IP Law Daily, PATENT—D. Idaho: Suit alleging bad-faith patent assertion under state law remanded to state court, (Aug 14, 2024)

By Kevin M. Finson

Claims arising under a state statute creating a cause of action for bad-faith assertion of patent infringement were remanded to state court because the action did not arise under federal statutes and was not inconsistent with federal patent law.

A federal court lacked jurisdiction over a case arising from claims of bad-faith assertions of patent infringement under Idaho state law, the U.S. District Court in Pocatello has held. While Micron Technology’s claims of bad faith assertion of patent infringement necessarily implicated an issue of federal patent law; namely, whether patent holder Netlist’s infringement claims were baseless, this issue was not substantial to the federal system as a whole and did not create a risk of inconsistent judgments between state and federal courts. Moreover, the state statute was consistent with federal law and did not evade or frustrate it (Micron Technology, Inc. v. Netlist, Inc., No. 1:24-cv-00001-DCN and No. 1:24-cv-00081-DCN. (D. Idaho Aug. 13, 2024)).

Micron Technology, Inc. and Micron Semiconductor Products, Inc. (collectively, Micron) were manufacturers of semiconductors. Over several years and three separate suits, Netlist, Inc. (Netlist) asserted that Micron infringed U.S. Patents Nos. 8,874,831 (the ’831 patent), 8,301,833 (the ’833 patent), 11,232,054 (the ’054 patent”) and 11,016,918 (the ’918 patent), all of which were eventually invalidated by the Patent Trial and Appeal Board (PTAB).

Micron then brought two related suits against Netlist in Idaho state court for violation of the Idaho Bad Faith Assertions of Patent Infringement Act, alleging that Netlist knew at the time of filing at least some of its suits that the patents were invalid, for example, because the ’833 patent was in all pertinent respects very similar to the ’831 patent, and when Netlist filed suit for infringement of the ’833 patent the ’831 patent had already been invalidated based on the elements which those patents shared. Netlist removed the cases to federal court. Micron moved for remand. Netlist moved to dismiss or transfer to the venue of the underlying patent litigation.

Federal question. Netlist argued that removal was proper because the cause of action, while not created by federal patent law, “arose” from it. The court applied the Gunn factors and found that the Idaho statute necessarily raised a patent law issue which was actually in dispute; namely, whether Netlist’s assertion of the disputed patents was objectively baseless. However, the court found that the patent law issue was not substantial to the federal system as a whole and did not create a risk of inconsistent judgments between state and federal courts. Additionally, allowing removal would disrupt the federal-state balance by interfering with state’s legitimate interest in protecting their citizens from unsavory business practices. There was no jurisdiction under the federal question statute.

Validity of patent law. Turning to the possibility of jurisdiction under 28 U.S.C. § 1442(a)(2), which creates jurisdiction for cases which affect the validity of federal law, the court found that the Idaho statute was consistent with federal patent law, being directed to the same essential purposes and imposed the same or higher standards. Because the Idaho statute did not evade or frustrate the federal statute, it did not affect the validity of federal law.

Finding that it lacked jurisdiction the court granted Micron’s motion to remand in both cases, which rendered Netlist’s motions to dismiss or transfer moot.

The Case is No. 1:24-cv-00001-DCN and No. 1:24-cv-00081-DCN.

Judge: Nye, D.

Attorneys: Christopher C. McCurdy (Holland & Hart LLP) for Micron Technology, Inc. and Micron Semiconductor Products, Inc. Andrew Henderson (Irell & Manella LLP) for Netlist, Inc.

Companies: Micron Technology, Inc.; Micron Semiconductor Products, Inc.; Netlist, Inc.

Cases: Patent IdahoNews