Federal Circuit Vacates Preliminary Injunction, Finding Patent Infringement Claims Were Not Objectively Unreasonable

In Lite-Netics, LLC v. Nu Tsai Capital LLC, No. 2023-1146 (Fed. Cir. Feb. 17, 2023), the Federal Circuit vacated a District of Nebraska decision granting Nu Tsai Capital’s (d/b/a Holiday Bright Lights) (“HBL”) motion for a preliminary injunction and remanded.

Lite-Netics sued HBL for infringement of U.S. Patent Nos. 7,549,779 and 8,128,264. After filing suit against HBL, Lite-Netics sent notices to its customers about allegedly infringing competitors in the market and explicitly named HBL as one such competitor. Some of Lite-Netics customers are also HBL customers. HBL filed a motion for a preliminary injunction to prevent Lite-Netics from suggesting that HBL is a patent infringer, that HBL copied Lite-Netic’s lights, or that HBL’s customers might be sued. The district court granted HBL’s motion and issued a preliminary injunction.

On appeal, the Federal Circuit vacated the district’s court’s preliminary injunction. The Court explained that because the injunction restricts speech, HBL had to establish at least a “fair chance” of prevailing on its claim that Lite-Netic’s patent infringement claims are objectively baseless. The Court found that HBL could not make such a showing. The Court first noted that an incorrect allegation of patent infringement is not necessarily objectively baseless. After analyzing each of Lite-Netic’s infringement claims, the Federal Circuit determined that they were not objectively baseless and found that the district court’s contrary conclusion rested on incorrect legal principles. Thus, the Federal Circuit held that the district court abused its discretion and vacated the preliminary injunction.