The U.S. Court of Appeals for the Federal Circuit rejected the argument that the presumption of patent validity is improperly applied where the patent has allegedly been fraudulently acquired, finding that while unenforceability may yet be shown, "the possibility of inequitable conduct behind the patent is not so clear-cut that the district court's reliance on the presumption of validity made its denial of the preliminary injunction an abuse of discretion." Judkins v. HT Window Fashion Corp., Case No. 07-1434 (Fed. Cir., April 8, 2008) (Kennelly, J., sitting by designation).
Ren Judkins (Judkins) sued HT Window Fashion Corporation for infringement of Judkins' patents relating to window coverings. HT counterclaimed for, among other things, a preliminary injunction under Sec. 43(e) of the Lanham Act, to enjoin Judkins from sending HT's customers and potential customers warning letters to advise them that an HT product infringed Judkins patents. In denying HT's motion for a preliminary injunction, the district court held that the balance does not weigh in HT's favor because the patent is presumptively valid and Judkins had a right to protect its invention by warning the marketplace against infringement. HT appealed.
HT argued that the court improperly applied a presumption of validity to patents that, as HT contended, were fraudulently obtained and applied the wrong legal standard for bad faith. With regard to bad faith, HT asserted that the court erred by requiring HT to provide evidence of Judkins' subjective knowledge of bad faith rather than using the "objectively baseless" standard.
The Federal Circuit concluded that while unenforceability for inequitable conduct may yet be shown, the mere "possibility of inequitable conduct behind the patent-in-suit was not so clear-cut that the court's reliance on the presumption of validity made its denial of the preliminary injunction an abuse of discretion."
With regard to the alleged failure of the district court to apply the proper standard for bad faith, the Federal Circuit noted that although bad faith has both objective and subjective elements, the former is a threshold requirement and that "a bad faith standard cannot be satisfied in the absence of a showing that the claims asserted were objectively baseless," meaning no reasonable litigant could realistically expect to prevail in a dispute over infringement of the patent. If a court, weighing a motion to enjoin a patentee from communicating its rights, determines the patent in question is not necessarily invalid or unenforceable, the objective baselessness requirement is not met and no injunction should issue. Since the status of the patent-in-suit was "open to reasonable debate," the Court concluded that Judkins had not acted in an objectively baseless way by notifying the market of the alleged infringement.
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