Lite-Netics, LLC v. Nu Tsai Capital LLC
| Decision Date | 17 February 2023 |
| Docket Number | 2023-1146 |
| Parties | LITE-NETICS, LLC, Plaintiff-Appellant v. NU TSAI CAPITAL LLC, DBA HOLIDAY BRIGHT LIGHTS, Defendant-Appellee |
| Court | U.S. Court of Appeals — Federal Circuit |
Appeal from the United States District Court for the District of Nebraska in No. 8:22-cv-00314-BCB-CRZ, Judge Brian C Buescher.
VINCENT J. ALLEN, Carstens, Allen, &Gourley, LLP, Plano TX, argued for plaintiff-appellant. Also represented by JORGE MIGUEL HERNANDEZ.
ROBERT GREENSPOON, Dunlap Bennett &Ludwig PLLC, Chicago, IL argued for defendant-appellee. Also represented by WILLIAM W. FLACHSBART; THUAN TRAN, Leesburg, VA.
Before LOURIE, TARANTO, and STARK, Circuit Judges.
Lite-Netics, LLC competes with Nu Tsai Capital, LLC d/b/a Holiday Bright Lights (HBL) in the market for holiday string lights. Lite-Netics brought a patent-infringement action against HBL in the United States District Court for the District of Nebraska. It also sent two notices, one before filing suit and one after, to its customers (in particular, stores that sell the lights), some of which were also HBL customers, informing them of allegedly infringing competitors in the market and stating Lite-Netics's intent to enforce its patent rights. Lite-Netics did not name such competitors in the first notice, but in the second notice, it identified HBL as an allegedly infringing competitor. After the second notice was sent, HBL, in the infringement action, simultaneously filed counterclaims, including for state-law torts, and moved for a temporary restraining order and a preliminary injunction, based on two of the statelaw counterclaims, against certain speech by Lite-Netics about its patents. The district court issued a preliminary injunction that bars Lite-Netics from suggesting that HBL is a patent infringer, that HBL has copied Lite-Netics's lights, or that HBL customers might be sued. Lite-Netics, LLC v. Nu Tsai Capital LLC, 2022 WL 15523245 (D. Neb. Oct. 27, 2022).
Lite-Netics appeals the district court's preliminary injunction against its patent-related speech. We hold that the district court abused its discretion in issuing the preliminary injunction because the applicable speech-protective legal standards are not met. We vacate the preliminary injunction and remand.
Lite-Netics sells string lights for illuminating homes and businesses during the winter holiday season-specifically, string lights held by magnets to a surface such as metal at a roof edge. Lite-Netics is the assignee of U.S. Patent Nos. 7,549,779 and 8,128,264, both of which are entitled "Magnetic Light Fixture" and describe and claim magnetic decorative lights. Lite-Netics, 2022 WL 15523245, at *1. The '779 patent issued in 2009, and the '264 patent issued in 2012 from a continuation in part of the application that became the '779 patent.
The patents describe light-fixture assemblies (to be strung together), each assembly having a magnetic base of the light socket for easy mounting of the assembly to a metal surface. '779 patent, col. 1, lines 5-9; '264 patent, col. 1, lines 14-18. Figures 1 and 9A (the same in both patents) depict an embodiment of the claimed assembly, showing one disk magnet:
Image Omitted
'779 patent, Fig. 1; id., Fig. 9A (light socket base magnet labelled "1"); '264 patent, Fig. 1; id., Fig. 9A.
Independent claim 1 of the '779 patent is representative for that patent. It recites:
'779 patent, col. 4, lines 51-63. Independent claim 1 of the '264 patent is representative for that patent. It recites:
'264 patent, col. 5, lines 19-32 (lettered indexing added).
HBL, which for a time was a customer of Lite-Netics, also sells holiday string lights. See Lite-Netics, 2022 WL 15523245, at *2. HBL sells a magnetic holiday string light that it calls the "Magnetic Cord," one of the two products on which Lite-Netics's infringement allegations focus. It is undisputed for present purposes that the Magnetic Cord is described (and claimed) in HBL's U.S. Patent No. 11,333,309, issued in 2022 based on a 2021 application. HBL's Magnetic Cord uses two half-disk magnets, rather than the single, full-disk magnet shown in Lite-Netics's figures, at the socket base. In distinguishing its claimed invention from prior art, including Lite-Netics's '779 patent, HBL's '309 patent relies on its inclusion of drain holes in its socket base and of at least two magnets protruding below the socket base, with a channel between them to help drain moisture-features that assertedly reduce the risk of corrosion and short circuiting. '309 patent, col. 1, lines 3345, 53-60; see also id. col. 1, lines 16-17; id. col. 4, lines 14. Figure 4 of the '309 patent illustrates its socket base, one half-disk magnet shown as "20," the other half-disk magnet removed:
Image Omitted
HBL sells a second product at issue here, the "Magnetic Clip" (introduced a few years before the Magnetic Cord), which, when mounted on the socket, converts a non-magnetic light string to a magnetic one.
On June 14, 2017, Lite-Netics, through counsel, sent HBL a cease-and-desist letter that referred to "U.S. Utility Patent No[s]. 7,549,779 and 8,128,264." J.A. 525-26. The letter included a picture of the Magnetic Clip and requested that HBL stop "selling these products or any other products that infringe" Lite-Netics's patents. J.A 525-26. No further communication between the two companies occurred for almost five years.
On April 12, 2022, Lite-Netics sent HBL another cease-and-desist letter. This letter, referring to "U.S. Utility Patent Nos. 7,549,779 and 8,128,264," included a picture of the Magnetic Cord and "demand[ed]" that HBL respond, either explaining why it was not infringing Lite-Netics's patents through the sale of the Magnetic Cord and Magnetic Clip or indicating that HBL will stop selling these and any other allegedly infringing products. J.A. 528-29. HBL responded to Lite-Netics on April 19, 2022, asking Lite-Netics to explain how HBL infringed its patents when the Magnetic Cord has no single magnet with a pull strength of at least five pounds or that does not protrude outside the socket base. J.A. 531. On May 27, 2022, Lite-Netics replied to HBL with evidence that it said showed (a) that the combined pull strength of the pair of (half-disk) magnets in the Magnetic Cord exceeds five pounds and (b) that the Magnetic Cord's magnets did not protrude from the perimeter of the base. J.A. 536-37. HBL wrote back on June 21, 2022, reasserting its one-versus-two position and insisting that the non-protrusion requirement of the '264 patent precludes not just protrusion from the perimeter of the base but also protrusion below the base. J.A. 539.
Communications between Lite-Netics and HBL ceased after this response.
On August 31, 2022, Lite-Netics sued HBL in the District of Nebraska for infringement of the '779 and '264 patents by HBL's making, selling, and other actions involving the Magnetic Cord and the Magnetic Clip. Lite-Netics asserted direct infringement, induced infringement, and contributory infringement under 35 U.S.C. § 271(a), (b), and (c). And it alleged that the infringement was willful.
Both before and after filing suit against HBL, Lite-Netics communicated with its customers, some of which were also HBL customers, about allegedly infringing competitors in the market. Before filing suit, in May 2022, Lite-Netics notified its customers "of recent attempts by other companies to make and sell similar products" to those "protected by U.S. [P]atent Nos. 7,549,779 and 8,128,264" and of its intent to explore "all legal rights and remedies to stop" these companies (May Notice). J.A. 533; Lite-Netics, 2022 WL 15523245, at *5. Lite-Netics did not accuse any particular competitor of infringement in the May Notice. J.A. 533; Lite-Netics, 2022 WL 15523245, at *5. In September 2022, however, after filing suit, Lite-Netics sent another letter to its customers (September Notice). J.A. 54243; Lite-Netics, 2022 WL 15523245, at *6. The September Notice stated that Lite-Netics's magnetic string lights were protected by the '779 and '264 patents; that other companies were attempting to "copy" Lite-Netics's patented products; that Lite-Netics had filed a "patent infringement lawsuit against [HBL]" to stop it from "making and selling infringing products"; and that Lite-Netics was "also considering...
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