Sung on the Freedom to Tell Customers That a Competitor Is Infringing Your Patent: Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 2008 U.S. App. LEXIS 8727 (Fed. Cir. Apr. 23, 2008)
Partner, Dewey & LeBoeuf LLP; Professor & Intellectual Property Law Program Director, University of Maryland School of Law
A consequence of business competition in the age of commercial exclusivity is the need to telegraph the existence of one's intellectual property rights. Perhaps more attention has been paid to the notification of one's patent rights to a competitor and the associated implications for declaratory judgment jurisdiction. However, a growing number of disputes over statements to the public about the asserted competitor infringement of one's patent rights are arising. Federal patent law preempts state law tort liability when a patentee communicates allegations of infringement of its patent, unless such communication is shown to be "objectively baseless." Lawrence M. Sung addresses the standards that govern whether certain statements in this regard will be protected by the "good faith" safe harbor, and the relationship to compliance with Federal Rule of Civil Procedure 11. He writes:
Shortly after filing its answer to OSRAM’s [patent infringement] complaint before the . . . [U.S. International Trade Commission (ITC)] in 2004, Dominant [Semiconductors] commenced this lawsuit asserting claims for unfair competition under the Lanham Act and for unfair competition, trade libel, and interference with contractual relations and prospective economic advantage under California statutory and common law. Dominant accused OSRAM of making false and misleading infringement allegations about Dominant’s products and of asserting its patent rights in bad faith . . . .
. . . .
The Federal Circuit ultimately affirmed the district court’s summary judgment that OSRAM did not engage in unfair competition, intentional interference with contractual relations, interference with prospective economic advantage, and trade libel because the communications to OSRAM’s customers that Dominant infringed several of its patents were not objectively baseless. The Federal Circuit began with the reminder that federal patent law preempts any state law tort liability in this regard without the incorporation of the extra, essential element of bad faith.
. . . .
Dominant argued that a new standard for objective baselessness, namely, the standard applicable to requests for sanctions under Federal Rule of Civil Procedure 11, should apply . . . . In the context of Rule 11 compliance, the Federal Circuit requires, at a minimum, that an attorney have interpreted the asserted patent claims and compared the accused device with those claims before filing a claim alleging infringement. Dominant urged that to be consistent, the Federal Circuit should impose the same standard in lawsuits alleging unfair competition arising from assertion of patent rights. In particular, Dominant contended that OSRAM would not be able to meet such a standard because . . . [OSRAM's counsel] did not test the accused devices before rendering his infringement opinion.
The Federal Circuit disagreed, noting the absence of any precedent to support Dominant’s proposal, and moreover, the disparate purpose and impact of the two standards – i.e., pre-litigation infringement allegations versus pleadings filed in court.
(citations omitted)