Patent Owner’s Freedom of Speech to Communicate with Alleged Infringers Is Protected Unless Made in Bad Faith and “Objectively Baseless”

May 12, 2020

In Myco Industries, Inc. v, BlephEx, LLC (Case No. 2019-2374, April 3, 2020), the Federal Circuit held that a patent owner has a First Amendment right to communicate with alleged infringers, unless such communications are objectively baseless and made in bad faith.

U.S. Patent No. 9,039,718 (the “’718 patent”) relates to an electromechanical device used by doctors to remove debris from the eye of a patient diagnosed with inflammation of the eyelids (blepharitis).  Dr. James Rynerson, the inventor of the ’718 patent, worked with John Choate to develop a commercial product, the BlephEx, based on the ’718 patent.  Rynerson and Choate then parted ways, and Choate later became chairman of Myco Industries, Inc.

In 2019, Myco began selling the AB Max, an electromechanical device used by medical professionals to treat blepharitis.  Later that year, Rynerson attended an optometry trade show and saw the AB Max device at Myco’s booth.  Choate contended that, upon observing the AB Max device, Rynerson became hostile and made loud accusations that the AB Max infringed the ‘718 patent within earshot of Myco’s prospective customers and that he would be “taking action”.  According to Rynerson, he merely asked if Choate thought the AB Max might infringe the ‘718 patent and did not threaten to sue anyone for patent infringement.

After the trade show encounter, Myco filed a declaratory judgment action against BlephEx in the U.S. District Court for the Eastern District of Michigan.  Myco sought a declaratory judgment of noninfringement of the ’718 patent, and injunctive and monetary relief under state and federal unfair competition laws.  The unfair competition claims charged that Rynerson had made bad faith patent infringement allegations at the trade show.

Shortly thereafter, Myco filed a motion for a preliminary injunction against BlephEx, seeking to prevent BlephEx from (1) “making false allegations that Myco’s AB Max infringes the ’718 patent;” and (2) “making baseless threats against Myco’s medical practitioner potential customers of AB Max.”  In its motion, Myco argued that it had a strong likelihood of success on the merits of its patent non-infringement claim, in part because Myco’s medical-practitioner customers are immune from liability under 35 U.S.C. §287(c)(1). 

The district court granted Myco’s motion, enjoining BlephEx from making allegations of patent infringement and from threatening litigation against Myco’s potential customers. Myco Indus., Inc. v. BlephEx, LLC, Case No. 19-cv-10645, 2019 WL 4023789 (E.D. Mich. Aug. 27, 2019).

On appeal, Judge O’Malley, writing for a three-judge panel of the Federal Circuit, reversed and vacated the district court’s decision.  In doing so, the Federal Circuit held that the district court abused its discretion when it granted the preliminary injunction enjoining the patentee’s speech without a finding of bad faith.

Before a preliminary injunction may prevent a patent owner from communicating its patent rights, federal law requires a showing that the patent owner acted in bad faith in communicating its patent rights.  Finding “bad faith” requires a showing that the patent infringement claims asserted are objectively baseless, such that no reasonable litigant could reasonably expect success on the merits.  GP Indus., Inc. v. Eran Indus., Inc., 500 F.3d 1369, 1373 (Fed. Cir. 2007).  In this case, the Federal Circuit found that the district court did not apply the correct legal standard, as it failed to make any finding of bad faith by patent owner BlephEx, or even make any reference to the bad faith requirement in its holding.  The Federal Circuit did not find any evidence in the record that BlephEx or inventor Rynerson threatened to sue Myco or its potential customers for patent infringement.

The Federal Circuit also rejected Myco’s argument and the district court’s holding that the “medical practitioner immunity” provision of 35 U.S.C. §287(c)(1) states that a medical practitioner is “immune from infringement.”  According to the Federal Circuit, the plain text of 35 U.S.C. §287(c)(1) establishes that, if a medical practitioner’s performance of a medical activity infringes a patent claim, the patent owner cannot seek a remedy for such infringement against the practitioner or related health care entity.  But there can still be infringement by the practitioner.  Accordingly, a medical practitioner’s direct infringement of a method claim, for example, may still form the basis of a claim of indirect infringement against a medical device manufacturer.  Barry v. Medtronic, Inc., 915 F.3d 1310, 1334 (Fed Cir. 2019).  Because of this, 35 U.S.C. §287(c)(1) does not “blanketly preclude” a patent owner from stating that a medical practitioner’s performance of a medical activity infringes a patent.

The Federal Circuit found that Myco failed to establish that BlephEx’s patent infringement statements, whether made generally or to medical practitioners, were made in bad faith and objectively baseless, as is required in order for a patent owner to be enjoined from communicating their patent rights.

Myco also failed to demonstrate a strong likelihood of success on its non-infringement claim, as would be required for the district court to grant Myco’s motion for preliminary injunction. The Federal Circuit found that the district court’s claim construction analysis was incorrect because it was based on a description of BlephEx’s product, not properly applied claim construction principles.

Overall, this Federal Circuit decision reaffirms and clarifies that a patent owner’s communications with alleged infringers is considered protected speech under the First Amendment.

Author: Elaine Lee