[00:00:00] Speaker 05:
The first case is Micron versus Longhorn, 2023, 2007, and 2095.

[00:00:09] Speaker 05:
Mr. Breedlove.

[00:00:11] Speaker 05:
Thank you, Your Honor.

[00:00:17] Speaker 01:
May I please the court?

[00:00:18] Speaker 01:
I'd like to reserve five minutes.

[00:00:21] Speaker 01:
What's happening with

[00:00:23] Speaker 01:
Patent litigation in Idaho is extraordinary.

[00:00:27] Speaker 01:
It began with my client, and now it's happening to others as well.

[00:00:34] Speaker 01:
Micron is in the middle of it all.

[00:00:35] Speaker 01:
Patent owners are being hauled into Idaho State Court to retaliate against federal ongoing patent litigation occurring in other states and at the PTAB.

[00:00:46] Speaker 04:
Is this statute an anomaly, or is it similar to other?

[00:00:49] Speaker 01:
State statutes?

[00:00:52] Speaker 01:
It's an anomaly in relevant ways.

[00:00:54] Speaker 01:
It's similar in a lot of it.

[00:00:57] Speaker 01:
But in relevant ways, it's an anomaly.

[00:00:59] Speaker 01:
It's the only statute, I believe.

[00:01:01] Speaker 01:
that specifically refers to a complaint when talking about unlawful conduct.

[00:01:06] Speaker 01:
It's unlawful to make a bad faith assertion in a complaint, which would, of course, be a federal complaint.

[00:01:11] Speaker 01:
So in that sense, it is an anomaly.

[00:01:14] Speaker 01:
And that is a central reason why we are arguing for the preemption on its face portion of our argument.

[00:01:21] Speaker 01:
We, of course, also have preemption as applied, but that's a big reason why we have the

[00:01:27] Speaker 01:
preemption on its face argument.

[00:01:29] Speaker 05:
This is all very interesting, and we're happy to hear you use your time as you wish.

[00:01:35] Speaker 05:
But do we have jurisdiction?

[00:01:39] Speaker 05:
Was this an injunction, or effectively an injunction?

[00:01:43] Speaker 01:
Well, it was effectively an injunction, and it was an order for a bond, which we believe fits squarely within the reasoning of Cohen and subsequent cases involving a bond, where the question was that

[00:01:56] Speaker 01:
The central question was the power of the court to order the bond in the first place.

[00:02:02] Speaker 01:
In this case, we say it did not because of the unconstitutional nature of the statute.

[00:02:10] Speaker 01:
We also contend that this is an injunction, that it is, in fact, micron in their complaint

[00:02:19] Speaker 01:
specifically pleads for equitable relief, enjoining the bad faith assertion.

[00:02:25] Speaker 01:
The bad faith assertion in this case is the complaint filed by Katana for patent infringement.

[00:02:30] Speaker 01:
And so they are seeking an injunction to prevent that complaint from going forward.

[00:02:36] Speaker 03:
And now that- What is the evidence that the amount of the bond is so significant that it prevents Katana's from proceeding?

[00:02:46] Speaker 01:
Well, there's no evidence in the record about anyone's ability to pay or ability to find the money or go to a bonding company or anything like that.

[00:02:53] Speaker 01:
But there is evidence that what this represents is quadruple the estimated damages of future patent litigation that hasn't occurred yet for Micron.

[00:03:04] Speaker 01:
And there are statements by both Idaho and the judge indicating that this bond was intended

[00:03:12] Speaker 01:
to scare off Katana to deter conduct that would occur immediately.

[00:03:19] Speaker 03:
So our contention is that the... In your view, how is the amount of the bond calculated?

[00:03:25] Speaker 03:
And what is it supposed to reflect?

[00:03:28] Speaker 03:
I thought it was supposed to reflect the amount of fees that Micron expected to have to pay in order to defend the litigation.

[00:03:36] Speaker 03:
Am I wrong?

[00:03:36] Speaker 01:
Times four.

[00:03:38] Speaker 01:
Times four.

[00:03:40] Speaker 01:
They submitted their argument that the number should be $15 million.

[00:03:45] Speaker 01:
The court went with $8 million.

[00:03:47] Speaker 01:
And they were including fees for the future federal

[00:03:51] Speaker 01:
infringement litigation to occur in the future, and they were including PTAP proceedings as well.

[00:03:59] Speaker 01:
And the judge brought that number down, looking at AIPLA statistics, and came up with two million, and then quadrupled that, which is based on, it's under the statute, it's supposed to be based on a likely finding trouble damages, so exemplary damages.

[00:04:21] Speaker 01:
And there was no analysis in the order to support that.

[00:04:25] Speaker 01:
But the court just quadrupled what the estimated attorney's fees were for defending.

[00:04:31] Speaker 05:
But you still have the problem of an interlocutory appeal.

[00:04:35] Speaker 05:
And you cite Cohen.

[00:04:36] Speaker 05:
Yes.

[00:04:37] Speaker 05:
And what is this collateral to?

[00:04:38] Speaker 05:
I mean, how does the collateral order argument work out?

[00:04:44] Speaker 01:
Well, the order to.

[00:04:48] Speaker 01:
pay the bond is collateral to any final judgment that might occur on the merits of the case.

[00:04:55] Speaker 01:
Because the central issue is the power of the court to issue the bond in the first place.

[00:05:02] Speaker 01:
And so it's made a final determination about that.

[00:05:05] Speaker 01:
And so that determination is collateral to the final judgment.

[00:05:13] Speaker 05:
Well, it's ultimately dealt with on the merits, right?

[00:05:20] Speaker 05:
Does it satisfy the three requirements for collateral order?

[00:05:28] Speaker 01:
Yes, we believe that it does.

[00:05:30] Speaker 01:
It comes within the explanation in Cohen itself.

[00:05:37] Speaker 03:
What about the irretrievably lost in the absence of an immediate appeal factor?

[00:05:44] Speaker 03:
Please answer Judge Laurie's question, but please emphasize that factor in particular.

[00:05:49] Speaker 01:
OK.

[00:05:51] Speaker 01:
So the test is the serious and unsettled question, using Cohen's words, and that's Micron's right to a bond.

[00:05:58] Speaker 01:
That's a serious and unsettled question.

[00:06:01] Speaker 01:
The district court's authority to order a bond before a patent owner can pursue enforcement is an important issue separate from the merits, whether it can do that.

[00:06:12] Speaker 01:
It's effectively unreviewable because the harm from the bond

[00:06:16] Speaker 01:
occurs before final judgment.

[00:06:19] Speaker 01:
And it's got hard costs associated with it upfront, especially the way that the district court described the statute.

[00:06:28] Speaker 01:
It said that the teeth of the statute is in the bond, that it was intended to scare off a patent owner.

[00:06:39] Speaker 03:
What is the evidence that shows that that bond is

[00:06:44] Speaker 03:
So difficult that there is no ability to file the suit or something else.

[00:06:53] Speaker 03:
I'm trying to find something more concrete here for why it's prohibitive and thus irretrievably lost.

[00:06:59] Speaker 03:
Or even an understanding of what the cost is to the company to get the bond.

[00:07:04] Speaker 01:
There's no evidence in the record of what the cost would be to get the bond.

[00:07:09] Speaker 01:
But we've cited cases in the constitutional context in particular where a bond of even much lower amounts is shown to have such chilling effect that it restricts the right to petition.

[00:07:22] Speaker 03:
Is evidence presented in those cases?

[00:07:26] Speaker 01:
Not that I'm aware of.

[00:07:26] Speaker 01:
I mean, we're talking about very low amounts, but that we're still considered to have constitutionally

[00:07:33] Speaker 03:
But you don't know if evidence was presented in that case, right?

[00:07:36] Speaker 03:
I mean, I'm just trying to figure out if any evidence was presented in this case so we can understand as an appellate court how it was viewed by the district court.

[00:07:44] Speaker 03:
But if no such evidence was presented, it feels like it's a difficult thing for us to wrap our hands around as an appellate court.

[00:07:51] Speaker 01:
Well, yes, there was no evidence of the ability or inability to pay a specific bond.

[00:07:58] Speaker 01:
But we have evidence that.

[00:08:02] Speaker 01:
the intent of the bond, and just from its nature being four times fees and at $8 million level, it has a deterrent effect on even good faith patent assertions.

[00:08:14] Speaker 01:
The Ninth Circuit recognized.

[00:08:16] Speaker 03:
But this doesn't apply to good faith patent assertions, right?

[00:08:20] Speaker 03:
I mean, the law itself specifically says it's for bad faith patent assertions.

[00:08:24] Speaker 01:
Right.

[00:08:24] Speaker 01:
But the bond was issued without any evidence of bad faith assertions.

[00:08:28] Speaker 01:
It's totally based on allegations and a complaint, allegations that were shown through evidence submitted by us to be wrong, false and misleading.

[00:08:38] Speaker 01:
And the order was issued for the bond with zero evidence.

[00:08:41] Speaker 01:
It's purely based on allegations.

[00:08:43] Speaker 01:
In fact, the district court said,

[00:08:45] Speaker 01:
that because we have denied Katana's Rule 12 v.

[00:08:50] Speaker 01:
6 motion based on the pleadings, it's a lower statutory standard in the Idaho statute.

[00:08:57] Speaker 01:
Therefore, we must order the bond.

[00:09:00] Speaker 01:
So no evidence of bad faith.

[00:09:02] Speaker 05:
What about preemption, which is where you wanted to go to begin with?

[00:09:06] Speaker 01:
Right.

[00:09:07] Speaker 01:
Preemption, this court's cases indicate that

[00:09:13] Speaker 01:
this standard about, well, was it bad faith or was it good faith?

[00:09:16] Speaker 01:
That applies to assertions that occur in the marketplace.

[00:09:20] Speaker 01:
When there are assertions made in the marketplace and there's marketplace injury, then you say federal law is, even though that's normally a state area, state is going to regulate the marketplace, if it's an assertion about patent infringement, then

[00:09:36] Speaker 01:
That's going to be preemptive unless it was in bad faith.

[00:09:40] Speaker 01:
But we're beyond that here.

[00:09:41] Speaker 01:
We're talking about the whole point of their case is to challenge our complaint in federal court.

[00:09:47] Speaker 01:
The question is not conduct in the marketplace or marketplace injury.

[00:09:51] Speaker 01:
This is not just protected by federal law.

[00:09:55] Speaker 01:
It's governed by federal law because it's purely assertions made in federal court, just like if you made some statement that was alleged to be defamatory in court.

[00:10:05] Speaker 01:
That wouldn't be like a defamatory statement in the marketplace.

[00:10:11] Speaker 05:
The court found a lot of factors for bad faith.

[00:10:16] Speaker 05:
Demand letter without conducting an adequate analysis.

[00:10:23] Speaker 01:
Yes, without any evidence.

[00:10:25] Speaker 01:
We submitted evidence that there was plenty of analysis by PhDs with semiconductor manufacturing expertise.

[00:10:34] Speaker 01:
There were PowerPoint presentations, and this is in the record, given to Micron at a meeting in November 2018 that used 10 images of the Micron NAND product and mapped it to the claim elements of the three patents.

[00:10:52] Speaker 01:
Micron came back with their response in an email just at a high level.

[00:10:57] Speaker 01:
Our clients responded in February 2019 with PowerPoint decks rebutting what Micron had said.

[00:11:06] Speaker 01:
You know, these TIM images are expensive.

[00:11:09] Speaker 01:
I mean, they were purchased, the record indicates, you know, for $35,000 just for the Micron TIM image.

[00:11:15] Speaker 01:
This is not some fly-by-night operation.

[00:11:17] Speaker 01:
These are real allegations, and the court considered none of that evidence.

[00:11:22] Speaker 01:
In fact, no evidence at all, to be fair to Micron.

[00:11:25] Speaker 01:
Didn't consider Micron's evidence either, just the allegations.

[00:11:28] Speaker 01:
And first of all, that's not what the Idaho statute would even call for.

[00:11:32] Speaker 01:
It calls for a finding.

[00:11:33] Speaker 01:
And I believe Idaho's brief at footnote 12, I think it is.

[00:11:38] Speaker 04:
Do we, though, carve out in Globetrotter an exception and indicate the preemption doesn't apply if there's a clear provision of bad faith in the statute?

[00:11:49] Speaker 01:
That's for statements in the marketplace.

[00:11:55] Speaker 01:
Hunter Douglas and Dow and all of those cases are about conduct in the marketplace where states historically regulate.

[00:12:04] Speaker 01:
States do not historically regulate patent litigation, which is all that this case is about.

[00:12:08] Speaker 01:
It's about Katana's patent infringement.

[00:12:10] Speaker 04:
But why wouldn't the bad faith proposition that's articulated there apply to an assertion in a complaint?

[00:12:18] Speaker 01:
Why wouldn't it?

[00:12:20] Speaker 01:
Yes.

[00:12:21] Speaker ?:
Right.

[00:12:22] Speaker 01:
What the standard indicates, and this was phrased, for example, in the Hunter-Douglas decision at page 1335 and 1337, if a plaintiff abases its tort action on conduct that is protected or governed by federal patent laws, then it's preempted.

[00:12:41] Speaker 01:
And in that case, they explain, talking about Dow, that the defendant's conduct in Dow is neither protected nor governed by federal patent law.

[00:12:51] Speaker 01:
In the marketplace, a statement of assertion is protected by patent law if it's not in bad faith.

[00:12:59] Speaker 01:
But a statement that is governed by federal patent law is preempted no matter what.

[00:13:07] Speaker 04:
You don't have to get it.

[00:13:08] Speaker 04:
You're saying that's the case with a complaint.

[00:13:10] Speaker 01:
With a federal complaint, yes.

[00:13:11] Speaker 01:
If you're in front of a federal agency or federal court, and you make a statement, that is governed by federal law.

[00:13:19] Speaker 01:
And that's why these cases emphasize over and over again that, hey, we're talking about statements in the marketplace.

[00:13:26] Speaker 01:
We're not talking about alleged abuse of process in front of federal agencies like the PTAB or in federal courts.

[00:13:35] Speaker 01:
So that's Abbott Labs.

[00:13:36] Speaker 05:
You were well into your rebuttal time, and you wanted to save some.

[00:13:40] Speaker 05:
Yes, sir, I would like to reserve give you three minutes.

[00:13:44] Speaker 05:
Thanks so much Mr. Dufresne And you're sharing your time with mr. Zarian, that's correct, your honor

[00:14:04] Speaker 00:
May it please the court?

[00:14:07] Speaker 00:
I want to pick up with Judge Schall's first question, which was about whether the statute is an anomaly.

[00:14:11] Speaker 00:
And we heard today that it's an anomaly because it applies to complaints.

[00:14:15] Speaker 00:
And that's not correct.

[00:14:16] Speaker 00:
As we explained in our brief, a whole host of these other state statutes apply to complaints and that they apply to communications as a whole.

[00:14:25] Speaker 00:
And among those, there's a large subset, 10 or more,

[00:14:29] Speaker 00:
that have specific carve-outs or civil actions asserting Hatch-Waxman claims.

[00:14:34] Speaker 00:
So if those other state statutes did not also include litigation, civil actions, complaints within their reference to communications, there'd be no reason for that carve-out.

[00:14:43] Speaker 03:
What about their attempt to distinguish globe charter on the basis that this Idaho law and I guess other state laws apply to complaints?

[00:14:55] Speaker 00:
Right.

[00:14:55] Speaker 00:
So I think as I understand, the distinction is that there's some sort of difference between marketplace assertions and assertions in court.

[00:15:04] Speaker 03:
And there's just sort of like a refrained cease and desist letter as opposed to an actual complaint.

[00:15:11] Speaker 00:
Correct.

[00:15:11] Speaker 00:
Yes.

[00:15:11] Speaker 00:
So there's no basis for that distinction in the governing law here.

[00:15:15] Speaker 00:
So Globetrotter walks through the history of the North Pennington doctrine very helpfully.

[00:15:22] Speaker 00:
And it talks about how that arose to protect First Amendment protected petitioning activity.

[00:15:29] Speaker 00:
And it started out as petitioning activity before the legislature seeking legislation.

[00:15:34] Speaker 00:
It was then extended to cover petitioning activity in front of a court.

[00:15:38] Speaker 00:
And then it was extended again to cover petitioning activity involving communications about a claim that could be brought in court, the kind of marketplace conduct they were talking about.

[00:15:48] Speaker 00:
In all three of those contexts,

[00:15:50] Speaker 00:
The exception that comes with North Pennington immunity turns on bad faith.

[00:15:55] Speaker 00:
There's no difference between a complaint or court proceedings as opposed to what counsel called marketplace communications.

[00:16:02] Speaker 00:
They all have the same carve out for bad faith communications or bad faith assertions, which is exactly what the Idaho statute goes to.

[00:16:11] Speaker 04:
Mr. Fray, what's your response on the jurisdictional issue that the panel discussed with opposing counsel?

[00:16:20] Speaker 00:
So as the court knows, we moved to dismiss this appeal entirely because we believe it's premature.

[00:16:26] Speaker 00:
It's an interlocutory appeal.

[00:16:28] Speaker 00:
And I think counsel focused on the collateral order doctrine first.

[00:16:32] Speaker 00:
And there's several problems with that.

[00:16:34] Speaker 00:
First of all, the collateral order doctrine requires that a determination by the district court be totally separate from the merits.

[00:16:42] Speaker 00:
But at the same time, counsel suggested in Longhorn's briefs that this court should take pendant jurisdiction over the entire dispute

[00:16:50] Speaker 00:
because the bond determination was inextricably intertwined with the merits of the dispute.

[00:16:56] Speaker 00:
So it's very hard to see how under those conditions the bond order that they're complaining about could be totally separate and apart from the merits of the case.

[00:17:06] Speaker 00:
In addition, I think the court discussed a little bit how there could be effectively unreviewable consequences later in the Cohen decision and the Supreme Court's follow on Swift decision explains to us that the

[00:17:20] Speaker 00:
instance where a court grants a bond, as has happened here, is not the kind of a thing that's effectively unreviewable.

[00:17:28] Speaker 00:
What the court was concerned about in Cohen was if the bond is denied, and then the court case goes all the way through, and the party who is eventually entitled to recover is left holding the bag because there's no money there to collect.

[00:17:40] Speaker 00:
But if the bond is granted, there's no irreparable harm to the bond.

[00:17:43] Speaker 00:
If the bond wasn't needed, it can just be refunded.

[00:17:46] Speaker 00:
So I'd submit the collateral redactor does not apply here.

[00:17:51] Speaker 05:
If we don't agree with you, what about preemption?

[00:17:54] Speaker 00:
About preemption.

[00:17:55] Speaker 00:
So at the start, I want to just point out that Longhorn's brief and the opening brief seem to argue that facial preemption should apply as a whole to the entire Idaho statute.

[00:18:08] Speaker 00:
I think they've walked that back in their reply brief.

[00:18:11] Speaker 00:
They said they're just focusing on, as applied to complaints now,

[00:18:15] Speaker 00:
And I think they're also taking the position that the kind of marketplace assertions that Judge Stoll was asking me about would be okay to redress those under the statute.

[00:18:25] Speaker 00:
So there's no way that there could be no...

[00:18:28] Speaker 00:
no possible set of facts for the statute would be constitutional under that view.

[00:18:32] Speaker 00:
So I don't think we're talking about, I don't think full preemption is even on the table anymore.

[00:18:37] Speaker 00:
As to complaints specifically, the statute is not preempted for the reasons that I mentioned having to do with the North Pennington Doctrine.

[00:18:47] Speaker 00:
fits right into the exception for bad faith.

[00:18:49] Speaker 00:
And the statute also does not conflict with any of the three objectives of federal patent law, which the Supreme Court uses to talk about these preemption issues.

[00:18:58] Speaker 00:
It doesn't remove any incentives for any legitimate petitioning activity or monetization of patents.

[00:19:06] Speaker 00:
It doesn't have any effect on disclosure.

[00:19:08] Speaker 00:
And if anything, it improves policing in the public domain by preventing assertions based on

[00:19:16] Speaker 00:
claims that where there is no actual good faith basis to try to exclude somebody.

[00:19:22] Speaker 05:
What about the chilling effect?

[00:19:24] Speaker 05:
Four times estimated litigation costs.

[00:19:29] Speaker 00:
So that was a choice that the Idaho legislature made in crafting its statutes and allowing for damages up to that amount.

[00:19:38] Speaker 00:
I don't see that there's any legitimate basis to believe that that remedy is going to chill legitimate good faith patent assertion because it is limited to bad faith patent assertion.

[00:19:51] Speaker 00:
That includes both subjective and objective bad faith.

[00:19:58] Speaker 00:
So it seems a very large stretch to me to say that a party is going to be so worried about being held liable for engaging in

[00:20:08] Speaker 00:
objective and subjectively bad faith patent assertion that they will totally forego any kind of assertion.

[00:20:14] Speaker 00:
A party knows if they are objectively bringing a patent claim in bad faith.

[00:20:18] Speaker 00:
That's not a mystery.

[00:20:20] Speaker 00:
And it's also a high bar to prove.

[00:20:22] Speaker 00:
So it's difficult to prove these kind of cases.

[00:20:25] Speaker 00:
There has to be real bad faith proven by clearing convincing evidence.

[00:20:29] Speaker 03:
What about the argument that the bond is just based on allegations that complain as opposed to real evidence?

[00:20:37] Speaker 00:
The district court received evidence from both parties, received briefing from both parties on that evidence, heard oral argument where the parties walked through that evidence, and the court made its decision on the bond based on that evidence.

[00:20:52] Speaker 00:
So I don't think there's any basis to think the district court made the determination based solely on allegations in the complaint, based on that history.

[00:21:02] Speaker 05:
These are expired patents.

[00:21:05] Speaker 00:
That's correct, yes.

[00:21:10] Speaker 05:
Anything further?

[00:21:13] Speaker 00:
One other thing I'd just like to point out, if the court will indulge me, is that most of the complaint that I've heard about today has been focused on the bond.

[00:21:22] Speaker 00:
And the potential stay of the district court action is some kind of impediment to actually pursuing a claim.

[00:21:29] Speaker 00:
To the extent the court has any problem with the bond itself,

[00:21:33] Speaker 00:
That's not a problem with the Idaho statute, which calls for the bond but doesn't include in its terms any consequence for nonpayment of the bond.

[00:21:41] Speaker 00:
The stay that the district court added was a discretionary choice by the district court as to what to do with that bond.

[00:21:47] Speaker 00:
So if the court is concerned about the stay in particular, that is not a problem with the statute and not a reason to impose any kind of preemption.

[00:22:00] Speaker 05:
Thank you.

[00:22:01] Speaker 05:
Let's hear from the state of Idaho.

[00:22:10] Speaker 05:
Mr. Zarian.

[00:22:11] Speaker 02:
Thank you, Your Honor.

[00:22:13] Speaker 02:
Please the court.

[00:22:14] Speaker 02:
We understand that there are significant jurisdictional questions in this case, but as the state of Idaho, our interest is in defending the constitutionality of the statute.

[00:22:21] Speaker 02:
So I'd like to only talk about the facial preemption argument, if that's OK.

[00:22:26] Speaker 02:
And I think on this point, we're very much singing from the same hymnal as Micron in that we understand only that according to

[00:22:35] Speaker 02:
Appellants, most of the statute is constitutional.

[00:22:38] Speaker 02:
I think there's no dispute about that under this court's precedent about written demand letters and cease and desist letters.

[00:22:43] Speaker 02:
But what's at issue here is complaints and whether complaints can form the basis for civil liability under state law.

[00:22:49] Speaker 02:
And it's well-established under Supreme Court precedent, starting with Noor and Pennington, and then California Motor Transports, and professional real estate investors.

[00:22:58] Speaker 02:
There's a whole line of cases that Globetrotter walks through that filings in court can be the basis for civil liability.

[00:23:05] Speaker 02:
And really, the understanding of this is that

[00:23:07] Speaker 02:
If you don't, if you have an objective, a sham petition is what they call it.

[00:23:11] Speaker 02:
If you have something that's objectively and subjectively unreasonable, at that point it's basically an abusive business tactic and you're not legitimately using the courts.

[00:23:19] Speaker 02:
And so states, and so that there can be liability under the Antitrust Act or the BE and K case talks about the National Labor Relations Act.

[00:23:26] Speaker 02:
You can't impose liability on this kind of conduct.

[00:23:28] Speaker 02:
And so Globetrotter takes this line of cases and says, well, under the First Amendment and under preemption, it talks about all the preemption doctrine that had gone on in the courts, in the federal circuit, and says this is going to be the standard for preemption, and the First Amendment is objectively and subjectively unreasonable.

[00:23:48] Speaker 02:
And it doesn't mention marketplace activity in Globetrotter.

[00:23:52] Speaker 02:
That just says this is the standard for state law claims.

[00:23:54] Speaker 02:
There are threads of talking about the marketplace in some of the earlier cases.

[00:23:59] Speaker 02:
There was quite a few cases between 1998 and 2002 when Globetrotters decided.

[00:24:03] Speaker 02:
It's the Hunter Douglas case and Dow and Zenith.

[00:24:06] Speaker 03:
But if you read Hunter Douglas, it talks about the facts of Globetrotter based on more of what one would think of as a marketplace situation.

[00:24:17] Speaker 02:
That's correct.

[00:24:17] Speaker 02:
But Globetrotter actually had to extend from petition to pre-petitioning activity.

[00:24:21] Speaker 02:
So it almost assumed that petitioning activity is more of the heartland of what's protected by the First Amendment and dealt with that.

[00:24:28] Speaker 02:
But it said that we also want to protect pre-petitioning rights.

[00:24:31] Speaker 02:
So it's talking about the same body of case law that would apply to a federal complaint.

[00:24:35] Speaker 02:
And then in the Hunter Douglas case, you see it talks about how there's two different types of state law claims that aren't preempted.

[00:24:44] Speaker 02:
And it talks about claims in the marketplace for bad faith.

[00:24:46] Speaker 02:
But it also talks about the Abbott Labs case and the Nobel Pharma case.

[00:24:50] Speaker 02:
And it talks about proceedings before the PTO that are sham proceedings or fraudulent proceedings.

[00:24:57] Speaker 02:
And this is, I heard my friend on the other side talk about how there's proceedings that are governed by federal law.

[00:25:04] Speaker 02:
And even in Abbott Labs and in Hunter Douglas and in Dow, they're talking about this Abbott Labs case where it says, yeah, sham proceedings, you can impose liability.

[00:25:11] Speaker 02:
And I think what was going on before Globetrotter is that bad faith and sham petitioning, they were talking about different things.

[00:25:18] Speaker 02:
For subjective bad faith is what they meant by bad faith.

[00:25:21] Speaker 02:
And then we talk about sham proceedings.

[00:25:22] Speaker 02:
It took a while for it to harmonize, but you don't see any of these statements about

[00:25:26] Speaker 02:
the marketplace, needing to be in the marketplace after globetrotter.

[00:25:32] Speaker 02:
And by the time we get to the energy heating case, the court says state tort claims based on enforcing a patent, including for tortitious interference, are preempted by the federal patent laws unless the claim can show that the patent holder acted in bad faith.

[00:25:45] Speaker 02:
So by that time, it's understanding it's just about enforcing a patent that can be in court and out of court.

[00:25:50] Speaker 02:
And it makes sense that that's how this would work.

[00:25:54] Speaker 02:
It's hard to see why the Patent Act says states can't impose liability for bad faith.

[00:25:59] Speaker 02:
You have a patent right to assert a patent.

[00:26:01] Speaker 02:
And if you're threatened to assert it, then states can impose liability there.

[00:26:04] Speaker 02:
But if you actually assert it, states can't impose liability anymore.

[00:26:07] Speaker 02:
I can't imagine why the Patent Act would want to encourage bad faith assertions, sham proceedings, objectively and subjectively baseless claims in court.

[00:26:17] Speaker 02:
I don't see how that would work.

[00:26:18] Speaker 02:
further the purposes of the Patent Act.

[00:26:23] Speaker 02:
There was this talk about chill, and maybe it's going to chill people from inventing in the first place, one of the purposes that the Supreme Court talks about when dealing with preemptions.

[00:26:31] Speaker 02:
But I think that's pretty, like Micron said, I think that's pretty far-fetched.

[00:26:36] Speaker 02:
The chill cases that are cited are usually about laws that get at

[00:26:41] Speaker 02:
good protected conduct and unprotected conduct.

[00:26:43] Speaker 02:
So the 10th Circuit case they relied on had a bond that you had to post if you were a fundraising consultant.

[00:26:50] Speaker 02:
All the fundraising consultants had to post that bond, even the ones who were acting in good faith because they were trying to get at fraudulent conduct.

[00:26:57] Speaker 02:
And so that's a chill on good faith activity.

[00:26:58] Speaker 02:
But as Judge Stoll said earlier, this only gets at the bad activity, the unprotected activity, baseless litigation.

[00:27:06] Speaker 02:
I suppose there's a remote risk that a court might get the case wrong and something will be misclassified.

[00:27:12] Speaker 02:
But my two responses to that would be that one, that risk already exists under Globetrotter.

[00:27:16] Speaker 02:
It could happen in a state tortures interference claim.

[00:27:19] Speaker 02:
And two, that it doesn't seem like it's particularly heightened in these statutes.

[00:27:23] Speaker 02:
These statutes were all passed across the country in 30 different states 10 years ago.

[00:27:27] Speaker 02:
And this is the first time it's been to the Supreme Court.

[00:27:29] Speaker 02:
So I don't think there's a real chill that this is going to revolutionize patent law for these claims to still exist.

[00:27:35] Speaker 02:
I say I'm out of time, and we'd ask that the court affirm.

[00:27:39] Speaker 05:
Thank you, counsel.

[00:27:40] Speaker 05:
Mr. Breedlove.

[00:27:43] Speaker 01:
Thank you, Your Honor.

[00:27:44] Speaker 01:
An objective of Congress is the uniformity of patent laws.

[00:27:48] Speaker 01:
This distinction between assertions made in a federal complaint versus marketplace activity is not something that we made up.

[00:27:57] Speaker 01:
If this is allowed, then every state could adopt a new attorney's fee scheme for their state for patent litigation.

[00:28:05] Speaker 01:
Idaho has a scheme where you just allege bad faith assertion and then you can have a counterclaim going after

[00:28:15] Speaker 01:
quadruple the estimated future attorney's fees of the accused in French.

[00:28:22] Speaker 01:
This distinction is raised repeatedly in this court's case law talking about, in Dow, for example, distinguishing Abbott, the abuse of process claimant issue was based entirely upon bad faith misconduct before the PTO.

[00:28:39] Speaker 01:
However, the tort claimant issue here is premised upon bad faith misconduct

[00:28:42] Speaker 01:
in the marketplace, we see the tort in this case as based essentially on bad faith communications that interfere with contractual relations.

[00:28:51] Speaker 01:
It said at page 1478,

[00:28:53] Speaker 01:
The tort of intentional interference with contractual relations is a remedy of money damages for improper behavior by competitors in the marketplace.

[00:29:02] Speaker 01:
The tort at issue covers all types of commercial actors and does not single out patent holders for either increased deference or additional scrutiny.

[00:29:11] Speaker 01:
This statute does single out patent holders.

[00:29:14] Speaker 01:
It targets complaints and it attempts to regulate federal patent litigation.

[00:29:20] Speaker 01:
It attempts to rate that because these statements are governed by federal patent law.

[00:29:24] Speaker 01:
This is not a distinction that we made up.

[00:29:27] Speaker 01:
Said council called it marketplace misconduct.

[00:29:30] Speaker 01:
These previous cases.

[00:29:32] Speaker 01:
That's what this court called it was marketplace misconduct.

[00:29:35] Speaker 01:
Abbott Labs distinguished marketplace misconduct.

[00:29:40] Speaker 01:
Semiconductor Energy Lab versus Samsung 204 F3rd 1368 made the distinction.

[00:29:46] Speaker 01:
And I wanted to mention also the

[00:29:48] Speaker 01:
uh... in re Netflix antitrust litigation in northern district of california in two thousand seven claims that are predicated on no more than bad faith misconduct before the PTO are preempted by federal patent laws conduct in front of the PTO is regulated by federal patent laws in the same way conduct in a federal pleading that's excluded from state court

[00:30:11] Speaker 01:
is governed by federal law.

[00:30:16] Speaker 01:
And so that's an important distinction.

[00:30:19] Speaker 01:
What should be required is marketplace misconduct that results in marketplace damages.

[00:30:27] Speaker 01:
If a person's damages are only to the defense of

[00:30:30] Speaker 01:
the federal patent litigation, that's something that federal law deals with.

[00:30:35] Speaker 01:
And Idaho should not be heard to be trying to pile regulation on top of the federal scheme that already exists.

[00:30:42] Speaker 01:
And no state should, because we really could have 50 states regulating patent litigation in different ways.

[00:30:50] Speaker 05:
Thank you to both counsel.

[00:30:52] Speaker 05:
A case is submitted.

[00:30:53] Speaker 05:
Thank you.