Antitrust Law Daily Wrap Up, RICO—NDIll: Patent Licensing Campaign Was Protected by Noerr–Pennington Doctrine, (Feb 5, 2013)

By Jody Coultas, J.D.

Because a patent licensing campaign by Innovatio IP Ventures, LLP was protected petitioning activity under the First Amendment and the Noerr-Pennington doctrine, the federal district court in Chicago dismissed RICO, unfair competition, civil conspiracy, intentional interference with prospective economic advantage, and unclean hands claims against Innovatio (In re Innovatio IP Ventures, LLC Patent Litigation, February 4, 2013, Holderman, J.).

After acquiring patents covering wireless Internet technology, Innovatio began a campaign to enforce the patents by seeking to license entities that Innovatio asserted to have infringed its patents. Innovatio alleged that hotels, coffee shops, restaurants, supermarkets, and other commercial users (Wireless Network Users) of wireless internet technology that made wireless Internet available to their customers or using it to manage internal processes infringed patents owned by Innovatio.

Several manufacturers of the devices used by the Wireless Network Users to implement their wireless Internet networks brought declaratory judgment actions against Innovatio, seeking a declaration that the manufacturers’ products, and the networks or systems of which those products are a part, did not infringe Innovatio’s patents. The manufacturers also filed claims that Innovatio fraudulently enforced its patents against the manufacturers’ customers.

Petitioning Activity. The Noerr-Pennington doctrine could protect petitioning activity from the manufacturers’ federal and state law claims, according to the court. Innovatio argued that its enforcement activity is protected by the Noerr-Pennington doctrine from RICO, unfair competition, civil conspiracy, intentional interference with prospective economic advantage, and unclean hands claims filed by the manufacturers. Although the doctrine originated in antitrust law, it has been extended beyond antitrust and is understood as an application of the First Amendment’s speech and petitioning clauses.

All pre-suit communications fell under the Noerr-Pennington doctrine’s protections, according to the court. Federal patent law preempts state laws that impose tort liability for a patent holder’s good faith conduct in communications asserting infringement of its patent and warning about potential litigation. In addition, the same First Amendment policy reasons that justify the extension of Noerr immunity to pre-litigation conduct in the context of federal antitrust law apply equally in the context of state-law tort claims.

Sham exception. The manufacturers’ allegations did not establish that Innovatio’s licensing campaign alleging infringement was a sham, according to the court. The manufacturers alleged that Innovatio’s licensing campaign was a sham because certain statements in its communications to the Wireless Network Users were fraudulent misrepresentations. Pre-suit communications are a sham if they are sent in “bad faith.” Specifically the statements must be shown to be objectively false made with knowledge of their falsity. None of the alleged misstatements was sufficient to make the entire licensing campaign a sham.

The cases are Nos. 11 C 9308, 11 C 9309, and 12 C 427.

Attorneys: Brian Erik Haan (Niro, Scavone, Haller & Niro) for Innovatio IP Ventures, LLC. Amanda Jean Hollis (Kirkland & Ellis LLP) for Cisco Systems, Inc.

Companies: Innovatio IP Ventures, LLC; Cisco Systems, Inc.

Cases: RICO StateUnfairTradePractices IllinoisNews