The long-running battle between Micron and Longhorn IP LLC has taken a new turn with the semiconductor company’s suit invoking a largely untested Idaho state law barring “bad faith assertion[s] of patent infringement”. That 2014 statute, in part, allows a court to require the patent owner making such an “assertion” to pay a bond that equals the accused infringer’s likely cost of litigation plus related damages for the patent owner’s violation of the statute. Micron has requested $15M for that bond, triggering a fight in the federal District of Idaho—where the case was moved from state court last month—over the underlying facts, timeliness, and the propriety of the law itself. The first ruling on the bond issue did not go in Longhorn IP’s favor: On August 8, the court declined its request to stay the bond proceedings pending the outcome of its related motion to dismiss.

The Idaho statute here at issue, codified in Idaho Code § 48-1701, et seq., allows a court to consider any factor that it finds “relevant” in determining whether a “person” (including a natural person or a corporate entity) has committed a bad-faith assertion, which can include “a demand letter, a complaint or any other communication”. However, the statute provides some examples of such conduct, including when a patent owner makes a claim in “subjective bad faith”, or where one “would know or reasonably should know that such assertion is meritless”. A pattern of such activity may also constitute bad-faith infringement, as a bad-faith assertion may be established where the “person or its subsidiaries or affiliates have previously filed or threatened to file one (1) or more lawsuits alleging patent infringement based on the same or similar claim, the person attempted to enforce the claim of patent infringement in litigation and a court found the claim to be meritless”. Further relevant, per the state, is when the “person offers to license the patent for an amount that is not reasonably based on the value of a license to the patent”.

Micron’s lawsuit, filed in June 2022 in Idaho’s Fourth Judicial District Court, recounted litigation and related negotiations involving several Longhorn IP entities as providing the “backdrop” for its bad-faith assertion claims under this statute—which Micron also paired with a request for injunctive relief. That history, per the complaint, began with an Eastern District of Texas lawsuit that Longhorn IP NPE Lone Star Silicon Innovations LLC filed against Micron in October 2016. The complaint highlighted several substantive setbacks suffered by Lone Star during that litigation—including its transfer to the Northern District of California, where District Judge William Alsup initially dismissed the case for lack of standing, as the patents’ former owner, AMD, had retained certain rights such that it needed to be joined as coplaintiff. Judge Alsup declined to let the parties add AMD, stating that doing so would reward the plaintiff’s “litigation gimmick”. (See here for RPX coverage of a subsequent appellate dustup in which the Federal Circuit reversed and remanded as to whether AMD should have been added.)

Micron also recaps a set of “decisive” victories before the Patent Trial and Appeal Board (PTAB) that led to the invalidation of the asserted claims, either through final written decisions finding the claims unpatentable or through adverse judgments requested by Lone Star. But per Micron, those victories “took more than three years of fighting and cost millions of dollars in fees”—meaning that when it faced the prospect of further appeals, it accepted “a settlement offer that can only be described as immaterial, tiny, and less-than-nuisance-value” in order to “make Longhorn go away” (emphasis in original).

While Micron pleads that it believed that “Longhorn would never again have the audacity to file another meritless suit against Micron”, that purportedly ceased to be the case in March 2022, when another Longhorn entity, Katana Silicon Technologies LLC, sued Micron in the Western District of Texas (in which suit Micron has also raised its Idaho bad-faith assertion arguments through counterclaims). That complaint followed a series of negotiations in which Micron alleges that it provided Longhorn with evidence that its patents were invalid as anticipated by prior art and rebutted the NPE’s infringement arguments. The fact that Longhorn, via Katana, proceeded with litigating such “exceptionally weak” claims despite Micron’s explanations regarding noninfringement, per Micron, meant that those claims were brought in bad faith.

Micron alleges that Longhorn is liable for these acts by Katana under two theories, both detailed in the motion for a bond that it filed in its Idaho suit (which was brought in June in state court and removed to federal court the following month). First, it argues that Katana is an alter ego of Longhorn under Idaho law, which requires that “a unity of interest and ownership to a degree that the separate personalities of the [companies] no longer exist” and that an “inequitable result would follow” if the acts at issue were treated as those of different entities. Such a unity of interest, it argues, “exists between and among” Longhorn and its “portfolio” entities, all of which are controlled by Khaled Fekih-Romdhane according to Texas state records. Micron alleges that Fekih-Romdhane “follows a pattern and practice of strategically using his Longhorn entities to assert different patent portfolios while shielding liability from Longhorn itself”, and that “Fekih-Romdhane and his agents continually blurred the lines between Longhorn, Katana, Lone Star, and himself”. In support, Micron cites demand letters sent by Katana identifying its licensing agreement with Longhorn and an email from Katana’s counsel asking to meet in order to “discuss the Longhorn portfolios” (emphasis in motion). Additionally, Micron alleged that “Fekih-Romdhane participated on behalf of all of Longhorn, Katana, and Lone Star at a meeting at Micron’s Boise offices” in 2018. Shortly after, Fekih-Romdhane allegedly suggested that the company review yet another portfolio being licensed by Longhorn NPE Carthage Silicon Innovations LLC, followed by further “threats” from Longhorn entities Hamilcar Barca IP LLC and Trenchant Blade Technologies LLC. When “NPEs like Longhorn structure themselves to disperse patents across a web of holding companies to avoid liability, such as the liability for bad faith assertions”, Micron argues, an “alleged infringer that prevails and is awarded damages is often faced with a judgment-proof adversary”—an inequitable result, as required by the statute.

Second, Micron argues that the same facts establishing a unity of interest and ownership also establish a principal-agent relationship, which in Idaho requires “control or right of control reserved by the [principal] over the functions and duties of the agent”. Such a relationship, per Micron, separately supports the imposition of liability on Longhorn IP for Katana’s actions.

The $15M amount requested by Micron includes an estimated $3.75M in litigation costs and fees, including $3M for defending against Longhorn’s federal litigation asserting the three Katana patents and $250K per patent for inter partes reviews (IPRs), plus treble damages. Longhorn has raised several counterarguments in its motion to dismiss, including—as noted above—that Micron’s claims are time-barred under the Idaho law’s three-year statute of limitations. While Micron has flagged the Katana lawsuit’s March 2022 filing date as significant, Longhorn argues that the company was aware of its patent assertion claims as early as 2018, meaning that Micron’s claim was allegedly “already stale” by 2021. That said, Longhorn acknowledges that no court appears to have interpreted the relevant provision pertaining to timeliness, which states as follows with respect to when a cause of action arising from such an “assertion” (which can include a demand letter or complaint, as noted above) is defined as having “accrued”:

No private action may be brought under the provisions of this chapter more than three (3) years after the cause of action accrues. A cause of action shall be deemed to have accrued when the party bringing an action under the provisions of this chapter knows, or in the exercise of reasonable care should have known, about the violation of the provisions of this chapter. Each bad faith assertion of patent infringement constitutes a separate violation under this chapter.

Longhorn also argues that there are several substantive issues with the Idaho statute itself. In part, the firm asserts that the law is “exceptionally broad” because its definition of a “person”, carried from another Idaho statute, makes the law cover “any natural person or business in the world”. (The cited statute, Idaho Code § 48-602, defines a “person” as “natural persons, corporations both foreign and domestic, trusts, partnerships both limited and general, incorporated or unincorporated associations, companies, trusts, business entities, and any other legal entity, or any other group associated in fact although not a legal entity or any agent, assignee, heir, employee, representative or servant thereof”). Per Longhorn, the statute also raises preemption issues: by targeting patent litigation in federal court, the company alleges that this “scheme raises preemption issues in light of the United States Constitution’s prohibition on certain laws abridging ‘the right of the people . . . to petition the Government for a redress of grievances’” under the First Amendment. Longhorn further claims that the law is preempted by the Constitution’s Supremacy Clause and the Patent Clause. Other alleged substantive defects include both that the statute wrongly swaps a presumption of good-faith assertion for one presuming bad faith and that it unduly lowers the evidentiary standard for what constitutes “bad faith” from requiring “clear and convincing evidence” to merely “a ‘reasonable likelihood’ showing”.

Additionally, Longhorn asserts that Micron has failed to establish bad faith, in part by attempting to rebut its arguments linking the earlier Lone Star litigation to the Katana campaign—arguing that Micron’s “conclusory” allegations have failed to show sufficient similarities between Lone Star’s former AMD patents and Katana’s former Sharp patents. Also lacking in adequate detail, according to Longhorn, are Micron’s noninfringement arguments as to each of the patents at issue.

In its response to Micron’s bond motion, Longhorn notably shifts from referring to Katana as a Longhorn “affiliate” to calling Katana its “client” and “sister compan[y]”, also raising some of the same points as its motion to dismiss—including with respect to Micron’s alter-ego theory, its arguments on bad faith, and preemption. The response further seeks to rebut other arguments from Micron, in part noting that Judge Alsup’s “litigation gimmick” ruling against Lone Star cited by Micron was reversed by the Federal Circuit (as noted above); arguing that its offer of a settlement after its “disheartening IPR losses” was an expected outcome, rather than evidence of something “sinister”; and asserting that Longhorn had been the last one to rebut the other side’s positions on infringement and validity, allegedly making it “Micron that failed to provide a plausible rebuttal”.

On July 28, Longhorn filed a motion to stay the bond proceedings, as noted, arguing that its “pending Motion to Dismiss will either dispose of the Bond Motion or shed significant light on it” and that there is no urgency due to the lack of other imminent case proceedings. Micron countered that “[s]uch a delay directly negates the purpose of the bond” and that “the Court can conserve its own resources by considering Longhorn’s motion to dismiss and Micron’s bond motion, which raise similar facts and issues, together”.

District Judge David C. Nye denied Longhorn’s motion to stay on August 8, largely agreeing with Micron’s arguments in his analysis of the three applicable factors. As to the first factor, concerning “potential prejudice to the non-moving party”, Judge Nye acknowledged that Micron could suffer prejudice by having to pay significant litigation costs if Longhorn were not required to post a bond, “based on the idea that Longhorn would be scared off from this case (and the related Katana case) if Longhorn was required to post a significant bond. This may be so”. While Judge Nye found that it was not possible to determine whether Micron would suffer such prejudice until the motion to dismiss was resolved, he concluded that this uncertainty cut against a stay. For the second factor, considering “hardship and inequity to the moving party”, Judge Nye rejected Longhorn’s cited justifications, finding that “[n]either of [its] concerns are significant” and deciding that this factor weighed against a stay. In particular, he disagreed that a stay would avoid unnecessary briefing, given the overlap between the motion for bond and Longhorn’s motion to dismiss. As for Longhorn’s concern that it would be required to post an “unreasonable” $15M bond, Judge Nye pointed out that denying a stay does not mean a bond will be imposed, only that the issue will move forward. With respect to the third factor—“the judicial economy and efficiency of the Court”—Judge Nye also found this counseled in favor of a stay, given the court’s preference for dealing with the motion for bond and motion to dismiss simultaneously.

More broadly, Judge Nye agreed with Micron that “the very purpose of Idaho Code § 48-1701, et seq.”—i.e., to “facilitate the efficient and prompt resolution of patent infringement claims”—weighed against a stay, since the bond provided for in the statute was “[p]resumably . . . intended to play a role in facilitating” such resolutions.

Finally, Judge Nye denied Longhorn’s alternative request for targeted discovery related to “Micron’s allegations and evidence and to respond to” its bond request. The court pointed out that the focus of the statute as applied here was on Longhorn’s conduct, not Micron’s, as a result of which there was “little need to delay” the motion for bond for this reason.

With Longhorn’s motion to stay denied, the remaining motions will be considered under the current schedule, which provides for the motion to dismiss that Longhorn’s reply to Micron’s opposition brief is due on August 15, and for the motion for bond, that Micron’s reply to Longhorn’s response in opposition is due on August 25.

As both parties have noted, it appears that just one case has tested the application of the Idaho statute. In Ice Castles v. Labelle, Judge Nye denied a motion for bond and expressed his reluctance to apply the statute at all, given lingering uncertainty over whether the bond requirement was a substantive state law (enabling a federal court to enforce it through supplemental jurisdiction) or, as it appeared to the court, “that the bond requirement itself is simply a procedural mechanism of enforcing a substantive state law statute” (emphasis in original), thereby possibly depriving the court of jurisdiction. That said, he found that the case fell within one of the statute’s exceptions, under which “[t]he court may waive the bond requirement if it finds the person has available assets equal to the amount of the proposed bond”.

It remains to be seen how the motion to dismiss and the motion for bond will fare given Judge Nye’s prior reluctance—and, for that matter, whether Longhorn will be required to make disclosures about its own financial situation, or that of Katana, if the waiver exception comes into play (an issue not yet raised by either party).

For more on Longhorn IP, including recent activity related to two of the other aforementioned entities under its umbrella (Hamilcar Barca IP and Trenchant Blade Technologies), see “SK hynix Sues Longhorn IP and Two of Its ‘Portfolio’ Entities” (July 2022).