Activision TV, Inc. v. Pinnacle Bancorp, Inc.
Filing
41
MEMORANDUM AND ORDER - Activision's motion for preliminary injunction, Filing No. 8 , is granted and defendants Bruning, Cookson and Lopez are enjoined from taking any steps to enforce the cease and desist order issued to Farney Daniels on Ju ly 18, 2013, in any manner that would prevent or impede the Farney Daniels firm from representing Activision in connection with licensing and litigation of U.S. patents owned by Activision with respect to companies based in, or having operations i n, Nebraska. If, however, 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. Defendants' objection to plaintiff's exhibits, Filing No. 35 , is denied. Ordered by Judge Joseph F. Bataillon. (MKR)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
ACTIVISION TV, INC.,
Plaintiff,
8:13CV215
vs.
MEMORANDUM AND ORDER
PINNACLE BANCORP, INC., JON
BRUNING, DAVID COOKSON, and DAVID
LOPEZ,
Defendants.
This matter is before the court on plaintiff Activision TV, Inc.’s (“Activision”)
motion for a preliminary injunction pursuant to Fed. R. Civ. P. 65.
Filing No. 8.
Activision asks the court to permanently enjoin the Attorney General for the State of
Nebraska from enforcing a cease and desist order entered by him on July 18, 2013,
Filing No. 7, Ex. F.1 This court previously enjoined enforcement of the cease and desist
order as to this case and future federal court cases. Filing No. 31. There is nothing left
for this court to determine in the motion for preliminary injunction other than whether the
State of Nebraska can order counsel for Activision TV, Inc. to cease and desist initiation
of all new patent infringement enforcement efforts in Nebraska.2
1
The Nebraska Attorney General stated that he was investigating possible violations of the
Nebraska Unfair Competition Act and the Nebraska Deceptive Trade Practices Act.
2
Defendants also filed an objection to plaintiff’s exhibits and declarations. Filing No. 35. The
court has reviewed the same and determines that it should be denied. The court has ignored the
hearsay, and only identified that information as is relevant and made its conclusions based on the
uncontested evidence and argument presented to the court.
BACKGROUND
Activision originally filed this case against Pinnacle Bancorp, Inc., alleging patent
infringement in violation of 35 U.S.C. § 271 et seq.3 Filing No. 1. Activision, acting
through counsel Farney Daniels, PC (“Farney Daniels”), believed that certain
companies were violating its patents4 throughout the United States. Farney Daniels
sent letters to these companies (five in Nebraska) asking for information to determine if
in fact violations occurred or were occurring. See Filing No. 7, Exs. C1-C6. From
February to June of 2013, the Nebraska Attorney General’s Office Consumer Mediation
Center received three complaints regarding patent license solicitation letters sent by
Farney Daniels and/or an entity named BriPol LLC, AccNum LLC, or IsaMai LLC, on
behalf of an entity named MPHJ Technology Investments, LLC. Filing No. 23-1 at ¶ 3.
On July 12, 2013, Activision filed this lawsuit against Pinnacle Bancorp, Inc., alleging
patent infringement.
On July 18, 2013, the Nebraska Attorney General filed a cease and desist order
against the Farney Daniels law firm. Filing No. 7, Ex. F. The cease and desist order
prohibited the law firm from initiating new patent infringement enforcement efforts within
the State of Nebraska. Id. at 2. Following the issuance by the Nebraska Attorney
General of the cease and desist order, Activision amended its complaint to include
Nebraska Attorney General Jon Bruning, and his employees, David Lopez and David
Cookson.
Filing No.
7.
Activision contends that its First Amendment rights are
infringed as a result of the cease and desist order, as it cannot hire and associate with
the counsel of its choice; that its Fifth and Fourteenth Amendment rights to due process
3
4
It is clear that Activision invented the technology that is covered by these patents.
The patents in this case involve digital signage.
2
have been violated; that federal patent law preempts state law; and that the NoerrPennington doctrine is applicable in this case.
The Attorney General argues that
Farney Daniels is not a party to this lawsuit, and thus the cease and desist order is not
relevant to this lawsuit.
DISCUSSION
A. Jurisdiction
1. Standing
The court must first determine if it has jurisdiction to hear this case. The Attorney
General argues that the cease and desist order applies only to Farney Daniels, and not
to Activision.
Consequently, the Attorney General argues there is no standing for
Farney Daniels, a nonparty, to raise the constitutional issues regarding the cease and
desist order in this lawsuit,5 and further argues the issue is not ripe. Counsel for the
Attorney General agreed in open court that Farney Daniels is prohibited from sending
these letters to new potential violators, similar to those in Filing No. 7, Ex. C1-C6, on
behalf of Activision.
“The issue of standing involves constitutional limitations on federal court
jurisdiction under Article III of the Constitution, which confines the federal courts to
adjudicating actual ‘cases and controversies.’” Potthoff v. Morin, 245 F.3d 710, 715 (8th
Cir. 2001); see Oti Kaga v. South Dakota Hous. Dev. Auth., 342 F.3d 871, 878 (8th Cir.
2003). The threshold question in every federal case is the plaintiff’s standing to sue.
Steger v. Franco, Inc., 228 F.3d 889, 892 (8th Cir. 2000). Without standing, the court
5
The court agrees that Farney Daniels is not a party to this lawsuit. Accordingly, the court will
review the case as it pertains to Activision.
3
lacks subject matter jurisdiction to hear the suit.
Young Am. Corp. v. Affiliated
Computer Servs., 424 F.3d 840, 843 (8th Cir. 2005).
To acquire Article III standing, “a plaintiff must have a ‘personal stake in the
outcome of the controversy.’” Potthoff, 245 F.3d 710, 714 (8th Cir. 2001) (quoting
Baker v. Carr, 369 U.S. 186, 209 (1962)). To satisfy the burden of establishing Article
III standing, the plaintiff must show: (1) plaintiff suffered an “injury-in-fact,” (2) a causal
relationship exists between the injury and the challenged conduct, and (3) the injury
likely will be redressed by a favorable decision. Eckles v. City of Corydon, 341 F.3d
762, 767 (8th Cir. 2003) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs.
(TOC), Inc., 528 U.S. 167, 180-81 (2000)); see Lujan v. Defenders of Wildlife, 504 U.S.
555, 560-61 (1992).
“An injury-in-fact is a harm that is ‘concrete and particularized’ and ‘actual or
imminent, not conjectural or hypothetical.’” Steger, 228 F.3d at 892 (quoting Lujan, 504
U.S. at 560); Faibisch v. Univ. of Minn., 304 F.3d 797 (8th Cir. 2002). Additionally, the
injury must be “fairly traceable to the challenged action of the defendant.” Saunders v.
Farmers Ins. Exch., 440 F.3d 940, 943 (8th Cir. 2006) (quoting Lujan, 504 U.S. at 560);
McClain v. Am. Econ. Ins. Co., 424 F.3d 728, 731 (8th Cir. 2005)).
“To establish
standing, a plaintiff must show that it is likely that the remedy she seeks can redress her
injury.” Faibisch, 304 F.3d at 801; see Monsanto v. Geertson Seed Farms, 130 S. Ct.
2743, 2752 (2010) (Article III standing requires that an injury be concrete, particularized,
and actual or imminent; fairly traceable to the challenged action; and redressable by a
favorable ruling).
4
In addition to the immutable requirements of Article III, “the federal judiciary has
also adhered to a set of prudential principles that bear on the question of standing.”
Valley Forge Christian Coll. v. Americans United for Separation of Church and State,
Inc., 454 U.S. 464, 474–75 (1982); Oti Kaga, 342 F.3d at 880. Prudential principles of
standing are statutorily imposed jurisdictional limitations separate from and in addition to
constitutional standing requirements. Davis v. U.S. Bancorp, 383 F.3d 761, 767 (8th
Cir. 2004). “By imposing prudential limits on standing, ‘the judiciary seeks to avoid
deciding questions of broad social import where no individual rights would be vindicated
and to limit access to the federal courts to litigants best suited to assert a particular
claim.’” Oti Kaga, 342 F.3d at 880 (quoting Gladstone, Realtors v. Village of Bellwood,
441 U.S. 91, 99–100 (1979)); Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11
(2004) (stating the prudential standing doctrine “embodies judicially self-imposed limits
on the exercise of federal jurisdiction”).
The Attorney General argues there is no showing of a concrete injury to
Activision, as the July 18 cease and desist letter does not mention Activision. The
Attorney General further contends that Activision cannot speculate on what Farney
Daniels might attempt to do in the future on behalf of Activision in the state of Nebraska.
In this regard, the Attorney General states that Activision has not explained who it is
planning to send additional patent letters to in Nebraska, and further, that the cease and
desist letter only prohibits Farney Daniels from sending the letters, not Activision. Thus,
any claim regarding the letter prohibition must be brought by Farney Daniels, not
Activision, argues the Attorney General.
5
Activision contends that it clearly has standing to raise this issue. The court
agrees. Activision has suffered an injury in fact. Farney Daniels was ostensibly unable
to represent Activision in this case until the court found the cease and desist order did
not apply to this case. Second, the settlement negotiations between Activision and
other defendants in this and other jurisdictions came to a standstill, as the other parties
believed the cease and desist order prohibited them from negotiating with Farney
Daniels on behalf of Activision.
Third, Farney Daniels cannot pursue further
investigations on behalf of Activision in the State of Nebraska. There is no doubt that
this injury is causally related to the cease and desist order and such injury is directed at
Activision’s activities via counsel.
A favorable decision by this court redresses the
respective injuries. Accordingly, the court finds Activision has standing to raise these
issues.
2. Ripeness
The Attorney General also argues this case is not ripe because, as of this date,
no one has incurred any injury as a result of the cease and desist order. “The ripeness
doctrine is drawn both from Article III limitations on judicial power and from prudential
reasons for refusing to exercise jurisdiction.” Nat’l Park Hospitality Ass’n v. Dep’t of the
Interior, 538 U.S. 803, 808 (2003) (quotation omitted).
The judicially created doctrine of ripeness “flows from both the Article III
‘cases’ and ‘controversies’ limitations and also from prudential
considerations for refusing to exercise jurisdiction.” Neb. Pub. Power Dist.
v. MidAm. Energy Co., 234 F.3d 1032, 1037 (8th Cir. 2000) (citing Reno v.
Catholic Soc. Servs., Inc., 509 U.S. 43, 57 n. 18, 113 S. Ct. 2485, 125
L.Ed.2d 38 (1993)). “ ‘Ripeness is peculiarly a question of timing’ and is
governed by the situation at the time of review, rather than the situation at
the time of the events under review.” Id. at 1039 (quoting Anderson v.
Green, 513 U.S. 557, 559, 115 S.Ct. 1059, 130 L.Ed.2d 1050 (1995) (per
curiam)). A party seeking review must show both “the fitness of the issues
6
for judicial decision and the hardship to the parties of withholding court
consideration.” Pub. Water Supply Dist. No. 10 of Cass Cnty. v. City of
Peculiar, 345 F.3d 570, 572–73 (8th Cir. 2003) (quoting Abbott Labs. v.
Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967)). Both
of these factors are weighed on a sliding scale, but each must be satisfied
“to at least a minimal degree.” Neb. Pub. Power Dist., 234 F.3d at 1039.
Iowa League of Cities v. E.P.A., 711 F.3d 844, 867 (8th Cir. 2013).
For the reasons previously set forth herein with regard to standing and as set
forth hereinafter with regard to patent infringement law, the court finds the issue is ripe
for review. Activision suffered injury, and continues to suffer injury, as a result of the
cease and desist order. Failure to address this issue now will permit continued injury to
Activision.
B. First Amendment
The First Amendment, applicable to the states through the Fourteenth
Amendment, provides that “Congress shall make no law . . . abridging the freedom of
speech . . . or the right of the people peaceably to assemble, and to petition the
government for a redress of grievances. U.S. CONST. amend I. “The hallmark of the
protection of free speech is to allow ‘free trade in ideas’—even ideas that the
overwhelming majority of people might find distasteful or discomforting.” Virginia v.
Black, 538 U.S. 343, 357 (2003) (quoting Abrams v. United States, 250 U.S. 616, 630
(1919) (Holmes, J., dissenting)). An individual’s interest in self-expression is a concern
of the First Amendment separate from the concern for open and informed discussion,
although the two often converge. First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765,
776 n.12 (1978) (identifying “the inherent worth of the speech in terms of its capacity for
informing the public” as “more than self-expression; it is the essence of selfgovernment,” and noting “self-government suffers when those in power suppress
7
competing views on public issues ‘from diverse and antagonistic sources.’”). The First
Amendment “presupposes that the freedom to speak one’s mind is not only an aspect of
individual liberty—and thus a good unto itself—but also is essential to the common
quest for the truth and the vitality of society as a whole.” Bose Corp. v. Consumers
Union of United States, Inc., 466 U.S. 485, 503-04 (1984); see also Bellotti, 435 U.S. at
776 (noting that the Constitution often protects interests broader than those of the party
seeking their vindication and that the First Amendment in particular serves important
societal interests). The First Amendment affords protection to symbolic or expressive
conduct as well as to actual speech. R.A.V. v. City of St. Paul, 505 U.S. 377, 382
(1992).
The right to free speech encompasses the right to association, which is
constitutionally protected in two distinct senses: freedom of expressive association and
freedom of intimate association. Roberts v. United States Jaycees, 468 U.S. 609, 61718 (1984). Expressive association—the right to associate for the purpose of engaging
in those activities protected by the First Amendment (speech, assembly, petition for the
redress of grievances, and the exercise of religion)—is governed by First Amendment
principles. Id. at 618 (noting that “[t]he Constitution guarantees freedom of association
of this kind as an indispensable means of preserving other individual liberties.”).
Intimate association, characterized as “choices to enter into and maintain certain
intimate human relationships” receives protection as a fundamental element of personal
liberty under the Due Process Clause. Id. at 617-18; Bellotti, 435 U.S. at 778 (stating
“the liberty of speech and of the press which the First Amendment guarantees against
abridgment by the federal government is within the liberty safeguarded by the Due
8
Process Clause of the Fourteenth Amendment”). These two constitutionally-protected
freedoms can coincide particularly when the state interferes with an individual’s
selection of those with whom they wish to join in a common endeavor. Roberts, 468
U.S. at 618.
A cease and desist order has been considered an unconstitutional prior restraint
on speech when it “prohibits future statements which, although possibly similar to prior
statements, have not yet found to be false, misleading, and deceptive.” Weaver v.
Bonner, 309 F.3d 1312, 1323 (11th Cir. 2002) (noting that there is a “heavy
presumption” against a cease and desist request’s constitutional validity); see also
Pestrak v. Ohio Elections Comn’n., 926 F.2d 573, 578 (6th Cir. 1991) (holding that
“cease and desist orders are a forbidden prior restraint. . . . Prior restraint of speech is
unconstitutional unless certain safeguards are present.”), citing Southeastern
Promotions, Ltd. v. Conrad, 420 U.S. 546, 550 (1975) (“Any system of prior restraint,
however, ‘comes to this court bearing a heavy presumption against its constitutional
validity.’” And stating further that “The settled rule is that a system of prior restraint
‘avoids constitutional infirmity only if it takes place under procedural safeguards
designed to obviate the dangers of a censorship system.’”) Id. at 558-59.
C. Dataphase
The extraordinary remedy of a preliminary injunction should not be granted
unless the movant has demonstrated: (1) the threat of irreparable harm to it; (2) the
state of the balance between this harm and the injury that granting the injunction will
inflict on other parties; (3) the probability that it will succeed on the merits; and (4) the
public interest. Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 113-14
9
(8th Cir. 1981) (en banc). No single factor is determinative, although the failure to
demonstrate the threat of irreparable harm is, by itself, a sufficient ground upon which to
deny a preliminary injunction. See Adam-Mellang v. Apartment Search, Inc., 96 F.3d
297, 299 (8th Cir. 1996); see also Modern Computer Sys., Inc. v. Modern Banking Sys.,
Inc., 871 F.2d 734, 738 (8th Cir. 1989) (en banc).
The burden on a movant to
demonstrate that a preliminary injunction is warranted is heavier when, as here,
granting the preliminary injunction will in effect give the movant substantially the relief it
would obtain after a trial on the merits. Calvin Klein Cosmetics Corp. v. Lenox Lab., 815
F.2d 500, 503 (8th Cir. 1987). “A preliminary injunction is an extraordinary remedy
never awarded as of right. In each case, courts must balance the competing claims of
injury and must consider the effect on each party of the granting or withholding of the
requested relief.” Winter v. Natural Resources Defense Council, 555 U.S. 7, 24 (2008).
In exercising their sound discretion, courts of equity should pay particular regard for the
public consequences in employing the extraordinary remedy of injunction.
Id.
“No
single factor in itself is dispositive; rather, each factor must be considered to determine
whether the balance of equities weighs toward granting the injunction.” United Indus.
Corp. v. Clorox Co., 140 F.3d 1175, 1179 (8th Cir. 1998) . “At base, the question is
whether the balance of equities so favors the movant that justice requires the court to
intervene to preserve the status quo until the merits are determined . . . .” Dataphase,
640 F.2d at 113.
At the early stage of a preliminary injunction motion, the speculative nature of the
inquiry into the probability of ultimate success on the merits militates against any
wooden or mathematical application of the test; instead, a court should flexibly weigh
10
the case’s particular circumstances to determine whether the balance of equities so
favors the movant that justice requires the court to intervene to preserve the status quo
until the merits are determined. Clorox, 140 F.3d at 1179.
1. Merits
Activision argues this cease and desist order is unconstitutional under 42 U.S.C.
§ 1983 because it violates the Fifth and Fourteenth Amendment Due Process Clauses
and the free speech clause of the First Amendment,6 interferes with its right to hire
counsel of its choice, federal patent law,7 and the Noerr-Pennington doctrine.8 The
cease and desist order, argues Activision, initially prohibited Activision from seeking its
rights in court to enforce its patents with counsel of its choosing, in violation of the First,
Fourteenth and Fifth Amendments. Further, Activision argues that the cease and desist
order constitutes a taking of its patents without due process as it cannot adequately
prosecute those entities who infringe on the patent.
preempted, absent a showing of bad faith.
In addition, patent law is
Accordingly, Activision argues that the
letters sent by Farney Daniels on behalf of Activision are absolutely immune unless the
activity is a sham.
6
The court likewise notes that the United States Constitution states: “To promote the progress of
science and useful arts, by securing for limited times to authors and inventors the exclusive right to their
respective writings and discoveries.” United States Constitution, Art. 1, § 8, cl. 8.
7
See Christopher v. Harbury, 536 U.S. 403, 415 n.12 (2002) (noting that a number of decisions
have concluded that the right of access to the courts in the Article IV Privileges and Immunities Clause,
the First Amendment Petition Clause, the Fifth Amendment Due Process Clause, and the Fourteenth
Amendment Equal Protection and Due Process Clauses); see also Harrison v. Springdale Water & Sewer
Comm’n, 780 F.2d 1422, 1427-28 and n.7 (8th Cir. 1986) (finding the constitutional right litigants have to
petition courts for redress of grievances impliedly includes a right to counsel); “The right to counsel in civil
matters ‘includes the right to choose the lawyer who will provide that representation.’” Texas Catastrophe
Property Ins. Ass’n v. Morales, 975 F.2d 1178, 1181 (5th Cir. 1992).
8
United Mine Workers v. Pennington, 381 U.S. 657 (1965) (right to petition the government);
Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) (same).
11
The court notes there is no doubt the Attorney General generally has the power
to investigate activity that it believes violates state law. Neb. Rev. Stat. § 87-303.03
(1)(a) allows the Attorney General to conduct the investigation and § 87-303.03 (1)(b)
allows the attorney general to issue a cease and desist order against any person
engaged in violation of the Deceptive Trade Practices Act.
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.9
The court finds the cease and desist order in this case is akin to a prior restraint.
“[C]ease and desist orders are a forbidden prior restraint. . . . Prior restraint of speech
is unconstitutional unless certain safeguards are present”). Pestrak, 926 F.2d at 578
citing Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 550 (1975). The Federal
Circuit in the Globetrotter case made this point quite clearly:
Our decision to permit state-law tort liability for only objectively [and
subjectively] baseless allegations of infringement rests on both federal
preemption and the First Amendment. The federal patent laws preempt
9
The court might view this matter very differently if (1) there was an imminent threat of significant
harm to the citizens or the State of Nebraska; or (2) if the investigation uncovered what clearly appeared
to be violations of state law, that reach the standard of “bad faith” as discussed hereinafter. That is not
the case at this point in the investigation.
12
state laws that impose tort liability for a patent holder’s good faith conduct
in communications asserting infringement of its patent and warning about
potential litigation. In addition, the same First Amendment policy reasons
that justify the extension of Noerr immunity to pre-litigation conduct in the
context of federal antitrust law apply equally in the context of state-law tort
claims.
....
Accordingly, to avoid preemption, bad faith must be alleged and ultimately
proven, even if bad faith is not otherwise an element of the tort claim. This
preemption is based on the following concept: “A patentee that has a
good faith belief that its patents are being infringed violates no protected
right when it so notifies infringers.” Accordingly, a patentee must be
allowed to make its rights known to a potential infringer so that the latter
can determine whether to cease its allegedly infringing activities, negotiate
a license if one is offered, or decide to run the risk of liability and/or the
imposition of an injunction.
Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1374, 1377
(Fed. Cir. 2004) (emphasis added) (internal quotations and citations omitted); see, e.g.,
Mirafi, Inc. v. Murphy, 928 F.2d 410 (Fed. Cir. 1991) (explaining that “bad faith
infringement litigation, [in knowingly asserting an invalid patent, for example] could
violate North Carolina’s Unfair Competition Statute”); Globetrotter Software, Inc., 362
F.3d at 1374 (“State [tort] law claims . . . can survive federal [patent law] preemption
only to the extent that those claims are based on a showing of ‘bad faith’ action in
asserting infringement.”); ClearPlay, Inc. v. Nissim Corp., 2011 WL 3878363 *8-9 (S.D.
Fla. 2011) (finding that federal patent law preempted the state-law claim of violation of
Florida’s Deceptive and Unfair Trade Practices Act); DeSena v. Beekley Corp., 729 F.
Supp. 2d 375, 401 (D. Me. 2010) (finding that bad faith in the publication of the patent
must be established to avoid preemption by patent law for a state law claim under the
Maine Uniform Deceptive Trade Practices Act); Alien Tech. Corp. v. Intermec, Inc.,
2008 WL 504527 *4 (D.N.D. Feb. 20, 2008) (citing the Washington Consumer
13
Protection Act and explaining that deceptive conduct falls within Washington’s
Consumer Protection Act, and further holding that a finding of bad faith for publicizing a
patent in the marketplace is required in order to survive federal preemption); In re
Innovatio IP Ventures, LLC Patent Litigation, 921 F. Supp.2d 903, 914 (N.D. Ill. 2013)
(stringent bad faith requirement); Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340,
1348 (Fed. Cir. 1999) (need bad faith).
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.
2. Irreparable Harm
“‘The basis of injunctive relief in the federal courts has always been irreparable
harm and inadequacy of legal remedies.’” Bandag, Inc. v. Jack’s Tire & Oil, Inc., 190
F.3d 924, 926 (8th Cir. 1999) (quoting Beacon Theatres, Inc. v. Westover, 359 U.S.
500, 506-07 (1959)). Thus, to warrant a preliminary injunction, the moving party must
demonstrate a sufficient threat of irreparable harm. Id. A showing of irreparable harm
does not automatically mandate a ruling in the plaintiff’s favor; the court must proceed to
balance the harm to the defendant in granting the injunction. Hill v. Xyquad, Inc., 939
F.2d 627, 630-31 (8th Cir. 1991).
14
It is clear in this case that injury has occurred and will continue to occur under the
cease and desist order. Activision’s First Amendment rights are being violated, and it is
questionable whether the Attorney General has the right to maintain the cease and
desist order given the preemption in this area of law. Further, Activision is entitled to
pursue cases in both Nebraska and other courts to the extent of the law. Other cases
have already been impacted, such as the case in the Eastern District of Texas,
Activision TV, Inc. v. Century Link, 2:13CV462 (E.D. Tex. filed June 5, 2013).10 That
case is held in abeyance because of the cease and desist order, and Activision is
almost out of time to serve defendants. Under the cease and desist order, such pursuit
is questionable and affects those in negotiations and lawsuits with Activision.
Accordingly, the court finds this factor favors Activision.
3. Balance of Harm
The public has a right to protection from scams and unfair trade practices.
However, Activision’s constitutional right to hire counsel of its choosing to pursue
investigations and lawsuits against infringers is clearly impeded by the cease and desist
order. Further, the federal government has preempted to a great extent the area of
patent law. Allowing the attorney general to interfere might be harmful to the patent
process. Based on the facts as presented, which indicates no bad faith, the court finds
this factor likewise weighs in favor of Activision.
4. Public Interest
The public interest is served by enforcing the Constitution of the United States.
This means that Activision and others have a right to counsel and a right to have
10
Century Link is also located in Omaha, Nebraska.
15
counsel pursue their interests. It also means that Activision and others have a due
process right to a meaningful process prior to issuance of a cease and desist order.
Accordingly, the court finds this factor weighs in favor of Activision.
THEREFORE, IT IS ORDERED:
1.
Activision’s motion for preliminary injunction, Filing No. 8, is granted and
defendants Bruning, Cookson and Lopez are enjoined from taking any steps to enforce
the cease and desist order issued to Farney Daniels on July 18, 2013, in any manner
that would prevent or impede the Farney Daniels firm from representing Activision in
connection with licensing and litigation of U.S. patents owned by Activision with respect
to companies based in, or having operations in, Nebraska. If, however, 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.
2. Defendants’ objection to plaintiff’s exhibits, Filing No. 35, is denied.
Dated this 30th day of September, 2013.
BY THE COURT:
s/ Joseph F. Bataillon
United States District Judge
16
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