Plaintiff Walter Farmer (“Farmer”) initiated suit in September 2014 asserting infringement of claim 1 of his U.S. Patent No. 7,362,007 (the “’007 Patent”), issued April 22, 2008, and covering uninterruptable power supply technology (“UPS”) products against Alpha Technologies, Inc. (“Alpha”). Alpha moved pursuant to a relatively new Georgia statute, O.C.G.A. §10-1-772 et seq., for an order requiring Farmer to post a $250,000 bond because of Farmer’s alleged bad faith patent assertion. The motion was addressed by Special Master James L. Ewing, IV in a 29-page Recommendation and Opinion that was adopted by Judge Leigh Martin May on December 9, 2015.
O.C.G.A. § 10-1-772 should serve as a road map to all counsel prior to filing a patent infringement action in Georgia. There are two areas where it may have particular impact.
First, non-practicing entities may be less inclined to initiate patent suits in Georgia as they may be subjected to motions and potential bond requirements that can be avoided elsewhere, and this statute makes it at least appear that the state is less receptive to NPE suits.
Second, companies that want to assert patents in Georgia need to be mindful of the interplay between this new statute and the First-to-File rule, which strongly favors the choice of forum of the party first filing a patent infringement suit or suit for declaratory judgment on the patent. See Michael A. Cicero, “First-to-file and Choice-of-Forum Roots Run too Deep for Micron to Curb Most Races to the Courthouse,” Journal of the Patent and Trademark Office Society, August 2008, Vol. 90, No. 8, at 541-614. See also Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347-1348 (Fed. Cir. 2005) (discussing anticipation alone insufficient to overcome First-to-File Rule being favored).
A party seeking to send a demand letter in keeping the statute will usually want to avoid jurisdiction preemption by an infringing party (with a suit for declaratory judgment). The statute, therefore, may require adoption of a strategy that takes the First-to-File rule into account. For example, a conservative approach might involve sending a demand letter showing conformance with the statute and allowing a reasonable time for response. The letter could be carefully drafted to satisfy an exception to the First–to–File Rule as discussed in T2 Products, LLC v. Advantus Corp., 2014 WL 4181932 at 2-4 (W.D.N.C.), and in Nutrition & Fitness, Inc. v. Blue Stuff, Inc., 264 F.Supp.2d 357, 360-362 (W.D.N.C. 2003). Under this approach, the recipient could be given an opportunity to further assist in expanding or clarifying the results of the infringement investigation (as described in the letter) and to respond to a claim chart. Yet, in addition, the letter could inform the recipient that litigation was imminent if contrary facts, opinions, and other information were not provided within a reasonable time. The letter could propose thirty days as a reasonable time to respond, but might wisely indicate receptiveness to a longer period based on a reasonable request. The letter could assert an objective of ensuring a full and fair decision on infringement was made before litigation commenced, but that, absent timely additional information, litigation was imminent and would be promptly commenced upon expiration of recipient’s period to respond. The paragraph could conclude with a statement that the letter was further intended to reasonably notify recipient of the status of the investigation and dispute, so as to avoid any necessity (or reasonableness) of anticipatory litigation on the part of recipient. There are a number of factual specific considerations that must be taken into account in connection with this approach (for example, if a patent holder has a history of making unfulfilled threats, uncertainty remains – weighing against the exception).
The First–to–File Rule has not lost its vitality and allows for a great deal of judicial discretion. Therefore, no matter how good the strategy, there can be no guarantee of success to the patent holder in ultimately moving forward in the desired forum.
In the final analysis, O.C.G.A. § 10-1-772 will likely discourage NPEs from pursuing claims with little merit in Georgia as designed, but the statute also complicates the strategic approach of Praciticing Entities and NPEs with stronger claims who desire to pursue a patent infringement claim in the state. A number of patent holders may elect to pursue claims in other jurisdictions where there is less risk (or cost) in ensuring that jursidiction can be obtained and retained in the forum preferred by the patent holder.
Walter Farmer v. Alpha Technologies, Inc., Dkt. No. 62, Case No. 1:14-cv-2958-LMM (N.D. Ga. Dec. 9, 2015), adopting the Recommendation and Opinion of Special Master James L. Ewing, IV, Dkt. No. 61, filed November 18, 2015.