CAN A PRESS RELEASE BE A TORTIOUS ACT?

| August 8, 2012

Press releases are a common feature of patent disputes, particularly patent disputes involving reexamination proceedings at the Patent Office.  An accused infringer announces that its reexamination request has been granted, that the patent claims have been rejected, or that a rejection has been affirmed by the PTO Board.  Or patent owner announces that its claims have survived reexamination.  Often the author of the press release tells its story in “a favorable light.”  Almost always, a party’s goal in issuing a release is to convince the public that it will ultimately prevail.

But can a press release, by itself, expose its author to potential civil liability?  Yes it can.  A story of such potential liability is now playing out in Taser International v. Stinger, (Case No. 2:09-cv-289 (D. Nev.)).  Taser, the developer of the TASER weapon for use by law enforcement, originally sued Stinger Systems for selling devices that infringed a number of Taser patents.  The infringement action lasted three years and ended with a judgment that Stinger infringed one of the patents and an injunction prohibiting future infringement of that patent.

In the course of the action, however, Stinger issued a series of press releases regarding its patent dispute with Taser, among them a press release reporting on a parallel reexamination proceeding.  In a second action, Taser accuses Stinger, Stinger’s CEO and Stinger’s attorney of various business torts, all centering on allegations that Stinger, ita CEO and its attorney issued misleading press releases, damaging Taser’s reputation and stock price.  According to Taser, one press release issued by Stinger in May 2007, caused its stock price to drop $40,000,000.

Last week Judge Miranda Du denied a motion for summary judgment by Defendants, essentially, finding that Taser’s allegations were sufficient to state a cause of action and that there was sufficient dispute of material fact between the parties to preclude summary judgment.  Two press releases appeared to be particular important.

The first issued April 24, 2008, and concerned a civil complaint that Stinger had filed against Taser.  Judge Du explained that on

April 28, 2008, Stinger filed a lawsuit against TASER … that TASER alleges was vexatious and served as the basis for other misleading press releases … The lawsuit alleged false advertising, unfair competition, and injurious falsehood. The complaint concerned TASER’s circulation of a study conducted by the National Institute of Justice (“NIJ”), the research, development, and evaluation arm of the United States Department of Justice. Stinger accused TASER of misleading consumers about the nature of the report.  The lawsuit was filed on April 18, 2008, but TASER alleges that Stinger waited to announce the suit until April 24, 2008, the same day that TASER released its quarterly earnings.  According to TASER, the April 24, 2008, press release announcing the lawsuit was misleading because the suit itself was meritless and because Stinger had no intention of prosecuting the suit.  Stinger never served TASER, and voluntarily dismissed the lawsuit after the service cutoff date passed and after an order to show cause was issued against Stinger.  TASER alleges that the Stinger lawsuit was intended merely to facilitate the misleading press release.

(Emphasis added).  Thus, according to Taser used the press release to give broad circulation to allegations from a complaint that it would not pursue in court.

The second, press release was dated January 17, 2008 and involved third party Bestex.  Judge Du summarized Taser’s allegations that in

January 2007, [Stinger’s attorney] approached LEA President Paul Feldman (“Feldman”) on behalf of Bestex to propose a sham agreement between Bestex and LEA to facilitate the publication of press releases that would drive up LEA stock and hurt TASER’s value. TASER provided transcripts of recorded conversations between Feldman and [Stinger’s attorney] describing this proposal, including how [Stinger’s attorney] planned to use strategic lawsuits to damage TASER and its stock. On February 9, 2007, LEA wrote to [Stinger’s attorney] rebuffing [Stinger’s attorney] and refusing to enter into the arrangement.

Almost a year later on January 17, 2008, TASER alleges that [Stinger’s attorney] issued a press release on behalf of Bestex that TASER claims misled the public into believing that Bestex and LEA had discussed and entered into an agreement. TASER alleges that [Stinger’s attorney] admitted authoring this release to try to push up LEA stock.

(Emphasis added).

Judge Du’s ruling last week first rejected a set of legal defenses likely to be unique to the case, specifically, standing, claim preclusion, and judicial estoppel.  She then addressed the parties’ allegations, finding sufficient factual issues to warrant trial.  In doing so, however, she listed a series of legal principles that will interest reexamination practitioners.

First, Stinger’s attorney might bear legal responsibility.  She stated that “‘a corporate officer’s active participation in infringing activity is sufficient to subject him or her to joint and several liability’ for Lanham Act violations.”  “So long as there is some showing made that [Stinger’s attorney] was personally involved in the challenged conduct, Defendants’ argument [that the attorney cannot be jointly and severally liable under the Lanham Act] fails as a matter law.”

Second, a “showing that either [Stinger’s attorney or its CEO] acted as agents of the infringing company (in this case, Bestex) and a showing of “active participation” in or a “moving, active conscious force behind” infringing activity, … suffices to hold them liable for Lanham Act unfair competition.”  Also, “TASER need not demonstrate that [Stinger’s attorney] published the release himself … .”

Third, “Bestex need not be named in order for its agent to be personally liable.”

Fourth, Judge Du commented that

the institution of the Stinger lawsuit demonstrate at least a triable issue of fact as to whether the lawsuit was filed for the purpose of releasing misleading press statements. First, Stinger did not serve TASER. Second, the release does not provide adequate background into the nature of the NIJ report, who the NIJ is, or what the report said. Third, there is evidence in the record that Stinger and [its attorney] wanted to pursue misleading press releases as an avenue for devaluing TASER, thereby making it more likely that the lawsuit and the April 28, 2008, release were intended to mislead. Fourth, the telephone recordings suggest that [Stinger’s attorney] contemplated vexatious litigation meant to drive down TASER stock.

Clearly, Judge Du’s ruling does not establish whether any of the parties’ allegations is true.  The case does remind us that “lawyerly exuberance,” while absolutely protected when expressed in judicial and administrative proceedings, does not enjoy the same immunity outside those proceedings.

Category: Press Releases

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