By Dennis Crouch
Activision TV v. Pinnacle Bancorp (D.Neb 2013)
In a second opinion in as many weeks, Federal Judge Bataillon (D.Neb.) has again ruled against the Nebraska State Attorney General and the state's campaign against patent enforcement activities. [Link to Decision] Activision holds several patents that essentially cover the operation of a digital menu board with photographs. See U.S. Patent Nos. 8,330,613 and 7,369,058. And the company has sued a host of defendants and has sent out cease-and-desist letters to an even larger group, including some in Nebraska.
In response to those enforcement activities, the Nebraska Attorney General sent a letter to Activision's litigation counsel ordering the firm to "immediately cease and desist the initiation of any and all new patent infringement enforcement efforts within the State of Nebraska pending the outcome of [the Attorney General] office's investigation."
In the first opinion, Judge Bataillon held that the firm could continue to represent Activision in Federal Court patent litigation by enjoining enforcement of that aspect of the Attorney General's order. Following that order, Activision pressed on – asking the court to also enjoin the entire Attorney General order so that the firm could continue to pursue new out-of-court enforcement activities – such as contacting infringers and demanding that they pay for licenses. The Court has now sided with the patentee and against the Attorney General – finding that the restriction on enforcement activities likely operate as a prior-restraint on speech in violation of Activision (and its Attorneys) First Amendment rights of Free Speech and their Due Process rights.
The court finds the cease and desist order in this case is akin to a prior restraint. . . . The court finds Activision is likely to win on the merits as there is no claim or evidence to date of bad faith. Further, as there is no claim of bad faith, federal law governing these patents, including sending initial letters to businesses believed to violate a patent owned by Activision, is preempted by the federal government. Also, Activision has a First Amendment right to associate with counsel of its choosing without interference from the state of Nebraska. In addition, the cease and desist order operates in this case as a prior restraint on Activision's speech and association rights. For these reasons, the court finds Activision is likely to win on the merits. . . .
The court is deeply concerned about the ability of the Attorney General to issue cease and desist orders, prior to the conclusion of the investigation, prior to any negative findings, prior to any hearings, and prior to permitting submission of documents and evidence by the Farney Daniels law firm. On the contrary, the Attorney General sent a request for information to Farney Daniels the same day it sent the cease and desist order, and gave Farney Daniels until August 18, 2013, to respond. Farney Daniels responded, and no further actions have been taken. The inability of Farney Daniels to submit such letters to businesses in Nebraska clearly infringes on the First Amendment rights of Activision to be represented by the counsel of their choice.
This opinion comes as a result of Activision's motion for preliminary injunction (that has now been granted). Thus, the court found that the patentee was likely to win its case on the merits and that the Attorney General order was causing immediate irreparable harm. Under the laws of Appellate Procedure, the Attorney General has the right to immediately appeal this decision to the Court of Appeals to the Federal Circuit (where he would lose).
An important aspect of this decision is that it is not limited to patent law issues. Rather, the same First Amendment and Due Process claims here would apply any time the Attorney General issues a cease-and-desist order prior to conducting any investigation.
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To be clear, the court did not shut-down the Attorney General's investigation but instead found that it is improper for the Attorney General to compel silence without even conducting an investigation. "The court notes, there is no doubt the Attorney General generally has the power to investigate activity that it believes violates state law. . . . If … at some point during the investigation evidence supports a claim of bad faith, the Attorney General is free to revisit this preliminary injunction with the court."