Finding that a Nebraska attorney general (AG) order directing counsel for a purported non-practicing entity (NPE) to cease threatening state businesses with patent-infringement litigation likely violates the NPE’s First Amendment and due process rights, a federal court has issued a preliminary injunction forbidding the AG from enforcing the July 2013 cease and desist order. Activision TV, Inc. v. Pinnacle Bancorp, Inc., No. 13-215 (U.S. Dist. Ct., D. Neb., order entered September 30, 2013).
According to the court, patent owner Activision TV has “suffered injury, and continues to suffer injury, as a result of the cease and desist order,” which prohibited its law firm “from initiating new patent infringement enforcement efforts” in the state while the AG investigated whether the firm’s activities violated state consumer-protection law. Deeming the cease and desist order akin to a prior restraint, the court was “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 law firm. Because the company has a constitutional right to associate with counsel of its choosing without interference from the state, the court ruled that the inability of the law firm to submit letters to businesses in Nebraska “clearly infringes on the First Amendment rights of Activision to be represented by counsel of their [sic] choice.” Because federal law preempts state action in “the area of patent law,” the court further determined that “[a]llowing the attorney general to interfere might be harmful to the patent process.” The court also noted that the company had a “due process right to a meaningful process prior to issuance of a cease and desist order.”
The court had previously entered a limited injunction to stop enforcement of the cease and desist order as to this case and future federal court cases after finding that the AG intended that the order apply only to the law firm’s issuance of letters to potential new infringers. Activision TV has filed more than two-dozen patent-infringement lawsuits throughout the United States in 2013. The patents at issue involve remote-control electronic-display systems used in many retail establishments.