assertions, Idaho’s statute is different “in relevant ways.” He said “it’s the only statute” that expressly makes it “unlawful to make a bad faith assertion” in a federal complaint. That feature, he argued, is “a central reason” the statute is facially preempted, in addition to being preempted as applied here.
The panel then shifted to jurisdiction. One judge asked whether the Federal Circuit had the authority to hear the appeal. Breedlove responded by arguing the district court’s order requiring an $8 million bond was both “effectively an injunction” and an impermissible bond under the collateral order doctrine. Breedlove contended Micron specifically pleaded for “equitable relief enjoining the bad faith assertion,” which Micron defined as Katana’s filing of the patent infringement complaint in federal district court.
A judge followed up and asked whether there was evidence “the amount of the bond is so significant that it prevents Katana from proceeding.” Breedlove acknowledged “there’s no evidence in the record about anyone’s ability to pay,” but noted the district court “quadrupled the estimated damages of future patent litigation” to reach the order amount, which exceeded Micron’s own projected future litigation costs. He argued the district court’s authority to order a bond remains a “serious and unsettled question,” and especially so when it is issued “before a patent owner can pursue enforcement.”
One judge then asked whether the bond requirement applies only to bad-faith assertions or whether it risks deterring good-faith assertions. Breedlove answered by arguing “the bond was issued without any evidence of bad faith assertions” and instead rested “purely on allegations,” despite Longhorn’s submission of materials contradicting Micron’s claims.
Another judge returned to the issue of preemption. Breedlove responded by emphasizing “the whole point” of Micron’s Idaho case is “to challenge our complaint in federal court” and not to regulate “conduct in the marketplace or marketplace entry.” Because Micron’s claim targets only Katana’s filing of a federal complaint, he argued, the issue is “governed by federal law because it’s purely assertions” made in federal court, not commercial activity.
Andrew Dufresne argued for Micron Technology, Inc. He began by noting that “a whole host” of states have bad faith assertion-related statutes that “apply to communications as a whole,” including complaints, and therefore, he said, Idaho’s statute is not an anomaly. A judge asked whether precedent could nevertheless be distinguished because this case involves application of the state law to a complaint rather than marketplace conduct. Dufresne responded by answering that there is “no basis for that distinction in the governing law.” In his view, he said, “the kind of marketplace conduct” at issue in earlier cases is governed by the same precedent. He said “there’s no difference between a complaint or court proceedings, as opposed to what counsel called marketplace communications.”
Another judge then shifted the discussion to jurisdiction, asking Dufresne to address the panel’s earlier discussion with opposing counsel. Dufresne noted Micron had already “moved to dismiss this appeal entirely.” He argued Longhorn’s reliance “on the collateral order doctrine” presented “several problems.” The doctrine, he explained, “requires that a determination by the lower court be totally separate from the merits.” In the present case, however, he said “the bond determination was inextricably intertwined with the merits of the dispute.” For that reason, he continued, “it’s very hard to see how” the bond order “could be totally separate and apart from the merits of the case.” He added there was no “irreparable harm” from the bond because, if it proves unnecessary once the case concludes, the bond “can just be refunded.” Thus, Dufresne maintained, “the collateral order doctrine does not apply here.”
Michael Zarian argued for the State of Idaho. He began by acknowledging “there are significant jurisdictional questions in this case,” but he emphasized Idaho has an “interest in defending the constitutionality of the statute.” For that reason, he explained, Idaho intended to “only talk about the facial preemption argument.”
Zarian argued “complaints can form the basis for civil liability under state law” because “it’s well established under Supreme Court precedent.” That precedent, he contended, holds that “a sham petition,” which is a court filing that is “objectively and subjectively unreasonable,” can amount to “an abusive business tactic.” He continued by pointing to Federal Circuit precedent that “almost assumed that petitioning activity is more of the heartland of what’s protected by the First Amendment,” except where the activity involves “sham proceedings or fraudulent proceedings,” in which case the law could “impose liability.” He suggested the governing rule was “state court claims based on enforcing a patent” are “preempted by the federal patent laws unless . . . the patent holder acted in bad faith.” Because there is no reason “why the Patent Act would want to encourage bad faith assertions,” he argued, Idaho’s statute is not facially unconstitutional.
In rebuttal, Breedlove argued the “distinction between assertions made in a federal complaint versus marketplace activity is not . . . made up.” He maintained the “distinction is raised repeatedly” in Federal Circuit precedent. Breedlove emphasized the Idaho statute “singles out patent holders” and “targets complaints.” In doing so, he argued, the statute “attempts to regulate federal patent litigation.”
We will continue monitoring this case and report on developments.