IP Law Daily, PATENT—D. Idaho: Micron’s bad faith patent assertion suit against licensing companies moves forward, (May 4, 2023)

By Thomas K. Lauletta, J.D.

Claims under the Idaho Bad Faith Assertions of Patent Infringement Act were not preempted, or time barred.

Motions to dismiss Micron’s counterclaims asserted against patent infringement claims brought by two patent licensing companies were denied by an Idaho U.S. District Court. In so ruling, the court held that Micron’s counterclaims adequately alleged that Longhorn IP and Katana Silicon made bad-faith claims that were prohibited by the Idaho Bad Faith Assertions of Patent Infringement Act. The court rejected Longhorn and Katana’s arguments that application of the Idaho Act was preempted by federal patent law and was time barred. The court also required Longhorn and Katana to post an $8 million bond before a case by Katana may proceed (Katana Silicon Technologies LLC v. Micron Technology, Inc., May 3, 2023, Nye, D.).

Micron Technology, Inc. is a major manufacturer of semiconductors headquartered in Boise, Idaho. Longhorn IP is a patent licensing company headquartered in Texas. It does not create products or offer services. Instead, it makes money by asserting a portfolio of patents against companies that create products or services. Through a network of affiliates, Longhorn acquires and enforces patents on, among other things, semiconductors. One of its many affiliates is Katana Silicon Technologies, which owns patents covering semiconductor manufacturing.

Patent claims and counterclaims. On March 4, 2022, Katana sued Micron for patent infringement in the U.S. District Court for the Western District of Texas, alleging that Micron infringed on three Katana patents: No. RE38,806 (the ’806 patent), No. 6,352,879 (the ’879 patent) and No. 6,731,013 (the ’013 patent). The ’806 and ’879 patents expired on December 30, 2018; the ’013 patent expired in July 2021. On the same day that it filed its answer and counterclaim to Katana’s claim, Micron sued Longhorn. Thereafter, all of the parties’ claims and counterclaims were removed to the U.S. District Court in Idaho.

Idaho patent infringement act. The Idaho Bad Faith Assertions of Patent Infringement Act (the “Idaho Act”) is meant to discourage “patent trolls.” It makes it “unlawful for a person to make a bad faith assertion of patent infringement in a demand letter, a complaint, or any other communication” (Idaho Code § 48-1703(1)). Katana and Longhorn argued that the Idaho act did not apply because it was preempted by federal patent law and because Micron’s claims against them was time barred.

Federal preemption. Katana and Longhorn argued that the Idaho Act was preempted by federal patent laws. The court analyzed the preemption issue based on express and implied preemption. The court described the case as pitting the federal government’s exclusive right to issue and regulate patent protections against Idaho’s police power to protect its businesses from harassment.

Express preemption. Congress may expressly preempt a state law by passing targeted federal legislation. It was undisputed that there was no federal statute that expressly preempted the Idaho Act. Further, the court noted that the Federal Circuit has held that the Patent Act does not generally preempt state unfair competition laws, which the Idaho act could be read to be.

Implied preemption. Federal statutes may impliedly preempt state statutes. Implied preemption can be divided into two general categories: field preemption and conflict preemption. The court concluded that field preemption did not apply because there was no indication that Congress had intended to exclusively occupy the field of bad-faith assertion of patent claims. In fact, by choosing not to legislate on the issue of bad-faith patent assertions, Congress created a policy vacuum, leading at least 30 states to adopt statutes outlawing bad-faith patent assertion in order to “protect local businesses from shakedowns at the hands of patent trolls.”

The court also held that the Idaho Act did not conflict with the Patent Act. In so ruling, the court rejected two subcategories of conflict preemption: impossibility preemption and obstacle preemption. According to the court, impossibility preemption did not apply because the Idaho Act did not make it impossible for a person to comply with both state and federal law. Further, obstacle preemption did not apply because the Idaho Act did not stand as an obstacle to accomplishment of the objectives of Congress as expressed in the federal patent laws.

Noerr-Pennington doctrine. Longhorn and Katana argued that, by making it unlawful to assert bad-faith patent infringement in a complaint, the Idaho Act impermissibly interferes with the ability to sue in federal court. While the court noted that that the Noerr-Pennington doctrine does not protect parties that are engaged in “sham litigation,” it declined to rule on this issue because it stated that the doctrine involved intensive factual questions that should be addressed in discovery.

Statute of limitations. Longhorn and Katana argued that Micron’s claims under the Idaho Act have been barred since 2021. The court rejected this argument, holding that by under the Idaho Act Katana and Longhorn’s complaint, filed on March 4, 2022, started a new limitations period that had not expired when the court handed down its decision on May 3, 2023.

Adequacy of Micron’s pleading. Longhorn and Katana argued that Micron failed to plead a plausible claim for bad-faith patent assertion and that the court must therefore dismiss Micron’s complaint in the Longhorn case and counterclaim in the Katana case under Federal Rules 8 and 12(b)(6). The court rejected this argument, holding that Micron sufficiently pleaded facts showing bad faith by Longhorn and Katana. These facts included those showing: (1) Katana sent a demand letter to Micron without first conducting an adequate analysis comparing its patents to Micron’s products; (2) Katana sent a threatening demand letter to Micron which the court concluded was evidence of bad faith; and (3) Longhorn and Katana’s claims were both objectively meritless, and their assertion of patent infringement was deceptive.

Bond. Concluding that there was a reasonable possibility that Longhorn and Katana asserted their infringement claims in bad faith, the court granted Micron’s motion to require them to post a bond.

Court action. The court denied separate motions to dismiss by Longhorn and Katana. It held that Longhorn or Katana must post an $8 million bond before the Katana case can proceed further.

The Case is Nos. 1:22-cv-00282-DCN and 1:22-cv-00273-DCN.

Attorneys: Keely E. Duke (Duke Evett, PLLC) for Katana Silicon Technologies LLC. Amanda Tessar (Perkins Coie LLP) for Micron Technology Inc., Micron Semiconductor Products Inc. and Micron Technology Texas, LLC.

Companies: Katana Silicon Technologies LLC; Micron Technology Inc.; Micron Semiconductor Products Inc.; Micron Technology Texas, LLC

Cases: Patent IdahoNews