This summer saw the escalation of a long-running fight between Longhorn IP LLC and Micron, with the latter’s July suit accusing the monetization firm of violating a largely untested Idaho law barring bad-faith patent assertion—seeking both damages from Longhorn IP and asking the court to impose a $15M bond against it. Now, as the defendant pushes forward on a motion to dismiss arguing that the law is unconstitutional, the state of Idaho has intervened in the statute’s defense, arguing that the law is narrowly tailored enough to avoid preemption by federal patent law.

As detailed in RPX’s recent coverage, the Idaho statute at issue—Idaho Code § 48-1701, et seq.—provides a cause of action for companies that receive patent demands brought in “subjective bad faith” or where an asserter “would know or reasonably should know that such assertion is meritless”. The law allows an accused infringer to establish such a claim in part by showing a pattern of such meritless claims. Micron’s June 2022 complaint invoking this law (1:22-cv-00273) argued that Longhorn IP had displayed exactly such a pattern of behavior in its litigation against the company—including an adverse ruling on standing against Longhorn-controlled plaintiff Lone Star Silicon Innovations LLC; a series of losses before the PTAB; a “less-than-nuisance-value” settlement offer (a basis for a “bad faith” claim that the state law explicitly contemplates); and a series of subsequent negotiations with a second plaintiff, Katana Silicon Technologies LLC, in which the NPE pushed forward with “exceptionally weak” claims despite receiving Micron’s evidence on noninfringement and invalidity. The $15M amount requested by Micron includes an estimated $3.75M costs and fees stemming from the Katana litigation, 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 IP moved to dismiss the claim in July, raising a variety of issues with Micron’s complaint—including timeliness, Micron’s characterization of the party’s negotiations and substantive positions,  and its theory extending liability to Longhorn IP, not just its controlled plaintiffs. Additionally, and of particular relevance here, are Longhorn IP’s challenges against the Idaho law itself, alleging that the law is overbroad and, most crucially, that it is unconstitutional.

On that last point, Longhorn IP argues that the statute raises preemption issues: by targeting patent litigation filed 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.

Micron’s opposition makes a variety of arguments pushing back as to constitutionality, noting broadly that none of the more than similar 30 state statutes in effect have been struck down as unconstitutional—“although patent owners have tried mightily, attempting a range of arguments (e.g., First Amendment, Takings Clause, and Dormant Commerce Clause)”. Such laws have survived, Micron argues, in part because the Federal Circuit has “determined that federal patent law neither fully occupies the field nor expressly preempts state patent law”, allowing only challenges alleging that the law in question conflicts with federal patent law, while the applicable presumption is against preemption. Moreover, since federal patent law protects only good-faith patent assertion, the law would only be preempted if it conflicts with the federal definition of bad faith, which has both a subjective and objective component. The Idaho statute, Micron asserts, seeks to avoid conflicting with such good-faith claims in both its stated intent and substance. Additionally, the company argues, the law provides a non-exhaustive list of factors that courts “may” apply that contemplate both “subjective bad faith” and objective bad faith (through its language referring to reasonableness). Further, Micron rejects Longhorn IP’s argument that these concepts must be explicit as getting the applicable preemption law wrong: courts addressing similar arguments, interpreting similarly structured state statutes, ruled that they do not have to explicitly set forth the requirements of subjective and objective good faith.

On September 6, Idaho Attorney General Brett T. DeLange moved to intervene as to the law’s constitutionality on behalf of the state, a request that District Judge David C. Nye granted as unopposed on September 27. Idaho filed its resulting memorandum in opposition to Longhorn’s motion to dismiss, beginning in part by stating that it “expressly joins, adopts, and supports” the portion of Micron’s opposition cited above as to constitutionality. Rather than “duplicate Micron’s arguments”, the state explains, its brief is designed to make two overarching points.

First, the state asserts, it wants to “emphasize the presumption against preemption that exists when a state’s historic police powers are at issue”. Here, the state continues, “[i]t is incontrovertible that Idaho’s Act—designed to prohibit the bad faith assertion of patent infringement in the marketplace—is well within the police powers properly exercised by the State and the type of unfair business practice that is traditionally regulated by States” as contemplated by the Supreme Court. No preemption occurs under the principles applicable in this context, the brief states. For one, as Micron noted, there is “no clear and manifest congressional intent to preempt the State from prohibiting bad faith assertions of patent infringement or to occupy the field”. In addition, there is no conflict preemption—the only type at issue—because, “[a]s Micron has demonstrated, prohibiting the bad faith assertion of patent infringement claims does not run afoul of federal law’s allowance of the good faith assertion of such claims”.

Second, the state seeks to underscore the law’s narrowly tailored nature—more specifically, to “highlight the specific steps the Legislature took to focus precisely on the abusive patent practices that States are permitted to regulate and nothing more”. In particular, the state emphasizes that the law includes explicit language expressing an intent to avoid preemption: the statute directly mentions that the Idaho legislature explicitly sought to avoid passing any statute that conflicts with federal patent law, and that the statute’s goals include “not interfering with legitimate patent enforcement actions”. The state argues that this “clear intent”, coupled with the principles that courts should construe statutes with the assumption that states were aware of the applicable laws and in favor of constitutionality, undercuts Longhorn’s other arguments. For instance, as to Longhorn’s assertion that the law is unconstitutional for failing to require the federal clear and convincing evidence standard for bad faith, the state argues that “it defies credibility to conclude that it intended to and enacted the Idaho Act with a standard of proof that would conflict with federal law”. Rather, it is reasonable “to conclude that the Legislature did not intend that the Idaho Act be governed by an evidentiary standard different than that required by federal law” (emphasis added). The same principle, the state asserts, undercuts Longhorn’s argument that the statute must explicitly require proof of both subjective and objective good faith.

Replies to the state’s brief are due October 12.

Finally, Longhorn IP suffered a notable setback prior to Idaho’s involvement when the court denied its motion to delay the bond proceedings. In that ruling, Judge Nye largely agreed with arguments raised in opposition by Micron, finding that the uncertainty over whether Micron would suffer prejudice, the unlikeliness of hardship stemming from the additional briefing or the prospect of paying the bond, and court efficiency concerns all weighted against a stay—also noting that staying the bond proceedings would cut against the statute’s purpose of encouraging settlements.

For more on that decision and the preceding litigation, see “Longhorn IP Fights Possible $15M Bond Under Idaho Patent Assertion Law as Court Denies Stay” (August 2022).