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Lessons from Mee Industries v. Dow Chemical
Mee sued Dow for malicious prosecution after a failed attempt by Dow to crush Mee as an annoying “cockroach,” as counsel for Mee pointed out during closing arguments in their successful defense in a patent infringement suit. According to Judge Presnell’s Order, the “Mee-as-cockroach” reference came from one of Dow’s internal emails. You would think that corporate America would learn from Microsoft’s mistakes in the already legendary antitrust litigation that candid emails of this kind are gold for a defendant trying to build a theme of David versus Goliath. One lesson that will be repeated again and again, unfortunately, is that email and text messages should be treated as formal, written correspondence and not as casual conversation, but this is not the most important lesson taken from this important case in the Middle District of Florida. Three important lessons may be learned from this case: small companies should consider the patent position of market leaders early on in product development and seek advice of patent counsel, malicious prosecution is a separate state law tort and is not precluded by failure to obtain attorneys fees under 35 U.S.C. § 285, and due diligence before bringing a patent infringement litigation requires at least some evidence of at least one instance of direct infringement.
A small company needs to consider, early on, whether a new product will infringe one of the patents of its larger rivals. Mee Industries did the right thing. According to the record, “Thomas Mee wrote to his lawyer that ‘we are going to have to face the Dow patent issue sometime soon … [e]ven if we only negotiate favorable terms for a license.’” Instead, Mee’s patent counsel was able to develop a strategy that allowed Mee Industries to avoid patent infringement, based on the known prior art and the interpretation of the meaning of the claims in Dow’s patent. In my experience, the vast majority of patents issued by the patent office provide any number of ways for competitors to design around the claims of the issued patent and to compete in the same marketplace as a patentee. If consulted early on in product development, a competent patent attorney can provide invaluable assistance to a small company faced with competition by a much larger market leader. Claim interpretation and prior art searching is not something that should be left to the last minute, because design changes might be necessary to make sure that a new product does not infringe an existing claim of a patent that is presumed to be valid. Advice of a dispassionate outside patent counsel should be sought.
To design around a problematic patent claim, patent counsel might need to work with designers and engineers early on before the design goes into production. According to Judge Presnell, any “…prudent (and non-infringing) business owner in Mee’s position – accused of infringement by a competitor with effectively bottomless pockets, faced with the prospect of spending a million dollars or more to successfully defend an infringement suit – would likely explore the possibility of making the problem go away more economically by securing a license.” How true! However, a successful design around of problematic patent claims can put a business in a position of being able to successfully seek a summary judgment motion of noninfringement in a patent infringement litigation. In addition, as shown by Mee Industries, a cause of action for malicious prosecution can be successful if the defendant is successful in the patent infringement litigation, and the defendant can show that the plaintiff did not have a reasonable belief, based on the facts and circumstances known to it at the time of filing of a patent litigation, that its patents were being infringed. This provides a far stronger position for a defendant to negotiate an end to a patent infringement lawsuit early on in the litigation process.
A defendant sued for malicious prosecution should not take the matter lightly. Unlike a request for attorneys fees pursuant to 35 U.S.C. § 285, which requires clear and convincing evidence that a case was so exceptional as to qualify for an award of attorney’s fees, malicious prosecution is a state law tort requiring proof of malice only by a preponderance of the evidence, a lesser burden. However, a cause of action for malicious prosecution must be brought in a separate civil action after the original action is terminated. To prevail in a malicious prosecution civil tort action under Florida law, Mee Industries had to establish: (1) that an original civil judicial proceeding was commenced or continued against Mee Industries; (2) that the present defendant was the legal cause of the original proceeding against Mee Industries; (3) that the termination of the original proceeding constituted a bona fide termination of that proceeding in favor of Mee Industries; (4) that there was an absence of probably cause for the original proceeding; (5) that there was malice on the part of the present defendant; and (6) that the plaintiff suffered damage as a result of the original proceeding. Alamo Rent-A-Car v. Mancusi, 632 So. 2d 1352, 1355 (Fla. 1994). According to the order in Mee Industries, under “…Florida law, probable cause for instituting suit is defined as ‘a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man…’” to have had “‘...a reasonable belief, based on the facts and circumstances known to him, in the validity of the claim.’” (citing Dunnavant v. State, 46 So. 2d 871, 874 (Fla. 1950); and Wright v. Yurko, 446 So. 2d 1162, 1166 (Fla. 5th DCA 1984). The most difficult element to prove for the plaintiff is that there was malice on the part of the present defendant in bringing the original civil action.
In the court’s order, Judge Presnell dismantles Dow’s arguments that the evidence at its malicious prosecution trial was so overwhelmingly in favor of Dow that no reasonable juror could have found against Dow. The court, and presumably the jury as well, discounted the legal opinions from in house and litigation counsel and the vetting by the litigation review committee of Dow. The advice of in house counsel and the litigation review committee was discounted, at least in part, because the evidence presented was merely conclusory, according to the court, without providing adequate evidence to support the conclusion. This should be a warning to all in house counsel and review boards to document the evidence relied upon in vetting the decision to bring a patent infringement action.
Best practice would be to send the matter to outside patent counsel, separate from litigation counsel, for an opinion of infringement based on all of the evidence known to the potential plaintiff in the litigation. In Mee Industries the advice of outside patent counsel was discounted, at least in part, because the outside patent counsel was the same attorney who litigated the case, which is a powerful incentive to find infringement, when no direct infringement is shown by the facts and a proper claim interpretation.
In any decision to bring a patent infringement lawsuit, when a serious question arises as to whether direct infringement of a claim actually exists, the advice of an independent outside patent counsel, who is not the litigation counsel, is desirable. This independent voice of reason was not obtained by Dow (or at least the opinion was not shared in their defense of Mee Industries action for malicious prosecution). Instead, Mee Industries was able to present evidence that Dow never ascertained whether any of Mee’s customers were directly infringing one of the claims of Dow’s issued patent. Dow needed to show that at least one of Mee’s customers was directly infringing a patent claim in the underlying patent litigation, because Mee Industries product was capable of being used for noninfringing purposes. Indeed, Mee provided a list of its customers to Dow. Dow sent letters to the customers of Mee warning them of possible infringement litigation, but “Dow made no effort to ascertain whether any of these customers actually used Mee’s equipment in a manner that would infringe,” according to the court.
A patent infringement suit based on infringement of only a method claim may be more difficult to bring than one based on infringement of a machine or composition of matter. If there are noninfringing methods of using a machine, a determination must be made whether it is reasonable to assume that the machine is being used in an infringing process. This is a difficult hurdle that might require inspection of the equipment being used in service by one of the customers of potential defendant, if access is available to a potential plaintiff. Even then, prior to commencing an action for contributory infringement or inducement to infringe, a patent owner should consider whether there is sufficient evidence to commence a patent litigation.
Dow did have one of its engineers analyze Mee’s equipment, but failed to confirm that the equipment was being used in service in any infringing way. The engineer concluded that under certain temperature and humidity conditions that the equipment could be used to accomplish wet compression, but this report necessarily supported the opposite conclusion, as well, that Mee’s equipment could be used in ways that do not infringe. Also, mere incremental wet compression was old technology and was disclosed in the prior art, according to the court. Therefore, the engineer’s report did not support any inference of direct patent infringement. The engineer, “…among others, admitted as much at trial,” according to Judge Presnell. Without any evidence supporting an inference that Mee’s equipment inherently infringed each and every element of at least one of Dow’s claims, it was Dow’s duty to determine if one of Mee’s customers was using Mee’s equipment in a way that was infringing at least one of Dow’s claims. Without this step, Dow did not have probable cause under Florida law for instituting the patent infringement suit, according to the Order of Judge Presnell.
Still, Dow might have successfully defended against the tort of malicious prosecution if it had been able to show a good faith reliance on the advice of counsel in instituting the patent infringement lawsuit. The jury was asked whether before “…filing the patent infringement case against Mee, Dow in good faith sought the advice of a lawyer, gave the lawyer a full, correct, and fair statement of what it knew, and reasonably relied on the lawyer’s advice in filing the case.” According to the Order of the court, the “jury answered in the negative.” The court opined that “…the jury could have reasonably concluded that Dow had reason to believe its lawyers’ advice was not sound.” Mee Industries was able to present evidence to convince the jury that there was malice on the part of Dow in its determination to ratchet up the pressure on Mee Industries to force Mee Industries to either pay Dow for a license or get out of the market for power augmentation technology. Emails referring to Mee Industries as a “cockroach” could not have helped Dow’s cause. The lack of any showing of direct infringement by one of Mee’s customers was the focus of the Order. Hubris does not play well with a jury, and potential plaintiffs should be forewarned to avoid any appearance of it.
A patent owner has the right to assert an infringed patent, but there should be neither joy nor animus in determining if a patent litigation is warranted. These emotions cloud good judgment. It is always important to choose dispassionate opinion counsel to provide reasoned advice that can be reasonably relied upon to make an informed decision whether to bring a patent infringement action. Even if there is not “probable cause” to bring a patent litigation, a party can enter into good faith negotiations to license the patent and know-how related to the technology to others.
Although bringing patent litigation on a method claim may be problematic, under some circumstances, method claims may provide for the protection of substantial revenue generated from services, technology transfer and licensing that should not be overlooked in patent prosecution. This specific case does not suggest that method claims should be disfavored in any way, and this commentary should not be construed as suggesting that method claims have no value or that method claims may be safely ignored by potential infringers.
